KPIs and metrics: Everything you need to know

KPIs and metrics: Everything you need to know
Last Updated: November 24, 2023

What are KPIs?

According to Investopedia, a key performance indicator (KPI) is a quantifiable measurement to assess a company's long-term success. KPIs place a greater emphasis on long-term business performance. You can see how close you are to attaining your business goals by looking at a key performance indicator. It can also offer a measurable way to describe how you compare to competitors or industry standards. The word "key," which denotes something distinctive or important, is important to note here. KPIs act as measurable benchmarks against defined strategic goals.

Examples of KPIs used in business


Financial KPIs

  • $ Revenue: In a survey of influential business people in 35 countries conducted in 2022, 88% of participants identified revenue as a key performance indicator (KPI) of their companies.
  • % Gross Profit Margin
  • % Net Profit Margin

Human Resources KPIs

Marketing KPIs

  • % Churn Rate
  • Search engine rankings
  • Organic traffic

Customer KPIs

  • % Customer Retention Rate
  • % Customer review score
  • % Net Promoter Score

Related: Example Key Performance Indicators

Related: A Guide for Developing Key Performance Indicators

What are metrics?

Investopedia defines metrics as quantitative measures commonly used to assess, compare, and track performance or production. Metrics are quantitative measurements used to track the operational effectiveness of specific company activities. They help put the accomplishment of significant corporate goals into context, but they don't have the same impact as KPIs do. The metrics your organization uses to measure, monitor, and perform concerning your strategic plan are not the most crucial. However, they track and offer data on the common business processes used by your organization.

RELATEDHuman Resource Metrics

Examples of metrics used in business

Some examples of metrics used in business are:

  • Website traffic: the total number of people who visit your site.
  • Employee absence rate
  • Email open rate: This indicator for email marketing determines the proportion of emails that are opened.
  • Customer churn rate: The proportion of customers who discontinue doing business with you over a certain length of time.
  • Revenue growth rate: This is the rise in revenue over a given period expressed as a percentage.
  • Employee turnover rate: The proportion of workers depart your company over a specific period.
  • Lead response time: The time it takes sales representatives to reply to a new lead.

Importance of tracking metrics and KPIs in business

It is crucial to track metrics and key performance indicators (KPIs) in today's competitive and dynamic business environment to evaluate and enhance your performance. Research by Umeå School of Business and Economics shows that the general business environment significantly influences companies' strategic decisions; therefore, businesses that track their metrics and KPIs have a competitive edge.

Some of the benefits of tracking metrics and KPIs are:

  • They offer clarity and focus on the most important issues to your company.
  • They allow you to share your vision and goals with your team and other stakeholders.
  • They help with problem-solving and data-driven decision-making.
  • They encourage accountability and openness within your company.
  • They encourage and inspire your group to pursue excellence.

Related: Key Performance Indicators Dashboard: What You Need to Know

Differences between KPIs and Metrics

  1. Purpose: KPIs are metrics intended to reflect the important objectives of an organization, whereas metrics cover a wider variety of data points.
  2. Focus: Metrics can be both operational and strategic, offering insights at multiple organizational levels, in contrast to KPIs, which are strategic and align with long-term objectives.
  3. Measurement: KPIs, a subset of metrics, serve as the organization's primary indicators.

Related: Metrics vs Key Performance Indicators

But, all metrics are not KPIs, but all KPIs are metrics. Key performance indicators demonstrate your success in achieving your business objectives. Metrics monitor the state of your business processes in the meantime. Metrics concentrate on the success of particular business processes, while KPIs let you know if you're meeting your overall business goals.

Metrics can be used to:

  • Track a process or activity's performance over time
  • Identify opportunities or areas for improvement
  • Compare performance to industry standards or best practices
  • Identify root causes and support decision-making and problem-solving.

KPIs can be used to:

  • Communicate the organization's vision and mission
  • Align the aims and objectives of different teams and departments
  • Assess the effectiveness and value of a strategy or program
  • Motivate and inspire stakeholders and workers
  • Reward and acknowledge accomplishments.

Related: Key Performance Indicators: A Guide for Managers

RELATEDThe case for good HR metrics

How to use KPIs and metrics effectively

Once you have chosen the right KPIs and metrics to track, it is important to use them effectively. This means regularly reviewing your data and identifying trends and patterns. You should also compare your performance to your goals and the performance of other businesses in your industry.

By using KPIs and metrics effectively, you can gain valuable insights into how your business is performing and make informed decisions to improve your performance.

Related: Key performance indicators by functional area

Tips & Best Practices for Accurately Measuring KPIs and Metrics

Track a manageable number of the right KPIs and metrics.

Choosing the right KPIs to measure is probably the most important step to track your strategies efficiently. Do not track vanity metrics. "Vanity metrics" refers to measurements that may appear impressive on paper but are ineffective at guiding future business strategy. Vanity metrics, which are indicators that aren't actionable or connected to anything you may consider relevant, are occasionally used to demonstrate improvement.

When you measure everything, you are measuring nothing. You need to consider what is most crucial for your company when deciding how to distinguish KPIs from metrics.

Other tips for measuring KPIs and Metrics are:

  • Review your data regularly and identify trends and patterns.
  • Compare your performance to your goals and other businesses in your industry.
  • Set realistic targets
  • Use your insights to make informed decisions to improve your performance.

When seeking strategies to monitor the success of your organization successfully, understanding KPIs and metrics is essential. Ultimately, they are both crucial indicators of how well you are reaching your goals; however, KPIs are more important in overall strategic alignment than metrics, which act as additional data points to illustrate performance patterns.

In conclusion, understanding and effectively utilizing Key Performance Indicators (KPIs) and metrics is crucial for businesses to measure their progress, identify areas for improvement, and make informed decisions. KPIs provide a clear and measurable way to track performance against organizational goals, while metrics offer specific data points contributing to the overall performance assessment. By selecting the right KPIs and metrics, businesses can gain valuable insights into their operations, optimize processes, and drive success. It is important to regularly review and analyze these indicators, adjusting strategies as needed to ensure continuous growth and success. Ultimately, KPIs and metrics are powerful tools for businesses to monitor performance, drive accountability, and achieve their objectives in an increasingly competitive landscape.

Chido Madzogo

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