In our line of work, we’re constantly talking with clients about business metrics, stats, measures, goals, targets, data points, Key Performance Indicators, etc., etc. Many of these words can be used interchangeably and we’re not ones to get too bogged down in semantics – but it is really important to be clear about what a Key Performance Indicator (“KPI”) is and how it differs from a Metric.  

Believe it or not, Metrics and KPIs do not mean the same thing. While they’re both quantitative measurements, and can be important to report on, they aren’t the same. Calling a run-of-the-mill metric a KPI could inadvertently elevate its perceived importance and shift focus from what is most important. After all, all gourmet meals are food, but not all food is a gourmet meal. 

The most important consideration in differentiating between a KPI and a metric is how it relates to your business strategy – for example, New Customer Acquisition could be a good KPI if Market Share is a key strategy, but New Customer Acquisition is likely a bad KPI if your objective is improving unit economics. 

Key Performance Indicators are:

• • High-level measurements that reflect performance toward specific strategic business objectives
  • Specifically chosen because they’re crucial in achieving stated goals
  • Maintain a high-level perspective of overall performance and are used for strategic decision-making

Metrics are:

• • Generally more granular, from a lower-level perspective, and can be used for day-to-day operational decision-making like average selling price per unit
  • Quantifiable measures to assess the performance of activities or operations within your business – these are often relevant for specific teams or functions but maybe not the full team (for example, time to respond for your customer service team)
  • There’s a wide spectrum, from financial metrics like revenue and net income to operational metrics like production volume to customer metrics like conversion; and they can be sliced many ways – e.g., product type, geography, customer segment
  • Some metrics may be linked to strategic objectives, but most are not. They can help explain or understand a specific aspect of your business but not your strategic goals

The easiest and most important thing to remember about KPIs is that they’re Key. While there are dozens and dozens of metrics related to your business, there can only be a few Key Performance Indicators. Otherwise your team risks losing focus, focusing on different things, or focusing on the wrong thing.  Like Stephen Covey said – “the main thing is to keep the main thing the main thing”!

Almost all of our client engagements include strategic discussion of what your business’s KPIs are and how Common can help those become a natural part of your team’s workflow. If you find yourself struggling with KPI definition and focus, we’ll partner with you to develop KPIs and processes that stick.