KPIs are metrics an organization uses to track and measure its progress toward critical business objectives. Metrics, on the other hand, are those that measure organizational performance and health in the context of specific activities and processes.
What are KPIs?
KPIs (key performance indicators) are metrics an organization uses to track and measure its progress toward critical business objectives. The operative word here is “key” since the metrics are the most important ones at hand and serve as measurable benchmarks.
Here are some common KPI examples across several industries or business types:
- SaaS – churn, cost per acquisition, and average revenue per user (ARPU).
- Retail – capital expenditure, sales per square foot, and stock turnover.
- eCommerce – conversion rate, users, and cart abandonment rate.
- Professional services – utilization, effective billable rate, and backlog, and
- Online media – unique visitors, share ratio, and time on site.
What are metrics?
Metrics, on the other hand, are those that measure organizational performance and health in the context of specific activities and processes. While metrics may be loosely related to organizational objectives, they are less important than KPIs and tend to provide little clarity on whether the company is making adequate progress.
Examples of business metrics include:
- Profit, and
- Profit margin.
Understanding the difference between KPIs and metrics
To understand the main difference between KPIs and metrics, consider that KPIs are a subset of metrics. In other words, all KPIs are metrics, but not all metrics are KPIs.
Some of the other differences between these quantitative measures include the following.
KPIs are strategic indicators that are used to communicate progress toward business objectives. Metrics are more granular and may be used to track activities, areas, or processes that support those objectives.
For example, a SaaS company may set an objective to increase sales by 15% in 2023. The KPI in this case may be the number of monthly active users, but to ensure the objective is reached, the company would need to track various metrics. These relate to the performance of sales personnel or the effectiveness of certain communication channels, and so forth.
KPIs are tied to outcomes such that they move up and down in response to organizational performance. Metrics measure the impact of day-to-day performance on various business areas and, as we noted earlier, may not be able to track the success or progression of strategic initiatives.
Understandably, KPIs are broad, holistic measures that define business objectives that are relevant to multiple departments. Metrics are narrower, lower-level measures that track activities and processes specific to one department, team, individual, or work area.
Let’s return to the example of the SaaS company that wants to increase sales by 15%. Since the various departments will play a role in helping the company achieve the objective, the metrics will also differ. The sales department may be concerned with lead conversion, while the customer service department may instead track NPS.
Read Next: KPI, North Star, OKR.
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