Understanding how you’ll measure success in strategic planning is one of the most pivotal elements of a successful and actionable strategic plan. But… we’re going to let you in on a little trade secret – measuring the right performance metrics and KPIs can be downright tricky, especially if you’ve been using them interchangeably without realizing they are different tools. Don’t worry, we’ll clarify some things for you. Read on to learn all about KPIs vs metrics— their similarities, key differences between, and how to optimize them each for best results.
The Real Difference Between KPIs vs Metrics
As strategic organizations, we all want to make sure we’re making the right decisions based on data. And that’s great, but we need to be particularly aware of the way we prioritize and measure this data, especially when it comes to the measurement of our strategic plan.
Many organizations use the terms KPI (Key Performance Indicator) and performance measures interchangeably. And while it’s forgivable, there is a key difference between a KPI and a performance measure when it comes to both the creation and implementation of your strategic plan.
What’s the Difference: KPI vs Metrics
Metrics and KPIs are often confused, but the clear difference is KPIs are the key measures that will have the most impact in moving your organization forward. They clearly articulate and provide insight into what your organization needs to measure and achieve to reach your long-term objectives. Great strategic plans have 5-7 clear Key Performance Indicators that keep the pulse on how you’re performing against your plan.
Metrics also track and provide data on your organization’s standard business processes but are not the most important metrics your organization needs to measure, monitor, and perform against to make progress against your strategic plan.
It’s easy to use the two terms interchangeably, but here is a good way to think about it. Key Performance Indicators help define your strategy and clear focus. Metrics are your “business as usual” measures that still add value to your organization but aren’t the critical measure you need to achieve. Every KPI is a metric, but not every metric is a KPI.
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Breaking Down Performance Metrics
Metrics can track progress and provide data on your organization’s standard business processes. Identifying and monitoring metrics is essential to measuring the success and progress of any strategic process. Metrics are like gauges on a dashboard, providing insight into areas that require improvement and highlighting those that are performing well. Marketing metrics, for instance, can help you understand the effectiveness of your campaigns, whether they are generating enough leads or attracting the right audience.
Another example would be the data you collect from Google Analytics or Facebook ads. Knowing that your ad reached the majority of people in a specific geographic region would be an interesting metric to track, or viewing the bounce rate on a new blog post. These metrics are good to know and can inform some of your decisions, or even your KPIs down the line.
However, it must be noted that performance metrics aren’t KPIs, meaning metrics are not the most important things your organization needs to measure, monitor, and perform against. That specific designation is reserved for your KPIs. Metrics help you measure performance, but they aren’t the most important to achieve your business goals.
The Low Down on KPIs
As stated earlier, metrics and KPIs are often confused, but the clear difference is KPIs are the key measures that will have the most impact in moving your organization forward. They clearly articulate and represent key business goals and provide insight into what your organization needs to measure and achieve to reach your long-term objectives. Tracking KPIs allows you to determine if your goals are being met, or at least close to being met. Great strategic plans have 5-7 clear Key Performance Indicators with a mixture of leading and lagging indicators that keep the pulse on how you’re performing against your plan.
Ultimately, while metrics are the data points that are good to know, KPIs are the data points that you need to know. Metrics are the building blocks to create KPIs. Start with listing your metrics first, then from all those different metrics above, narrow down your primary 5-7 points that would be your key performance indicators.
KPI vs Metrics Examples
An example of a great KPI would be, “to increase new customer trials by 15% in 2019, representing a growth of 15 trials per week to 18 trials per week.” This KPI supports a specific strategic outcome–an increase in net-new revenue and helps clearly outline an outcome.
An example of a metric would be the amount of organic inbound website traffic, or the clickthrough rate on a new Google ad. It’s important to track this metric as it helps feed your strategy outcome, but it’s not a clearly defined KPI related to an outcome. It’s just a valuable metric.
