Business Metrics vs KPIs: What's the Difference?
Are you confused by business jargon?
There are so many acronyms and terms that exist. Not to mention phrases that are specific to certain industries or corporations. It's easy to get baffled by all of the different terminologies.
Two of the most complicated terms are business metrics and KPIs. When you first hear them mentioned in a board room, you might believe they mean the same thing. However, for most companies, they have very different definitions.
There are a couple of ways you can get through these meetings without looking silly or, worse, fired. You can nod and smile to make everyone in the room believe you completely understand.
Another option is to keep reading and find out what both phrases actually mean.
What Are Metrics in Business?
The most common definition for business metrics is a quantifiable measure that tracks progress and determines success. They can help better understand performance in specific areas essential to the company's survival.
It's also important to know that a metric is not a measure. Business performance metrics can be made up of multiple indicators to define what success looks like.
The audience for business metrics is not only the employees in the organisation. They're generally specifically designed for investors, customers, and others around the company interested in its performance. These individuals can then hold the executives to account using these measurements.
What Are Some Examples of Business Metrics?
Key business metrics can differ according to the industry and what's important to the company. However, some are common regardless of the field. A few examples of business metrics include:
Revenue
Gross margin
Net profit margin
Total customers
Number of employees
Net promoter score or customer satisfaction
Monthly recurring revenue
Employee engagement
Other examples may refer specifically to the type of business you work in. For example, an online store may include metrics around traffic and unique visitors, which helps define its success.
What Are KPIs?
A key performance indicator or KPI is a value used to help review progress against defined goals. These can get tracked against individual employees, teams within the organisation, or the company itself.
They can provide direction towards the success that the organisation wishes to achieve. But, the key to a good KPI is that it must be measurable, relevant to the company, and provide a clear link to the business metrics.
What Are Some Examples of KPIs?
KPIs are for an individual or team working towards the same outcome. As such, the list of KPI examples is much longer and can include some unique measurements specific to the company you work for. Some common types of KPIs can consist of:
Planned hours of work
Missed milestones
Percentage of projects completed before the deadline
Cost of managing processes
Return on investment
Percentage of cancelled initiatives
Schedule variance
Sales conversion
Retention rate
Attrition rate
Cost to acquire a new customer
Cost to retain a customer
There are hundreds and potentially thousands of KPI examples. They should help provide you with an idea of where to focus your efforts and what's important to the company that you work for.
Which One Is Better?
KPIs and business metrics are essential for a company and play very different roles. It's not a case of choosing one over the other. You need both to help drive towards the success the bosses want to see.
Your key performance indicators should provide you with guidance on how to achieve a business metric. For example, if one of the business metrics is related to the total number of sales in the calendar year, then one of your KPIs might be the conversion of new customers to help achieve the figure required.
Without the relevant business metric, you wouldn't know what KPIs to set to reach the success the company needs to keep its doors open. Metrics and key performance indicators should be reviewed regularly to ensure the organisation is on the right track. They should also be challenging to achieve, so you don't meet some business metrics and KPIs one month into the new year.
What's the Best Way to Track Business Metrics and KPIs?
There are several ways to keep an eye on how you're progressing with your measures, such as building reports or dashboards. You can even use Microsoft Excel to monitor key performance indicators and business metrics.
Thankfully, there are better ways, as many business intelligence platforms can help integrate all your metrics into one place that's easy to read. For example, if you use time-tracking software, you can program it to follow specific measures relevant to your business.
Many of them will also allow you to finetune it over time if you find the goals you've set are too easy. It's much simpler than putting in a series of Excel formulas and collating information from multiple sources.
How to Keep Track of Business Metrics and KPIs
The best business metrics and KPIs are the ones that are measurable and can be easily tracked using dashboards or platforms to measure success. You need both figures to monitor how the company is progressing and ensure it's heading in the right direction.
Tracking your targets should be the easy part of the process, especially if you're using our platform. Our software not only helps you analyse business performance, but it can also help you manage projects, assign tasks, and track employee time. If you want complete visibility of your business metrics, start using our program today.
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