Business metrics vs KPIs. What’s the difference?
Published October 27th, 2017, updated October 12th, 2022
Summary - What's the difference between a business metric and a KPI? Knowing the difference will help you understand the impact & level up your reporting.
I’d be willing to guess that most of us learning about key performance indicators (KPIs) and business metrics aren ’t data scientists or business analysis. We’re curious people who want to take accountability for our performance—whether it’s in our jobs or in our personal lives. But what does learning about KPIs and metrics really mean? Well, it means monitoring our progress while understanding how we impact it.
But it’s also important to know the difference between a metric and a KPI.
When it comes to learning about business metrics and KPIs, you’ll discover that each term should be treated differently. It’s not just semantics, either. Using the term metric and KPI interchangeably can have an impact on how you design and implement your strategy.
Taking the time to separate your metrics from your KPIs will help to give you a step up on those who don't know the difference.
What’s the difference between a metric and KPI?
The difference is that KPIs are laser-focused on targets and objectives. By comparison, metrics are anything that measure processes. KPIs and metrics are not mutually exclusive. KPIs require more thought around targets, whereas metrics can exist without a target, but a KPI can’t.
Klipfolio's Co-Founder, Allan Wille, discusses KPIs
“In its simplest form, a KPI is a type of performance measurement that helps you understand how your organization or department is performing,” writes Ted Jackson, the founder of ClearPoint Strategy. “A good KPI should act as a compass, helping you and your team understand whether you’re taking the right path toward your strategic goals.”
An easy way to remember the difference: KPIs must have targets, a specific timeframe for reaching the target, and be relevant to business outcomes. Metrics may or may not have all of the above.
Let’s dive into the differences.
Metric vs. KPI Example
No. While it may have business value and be tied to outcomes, it’s not a direct line to achieving a business objective.
Why does it matter?
It all comes down to motivation. KPIs act like a performance guidepost and map to business outcomes.
On the other hand, metrics should be tracked at a regular cadence—like daily or weekly—because they map to your department or project performance. The caveat: If a metric is providing better business outcomes, consider adopting it as a KPI.
The process of business performance management is iterative. Don’t be afraid to experiment and try new things. Metrics can become a KPI if it impacts business outcomes. KPIs can become metrics if a target doesn’t pan into tangible results.
Every KPI is a metric, but not every metric is a KPI
For the sake of analogy, let’s pretend metrics are the individual players that make up a hockey team, but the goalie is your KPI. Every person on the team is a player—including the goalie—and each player has a specific role.
But your goalie, that’s your KPI. KPIs are the most important metrics you have – the ones that really underscore what your key business goals are. In this hockey analogy, it’s blocking the opposing team from scoring on your net. And you can’t win without an all-star roster of metrics (or players) to support your KPI and help you get there.
Separating out the KPIs from the metrics
It’s an old saying that doesn’t get any less true the more clichéd it becomes: Measuring everything means you’re really measuring nothing.
It comes down to prioritizing what’s important to you and your business. Anything, as long as you can count it, can be a metric. But what good is that if it doesn’t provide you with any insight on how your business is performing, help allocate resources, or identify strategic goals? When you measure everything, it can easily get overwhelming. It’s also worth noting that while you can effectively track a multitude of metrics, KPIs lose their meaning if you have too many. Too many KPIs and it defeats the purpose of it being “key”—so be judicious of your usage of KPIs!
KPIs and strategy
KPIs are strategic. Identifying your KPIs forces you to sit down and think about your long-term objectives. If you’re using the wrong metric as a measuring stick, you’re going to end up wasting your time, money and energy chasing a goal that doesn’t matter.
KPIs force you to sit down and ask, “OK, what are we actually trying to accomplish here? What are the metrics that really contribute to the success or failure of this business?”
KPIs “are metrics (Indicators) that are directly aligned with your business goals (Key), and measure how successful (Performance) you are at achieving your objectives,” writes Dave Gerhardt, the Director Business Development and Communications for Arbill Industries.
“Your KPIs answer the questions generated by your business objective,” he adds.
Bringing it all together
The difference between metrics and KPIs often goes unnoticed in a world where nearly everything can be and is measured. Staking out a ring around those metrics that can actually give you a strategic sense for how your business is performing is more than worth the time. Learn how business leaders are using KPIs and metrics to build businesses that succeed with data on the Metric Stack podcast.
This article was originally published in October 2017 and has been revamped and updated for accuracy.