How to Turn a Metric into a KPI
However, the two examples of metrics above can easily be translated into KPIs. Here’s how:
You’ve been tracking your inbound website traffic for over a year now. You’ve identified that this is a strong marker of your online sales revenue, so you want to set a KPI to increase this. Now you need to set a numerical target of where you want your inbound web traffic to be- so, you would set your goal as a 6% web traffic increase by the end of FY 2023. Once you set up a data source and reporting frequency, you’ll have your first KPI.
Achieve a minimum of 6% increase in monthly website traffic over the next year.
- Measure: Monthly website traffic
- Target: 6% increase in monthly website visits
- Data Source: Google analytics
- Reporting Frequency: Monthly
- *Owner: Marketing Manager
- Due Date: End of 2023
Improve the click through rate across all Google Ads to 30%
- Measure: CTR on Google Ads
- Target: 30% CTR
- Data Source: Google Ad Sense
- Reporting Frequency: Weekly
- *Owner: Marketing Manager
- Due Date: End of Each Quarter End of Each Quarter
Read our 27 KPI Examples post to get inspiration for your own Key Performance Indicators.
Effective Strategic Plans Implement Both KPIs and Metrics
When developing a robust data-driven strategic plan, the debate is often centered around what is more important: KPIs or metrics? The truth is, both are critical components of any effective strategy because they provide different perspectives on the progress and performance of an organization.
KPIs focus on the most important aspects of a business that drive success, such as customer satisfaction, sales revenue, and market share. They are also tied directly to other business objectives and initiatives. Conversely, metrics are more granular and measure specific actions and activities, such as website visits, campaign performance, or blog post engagement.
By combining KPIs and metrics, companies get the big picture of their overall business performance and ensure they optimize smaller elements that contribute to their success.
KPIs are generally best suited for annual organization-wide goals. Metrics help measure shorter-term actions.
Identifying and Monitoring Metrics
Metrics are an essential part of the strategic process. They help to measure performance and identify areas that need improvement. However, not all metrics are created equal, and it can be challenging to identify which metrics are most relevant to your organization or area of operation.
- Determine your necessary metrics – The first step is to conduct a thorough analysis of your goals and objectives. This will help you to determine which metrics are most important to track.
- Set up your monitoring process – Once you have identified the metrics you need to track, it’s time to set benchmarks and establish a monitoring system.
Regularly monitoring metrics will provide valuable insights into how your business is performing and whether you are meeting your goals. It will also help you identify trends and patterns over time, which can be used to make informed decisions about improving performance.
- Ensure you’re set with the right tools – To monitor your metrics effectively, having the right tools in place is important. This might include data visualization software, dashboards, and automated reporting systems.
Ultimately, the key to successful metric tracking is to remain adaptable and willing to adjust your approach as needed. By valuing the insights provided by metrics and taking the time to fine-tune your monitoring process, you can position your business for continued success.
Now, let’s explore how to structure your KPIs (which most likely have been identified and selected from your list of metrics). This is a bit more of a formal and more involved process as you will need to regularly report on these with your department and organization.
Structuring Your KPIs
Creating KPIs forces your organization to clearly define the performance measures that outline how you’ll achieve your big strategic priorities. Here’s a great video on how you can develop your KPIs.
Video Transcript How to Develop Key Performance Indicators
Hi, my name is Erica Olsen.
Today’s whiteboard video is on key performance indicators, or KPIs for short. KPIs are those things that are associated with either goals or objectives, whatever you’re calling them, those elements of your plan that are the expressions of what you want to achieve by when those quantifiable outcome-based statements. So KPIs answer the quantifiable piece of your goals and objectives. They come in three different flavors. So we’ll talk about that in just a minute.
But before we do, putting great KPIs together and making sure they work well for you, you need to have these four attributes. And before I talk about those four attributes, so I just want to say the reason they need to work well for you is because KPIs are the heartbeat of your performance management process.
