Best Practices

KPIs vs. Metrics: What They Are & How To Track Them

Jonathan Friedman
March 27, 2021
KPIs vs. Metrics: What They Are & How To Track Them

In order to measure the success of your goals you can leverage both KPIs and metrics.

People who have goals are found to be 10x more successful than those who don't. And the people who write down their goals are 33% more likely to achieve them than those who don't.

But what about businesses? Well, companies that track their progress towards goals are twice as likely to achieve them. The tools they use for this? KPIs and metrics.

But what's the difference between KPIs vs. metrics? Do you need both? And how can you use them to measure progress towards your business goals?

Read on for a deep dive into KPIs vs. metrics and how you can use them to grow your business. Below is everything we will cover. Feel free to skip ahead.

What are metrics?

To use KPIs and metrics, you first need to understand what they are. 

Simply put, metrics measure how a business is doing in terms of any business goals. They are quantifiable measures you can use to understand how a company is performing. They cover every aspect of your business, and every department can track its metrics. 

For example, project managers can use tons of metrics to get a clear picture of their progress towards bigger goals. They can focus on productivity metrics, such as milestones completed or the ROI for a project. They can also look at quality metrics, such as customer satisfaction or errors made within a project.

What are KPIs?

KPI metrics are a more specific type of metric. KPIs, or key performance indicators, are quantifiable measures of key business goals. The key here is essential; KPIs are metrics that track the most important goals a business hopes to achieve. 

KPIs are important because they allow you to measure how a business performs in terms of the most important goals. By tracking KPIs, you can evaluate and adjust your strategy when needed to achieve core business goals.

KPIs vs. business objectives

Here it may seem that KPIs and business objectives are the same. And while they are similar, they have fundamental differences. 

Business objectives are targets towards a goal. They are essentially the outlined steps or milestones that are necessary to achieve a larger goal. 

So if the business objective is the means to achieving the goal, a KPI is how you measure the objective. As an example, say a business has the objective of increasing its Instagram following by 10%. The KPI they would use to track this objective is the number of Instagram followers they have.

KPIs vs. metrics: what's the difference?

While both KPIs and metrics help measure progress towards business success, they aren't the same thing. Metrics are used to track critical goals for company success. KPIs (or "key performance indicators") are metrics but a more specific type. 

You can compare KPIs and metrics to squares and rectangles to understand the difference. All squares are rectangles, but not all rectangles are squares. A square is a more specific kind of rectangle.

In the case of KPIs and metrics, KPIs are like squares. They fit into the broad "rectangle" category of metrics, but they have more distinguishing features that set them apart. There are more specific rules that define what is considered a KPI.

If a metric is measuring a core business objective, it's a KPI metric. If it isn't, it's just a metric.

KPI example

To get a better idea of how KPIs are used, let's start with a hypothetical example. Say a mom wants her family's house to be tidier. She may realize that her kids leave their dirty clothes on the floor.

With this in mind, she could set an objective to reduce the clothing on the floor by 75%. This is very important to her: it is a core objective that she wants to track. This means the number of clothing items on the floor is a KPI, meaning it is a KPI, not a metric.

Because KPIs need to be measurable ways to track progress towards a goal, her KPI would not be "have a tidier house." This is not measurable. Instead, she uses "items of clothing on the floor" as a KPI to measure progress towards her goal.

KPIs vs. metrics: why businesses need both

It may be tempting to think that you only need KPIs and can ignore metrics altogether. After all, they do measure the key business objectives. So why would you need metrics that are not focused on the most critical aspects of a business?

KPIs don't give a complete picture of an organization. Sure, they allow you to measure how the business is doing in terms of its main objectives. But if a KPI indicates that something is going wrong, they usually won't show why there is a problem. 

You look at KPIs to see if you are on track towards a goal. If you aren't, you need to look to metrics to figure out why.

Using metrics to get KPIs back on track

Let's look back at our tidy home example to illustrate this point. Say the mom measures the number of dirty clothes on the floor at the end of every day. One night, she notices that there is a spike in the number of dirty clothes.

She uses this as an indication that her kids are not performing up to her standards. Her KPI gives her awareness of the problem, but they do not indicate how to fix it. She needs to look at other metrics to determine how to resolve the issue and get back on track towards her goals.

While looking through the metrics for her home, she realizes that the number of clothes baskets available is down significantly. Her kids are throwing their dirty clothes on the floor because there are no baskets to put them in. Knowing this, she can find more clothes baskets and get back on track towards a clean floor.

