kpis-vs-metrics

KPIs vs. Metrics

Business / By / January 27, 2023

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:

  • Leads.
  • Revenue.
  • Traffic.
  • 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.

Communication

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.

Intention

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.

Focus

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.

Connected Leadership Concepts And Frameworks

Leadership Styles

leadership-styles
Leadership styles encompass the behavioral qualities of a leader. These qualities are commonly used to direct, motivate, or manage groups of people. Some of the most recognized leadership styles include Autocratic, Democratic, or Laissez-Faire leadership styles.

Agile Leadership

agile-leadership
Agile leadership is the embodiment of agile manifesto principles by a manager or management team. Agile leadership impacts two important levels of a business. The structural level defines the roles, responsibilities, and key performance indicators. The behavioral level describes the actions leaders exhibit to others based on agile principles. 

Adaptive Leadership

adaptive-leadership
Adaptive leadership is a model used by leaders to help individuals adapt to complex or rapidly changing environments. Adaptive leadership is defined by three core components (precious or expendable, experimentation and smart risks, disciplined assessment). Growth occurs when an organization discards ineffective ways of operating. Then, active leaders implement new initiatives and monitor their impact.

Blue Ocean Leadership

blue-ocean-leadership
Authors and strategy experts Chan Kim and Renée Mauborgne developed the idea of blue ocean leadership. In the same way that Kim and Mauborgne’s blue ocean strategy enables companies to create uncontested market space, blue ocean leadership allows companies to benefit from unrealized employee talent and potential.

Delegative Leadership

delegative-leadership
Developed by business consultants Kenneth Blanchard and Paul Hersey in the 1960s, delegative leadership is a leadership style where authority figures empower subordinates to exercise autonomy. For this reason, it is also called laissez-faire leadership. In some cases, this type of leadership can lead to increases in work quality and decision-making. In a few other cases, this type of leadership needs to be balanced out to prevent a lack of direction and cohesiveness of the team.

Distributed Leadership

distributed-leadership
Distributed leadership is based on the premise that leadership responsibilities and accountability are shared by those with the relevant skills or expertise so that the shared responsibility and accountability of multiple individuals within a workplace, bulds up as a fluid and emergent property (not controlled or held by one individual). Distributed leadership is based on eight hallmarks, or principles: shared responsibility, shared power, synergy, leadership capacity, organizational learning, equitable and ethical climate, democratic and investigative culture, and macro-community engagement.

Ethical Leadership

ethical-leadership
Ethical leaders adhere to certain values and beliefs irrespective of whether they are in the home or office. In essence, ethical leaders are motivated and guided by the inherent dignity and rights of other people.

Transformational Leadership

transformational-leadership
Transformational leadership is a style of leadership that motivates, encourages, and inspires employees to contribute to company growth. Leadership expert James McGregor Burns first described the concept of transformational leadership in a 1978 book entitled Leadership. Although Burns’ research was focused on political leaders, the term is also applicable for businesses and organizational psychology.

Leading by Example

leading-by-example
Those who lead by example let their actions (and not their words) exemplify acceptable forms of behavior or conduct. In a manager-subordinate context, the intention of leading by example is for employees to emulate this behavior or conduct themselves.

Leader vs. Boss

leader-vs-boss
A leader is someone within an organization who possesses the ability to influence and lead others by example. Leaders inspire, support, and encourage those beneath them and work continuously to achieve objectives. A boss is someone within an organization who gives direct orders to subordinates, tends to be autocratic, and prefers to be in control at all times.

Situational Leadership

situational-leadership
Situational leadership is based on situational leadership theory. Developed by authors Paul Hersey and Kenneth Blanchard in the late 1960s, the theory’s fundamental belief is that there is no single leadership style that is best for every situation. Situational leadership is based on the belief that no single leadership style is best. In other words, the best style depends on the situation at hand.

Succession Planning

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Succession planning is a process that involves the identification and development of future leaders across all levels within a company. In essence, succession planning is a way for businesses to prepare for the future. The process ensures that when a key employee decides to leave, the company has someone else in the pipeline to fill their position.

Fiedler’s Contingency Model

fiedlers-contingency-model
Fielder’s contingency model argues no style of leadership is superior to the rest evaluated against three measures of situational control, including leader-member relations, task structure, and leader power level. In Fiedler’s contingency model, task-oriented leaders perform best in highly favorable and unfavorable circumstances. Relationship-oriented leaders perform best in situations that are moderately favorable but can improve their position by using superior interpersonal skills.

Management vs. Leadership

management-vs-leadership

Cultural Models

cultural-models
In the context of an organization, cultural models are frameworks that define, shape, and influence corporate culture. Cultural models also provide some structure to a corporate culture that tends to be fluid and vulnerable to change. Once upon a time, most businesses utilized a hierarchical culture where various levels of management oversaw subordinates below them. Today, however, there exists a greater diversity in models as leaders realize the top-down approach is outdated in many industries and that success can be found elsewhere.

Action-Centered Leadership

action-centered-leadership
Action-centered leadership defines leadership in the context of three interlocking areas of responsibility and concern. This framework is used by leaders in the management of teams, groups, and organizations. Developed in the 1960s and first published in 1973, action-centered leadership was revolutionary for its time because it believed leaders could learn the skills they needed to manage others effectively. Adair believed that effective leadership was exemplified by three overlapping circles (responsibilities): achieve the task, build and maintain the team, and develop the individual.

High-Performance Coaching

high-performance-coaching
High-performance coaches work with individuals in personal and professional contexts to enable them to reach their full potential. While these sorts of coaches are commonly associated with sports, it should be noted that the act of coaching is a specific type of behavior that is also useful in business and leadership. 

Forms of Power

forms-of-power
When most people are asked to define power, they think about the power a leader possesses as a function of their responsibility for subordinates. Others may think that power comes from the title or position this individual holds. 

Tipping Point Leadership

tipping-point-leadership
Tipping Point Leadership is a low-cost means of achieving a strategic shift in an organization by focusing on extremes. Here, the extremes may refer to small groups of people, acts, and activities that exert a disproportionate influence over business performance.

Vroom-Yetton Decision Model

vroom-yetton-decision-model-explained
The Vroom-Yetton decision model is a decision-making process based on situational leadership. According to this model, there are five decision-making styles guides group-based decision-making according to the situation at hand and the level of involvement of subordinates: Autocratic Type 1 (AI), Autocratic Type 2 (AII), Consultative Type 1 (CI), Consultative Type 2 (CII), Group-based Type 2 (GII).

Likert’s Management Systems

likerts-management-systems
Likert’s management systems were developed by American social psychologist Rensis Likert. Likert’s management systems are a series of leadership theories based on the study of various organizational dynamics and characteristics. Likert proposed four systems of management, which can also be thought of as leadership styles: Exploitative authoritative, Benevolent authoritative, Consultative, Participative.

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About The Author

Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
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