They tell you whether you’re making progress, and ultimately, we want to make progress against our strategy. So KPIs are the thing that do that for us. So you’re going to live with them a lot. So let’s make sure they’re really good.
Okay, so the four things you need to have in order to make sure your KPIs work for you.
Our number one is your measure. So the measure is the verbal expression very simply, in words, what are we measuring, which is fairly straightforward. The tricky thing is, is we need to be as expressive as we possibly can with our measures. So number of new customers, that’s fine. There’s nothing wrong with that. But a little bit advanced or a little bit more expressive, would be number of new customers this year, or number of new customers for a certain product or a certain service. So what is it is it? Yeah, so it is, so be really clear.
And when it comes to measuring it on a monthly basis, you’re going to want to be as clear as possible.
So number of new customers, let’s say this year, number two, is our target, or target is the numeric value that we want to achieve. So a couple of things that are important about this is, the target needs to be apples to apples with when the goal date is set, or the due date is set. So we want to achieve 1000 new customers by the end of the year. So the due date in the target works hand in hand. The other thing is the measure and the target need to work hand in hand. So it’s a number. So this is a number, this is a percentage, this is a percentage, you get the idea.
Third thing, we actually run a report on this data. So where is it coming from? Be clear about what the source is. Most organizations have all sorts of data sources, fragmented systems. So making sure you identify where this data is coming from will save you a lot of time.
And then frequency. So how often are you going to be reporting on this KPI, ideally, you’re running monthly strategy reviews to report on the progress of your plan, at least monthly, in which case we’d like to see monthly KPIs. So you got to be able to pull the data monthly in order to make that happen. That’s not always possible. But let’s try to get there. Certainly some organizations are weekly and others are daily, monthly is a good place to start. So frequency. Great.
So now we know the components that we need to have in place in order to have our KPIs. Here are some different types of KPIs that you might think about as you’re putting your plan together. So there are just straight up raw numbers, I call these widget counting, there’s nothing wrong with widget counting, they don’t necessarily tell a story. And I’ll talk about how to make this tell a story in a minute. But this is just simply widget counting number of things.
The second thing is progress. So this is really often used, it’s great. We use this, which is expressed as percent complete percent complete of the goal, percent completed a project, whatever it might be, it’s a project type measure. It’s a good measure, if if you don’t have quantifiable measures, or you can’t get the data, and you just want to track the performance of the goal as it relates to action items being completed under it.
The third type of indicator is a Change Type Indicator, like percent increase in sales, making this better would be percent increase in sales compared to last year. And the idea is 22%. So you can see how that starts to be more expressive, and work with the target. So this serves to tell a little bit more of a story than this one does, right? And if you want to actually make your widget counting measures tell more of a story like this one does, you might change something like this to read percentage of new customers acquired compared to same time last year. So that’s an example.
Okay, so now we know what we have to have in place and kind of different types of measures to get our ideas flowing. Let’s talk about one thing that you might take your measure writing to the next level and that is think about the fact that there are leading and lagging measures so are leading and lagging indicators. So percent increase in sales or sales is a lagging indicator it occurred as an outcome. If you want to make sure that you’re on track, you might have a KPI in place, which is telling us whether we’re going to hit that increase such as your pipeline, maybe number of leads, or the size of your pipeline.
So we don’t want to over rotate on this necessarily, but we do want to make sure we have a combination of leading and lagging measures when we’re looking at our performance on a monthly basis. So with that, that’s all we have for today. Hopefully you have what you need to write great KPIs for your organization.
Happy strategizing. And don’t forget, subscribe to our channel.
As you create yours, KPIs are comprised of four key attributes and your output should be 5-7 clear KPIs for your plan. Remember the following:
1) Define Your Measure – This sounds obvious, but every KPI must have a clear expression of what you need to measure. The more descriptive your performance measure, the better. You can categorize performance measures into these categories:
- Activity Measures –This measures activity and can include a percentage, number, currency and activities, or processes. An example of this measure would be the number of leads in your pipeline.