Metrics and KPIs help businesses achieve goals

Of course, most moms are not actually tracking KPIs and metrics. So how do KPIs and metrics work in real life to help businesses achieve their goals?

Let's look at a few examples to illustrate this. Say Jim from marketing is looking to determine how effective his department's email marketing campaign is. He uses an email open rate as his KPI for this. 

While looking at this KPI, he realizes the open rate is down. But he doesn't know why, so he looks at other metrics to determine the cause. In doing so, he realizes that the bounce rate is significantly higher than average. 

He can then use this information to address the underlying issue. KPIs help indicates that there is an issue, and other metrics help address it.

See how this information can be incredibly valuable to stay on track towards business objectives? Here's another more broad example to illustrate this. Say, Dunder Mifflin, a paper sales company, is tracking net profits as a key performance indicator.

Net profits for the month are down. There are many possible reasons for this. Michael, the manager, looks at other metrics to see what issues need to be addressed to get back on track. 

He may start by looking at the sales team's performance to see if they are causing the issues. He realizes that their sales call volume is incredibly low because they are distracted. Instead of making sales calls, they are pulling pranks and wasting time. 

He also may look at the month's expenses to determine why net profits are down. He realizes that his office has thrown three parties in the last month in looking at this metric. Each party had a significant budget, which cut into the net profits for the month. 

With these metrics in mind, he can now form a plan to get net profits back on track. He will reduce spending on parties, and he will work to reduce workplace distractions so that his sales team will make more calls. 

Without measuring both KPIs and metrics, he would not have a clear picture of where the problem arose, and he would be helpless to getting Dunder Mifflin back on track.

Types of KPIs and metrics

Now that you understand the importance of KPIs and metrics for businesses to achieve their goals, let's discuss some examples of KPIs and metrics that companies can track. 

A company may measure outputs, such as profits, downloads, or sales. These will often be KPIs, as they are a result of other efforts. If these numbers are down, it may indicate that there are issues with the inputs.

The inputs involved in achieving those outputs, like the resources, behaviors, and energy consumed in a process, are standard metrics. The outputs depend on these inputs. In the example above, profits (output) were dependent on sales calls (input). 

Another type of metric is a process metric, which can evaluate the efficiency, quality, or consistency of a process. Project metrics are used to track milestones related to projects or initiatives. 

These different types of metrics work together to get a clear picture of how a business is doing. Businesses and departments should make decisions on what KPIs and metrics are relevant to track.  

KPIs differ between businesses

Some KPIs are better than others for a particular business. As a result, different companies can use different KPIs to measure the same things.

In the tidy home example, one mom may choose to measure "dirty clothes on the floor," and another may choose to calculate "dirty dishes in the sink." They could also look at things like "number of loads of laundry" or "the amount of time clean dishes sit in the dishwasher."

Depending on the home and the issues present, different moms with the same goal— a tidy house— will focus on other areas. The same is true of businesses. 

For example, if a business wants to increase brand awareness, it can look to many different KPI metrics. One business may look at growing its social media following, while another may focus on improving website traffic. 

KPIs and metrics in different departments

Different departments within a company should measure their own KPIs to get an accurate picture of their performance.

For example, a sales department could measure conversion rates, the amount of time it takes to close a sale, or various e-commerce metrics to measure their performance. A marketing department would look at different metrics, such as website traffic, the cost of customer acquisition, or social media growth.

The HR department may use employee turnover rate, average revenue per employee, or the cost per hire as KPIs to measure their performance. And a project manager may look at the cycle time of projects or whether the projects stay within budget.

When individual departments measure and track their own KPIs, the entire company will become more effective. 

4 Steps to set and track effective KPI metrics

Clearly, there are many benefits to setting and tracking KPIs. Luckily, the process of effectively using KPIs and metrics is not as complex as it may seem.

Use the following simple steps to propel your business closer to achieving its goals in no time.

Steps to set and track effective KPI metrics

1. Choose effective KPIs

KPIs are essential, and there are many different options of KPIs and metrics to set. So how does a business choose which KPIs to track? Often companies will adopt industry standard KPIs, but this approach isn't always practical. 

Instead, start by looking at your overarching business goals and make a plan for achieving them. Break your big goals into smaller goals or business objectives.

The business objectives that you set will inform the KPIs you use to track those objectives. Then, take a look at what metrics you can use to track these objectives.

Tidy Home KPI Example

For our tidy home example, one objective may be to have 75% more clear floor space. The KPI that the mom uses to measure this is the amount of clothing on the floor.

