Business Metrics vs KPIs: What's the Difference?

Do you get 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 your head 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.

The most common business metrics definition is a quantifiable measure that tracks progress and determines success. They might get used to help better understand performance in certain areas that are essential for 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 better define what success looks like. 

The audience for business metrics is not only the employees in the organization. They're generally designed explicitly for investors, customers, and other people around the company who are interested in how well it's performing. These individuals can then hold the executives to account using these measurements.

Key business metrics can differ according to the industry and what's important to the company. However, there are some commonalities regardless of the field. 

Some 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.

A key performance indicator or KPI is a value that's utilized to help track progress against defined goals. These can be attributed to individual employees, teams within the organization, or the company itself.

They can provide direction toward the success that the organization wishes to achieve. However, 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.

KPIs are generally specific to 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 based on 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 canceled 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 provide you with an idea of where to focus your efforts and what's important to the company that you work for.  

KPIs and business metrics are essential for a company and play very different roles in the organization. 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 refer to the conversion of new customers to help achieve the figure required. 

With the relevant business metric, you will 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 organization is on the right track. They should also be a challenge to achieve so that you don't meet all the business metrics and KPIs one month into the new year.

There are several ways to monitor how you're progressing with your measures, such as building reports or dashboards. You can even use Microsoft Excel to keep tabs on 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 platforms.

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 help track how the company is progressing and ensure that it's heading in the right direction.

Tracking your targets should be the easy part of the whole process, especially if you're using our platform. Our software not only helps you analyze 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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