- Outcome Measure – This measures progress against a defined outcome, often expressed as a percentage increase, change, or results from an outcome. An example of this would be % increase in revenue compared to last year.
- Project Measure – This measures the progress of a project, often expressed as percent complete, a deliverable, activity, or process the owner can influence. An example would be % complete to complete XX strategic project.
- Target Structure – These represent a numeric result against a date. A perfect example would be $XXXM in revenue by the end date of a strategic objective.
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2) Define Your Target – Your target is the numeric value you’re setting out to achieve. Targets need to match your measurement type and due date. If your measure is a percentage, your target needs to be a percentage. If your measure is a raw number, the target should be a raw number.
3) Outline the Data Source – Every KPI needs to have a clear data source. Make sure you articulate where you are pulling your data from and what the calculations are so everyone is on the same page.
4) Define an Owner and Tracking Frequency – As with any SMART goal, a KPI needs to have a clear owner and defined tracking frequency. So, make sure someone is accountable for pulling the data and updating performance on a defined frequency. We recommend monthly in most cases.
Leading Key Performance Indicators
Leading KPIs are those metrics that help you identify and determine whether you’re on pace to hit your goals. They focus on the future and tell you what you can expect. For example, increased performance of your website ranking, traffic, and visitors can indicate if you’re on track to meeting your sales goals.
Lagging Key Performance Indicators
These indicators show you the outcome of what has already passed. It reports on past performance, rather than future performance, or the reporting looks back and ‘lags’ behind rather than looking towards the future indicators.
A Checklist to Know You Got Your KPIs Right
We know KPIs and performance metrics can be downright hard. As an evaluation to see if you got your Key Performance Indicators right, here’s a quick punch list you can use to pressure test your list of KPIs to make sure they’re strategic:
- They provide a way to see if your strategy is working.
- They focus our staff’s attention on what matters most for success.
- They provide a common language and understanding for communicating our performance.
- They are valid and realistic, helping ensure we’re measuring the right things.
- They are verifiable and ensure accurate data.
- Bonus: They’ve moved from outputs to outcomes.
When we say moving from outputs to outcomes, it means the KPI has clearly expressed the result or outcome of achieving the objective. It helps answer the question, “why are we working on this objective?” The best KPIs are a clear expression of your desired outcome at the end of your strategy.
Benefits of a Performance Measurement and KPI Dashboard
When it comes to measuring performance, KPIs and metrics are the best way to get a pulse on how you’re doing and how you’re stacking up against your goals. Ultimately, it’s hard to know if you’re succeeding or on track to meet your objectives unless you have a way to keep track of your progress. That’s where performance dashboards come into play.
All dashboards are created differently, but these powerful tools generally allow you to track key performance indicators and get a bird’s-eye view of how your business is doing at any moment. With OnStrategy’s performance dashboard, you can easily see everything from your sales figures to your website traffic, giving you a comprehensive picture of your business’s overall health.
And the best part? With all the information in one place, you can quickly identify any areas that need improvement and take action to get back on track. Our dashboards are easily customizable, so you can tailor them to your specific business processes strategic needs, set multiple owners, and schedule reporting frequencies, ensuring that you’re tracking the metrics that matter most to your success.
As you can see, key performance indicators and metrics can help your organization become more proactive and efficient. The trick is to identify and apply the right ones strategically for optimal performance results. It’s vital to identify and monitor each metric carefully and structure your KPIs effectively. Monitoring progress on multiple metrics using a performance measurement dashboard, like OnStrategy’s comprehensive Strategy Hub, for maximum insight into your data will lead to better decisions, smarter problem-solving, and maximum ROI.
Here at OnStrategy, we believe regularly reviewing KPIs can go a long way in helping any organization reach its strategic aims. Read our other content on KPIs to educate yourself further on this ever-evolving world of measuring strategic performance and progress.