Business KPI Example

For Dunder Mifflin, they may have the objective of increasing employee productivity. They may use the number of sales calls made as a KPI to measure this. Or they may opt to measure other KPIs, such as conversion rates or the amount of time it takes to close a sale.

2. Make your KPIs specific, measurable, and relevant

You may find yourself in a position where you need to decide between different KPIs. You can use the SMART goal-setting process to help narrow down your options. SMART goals are an acronym for goals that are Specific, Measurable, Attainable, Relevant, and Time-bound.

You can use a similar process for setting good KPI metrics. Though KPIs aren't the same thing as goals, they are the progress indicators towards a goal. KPIs should be specific, measurable, and relevant to the goals they are tracking.

Let's dig a bit deeper into each of those items so you can choose effective KPIs to measure.

Specific KPIs

Your KPIs need to be well-defined. Consider the mom who wants her kids to keep the house tidy. She could set a KPI that measures how much stuff is on the floor. 

But what constitutes "stuff"? Does furniture count toward this measurement? And what about decor items? Can stuff be on the floor if it is in its designated spot?

This is not an effective KPI because it isn't well-defined. Instead, the mom defines her KPI as clothes on the floor. This hones in on a problem area that she has identified: her kids leaving their clothes on the floor.

Measurable KPIs

When setting KPIs, you also need to ensure they are measurable. This allows you to track performance easily. With the tidy home example, the mom is frustrated that the floor is covered with things that shouldn't be there.

She could have set a KPI as the amount of clear floor space, but how would she measure this? Would she get out her tape measure and calculate the square footage of floor space that isn't covered by junk? Unlikely. 

By choosing a metric that is easy to measure, she is choosing an effective KPI. She can easily count how many clothing items are on the floor to determine how her kids are doing. 

Relevant KPIs

KPIs need to focus on the right things. If a mom wants her kids to keep the house tidier, she isn't going to track how much candy they eat. Similarly, if your business objective is to increase website conversions by 20%, you will not use your social media follower numbers as a KPI. 

A KPI that tracks the number of clothing items on the floor is relevant for a mom who constantly finds herself picking up her kid's clothes. However, if that mom finds herself picking up toys on the floor, not clothes, then the KPI is no longer relevant.

This is why it is essential to look within your own business when setting KPIs, not just to adopt KPIs that other organizations are tracking. As mentioned before, different companies will track different KPIs. When setting your KPIs, make sure they are relevant to your business objectives.

3. Track your KPIs

It's not enough to set KPI metrics; you also need to keep track of them. And while a pen and paper can be useful for some things, they are not very practical for keeping track of KPI metrics. Luckily, there are plenty of tools available to help you keep track of your KPIs.

TrueNxus is one tool that you can use to keep track of your KPIs. It is a collaboration platform that can help your company work together on initiatives and projects.

When you create a project in TrueNxus, you can outline your key objectives from the start. Your entire team will then have a goal in mind to work towards.

With this goal in mind, you can make a plan for what tools to use. You may track your KPIs with a tool like Google analytics. Or perhaps you need to track project objective KPIs, which you can do automatically within the TrueNxus tool.

By using project management software to keep the team on track, you will have a clear picture of how your team is working towards the goals you've set. 

Whatever your KPIs, make sure you have a plan in mind for how to track them.

4. Evaluate KPI metrics

When you get into the implementation phase, your KPI metrics may let you know that you are falling short of your business objectives. You can use these metrics to evaluate and adjust your strategy and reach your goals.

Or perhaps you realize that the KPIs you set are not practical tools to give you a clear picture of your progress. You may need to adjust them.

Say the mom tracks how many clothes are on the floor for a few months. Eventually, her kids stop throwing their dirty clothes on the floor. But she realizes there is a new problem: she keeps stepping on legos.

Instead of continuing to track clothing items, she should adjust her KPI accordingly. She wants the floor clean, and if she is tracking the wrong KPI, she will not achieve this goal.

Regularly evaluating what the KPIs and metrics are telling you and adjusting your strategy accordingly will set you up for success. 

Set and track KPI metrics

So who is the winner in the KPIs vs. metrics debate? Well, neither. It's not a competition. Both are essential for keeping your business on track towards its goals. 

You now have an understanding of the importance of KPIs and metrics. And you know how to set and track them. Start monitoring your KPIs and metrics today!

And if you need help keeping your projects and business objectives organized across your entire team, use TrueNxus. You can try it for free today.