KPI stands for Key Performance Indicator. With the word “keyword” included in the name, we realize that maybe a KPI has a certain level of importance. A KPI is a metric that measures something important, such as how well a company is achieving its business objectives. KPIs can be defined at the general level of the company, within departments and teams, or at the level of individual tasks.
What are KPIs? KPIs or key performance indicators are the metrics used to measure fundamental business initiatives, objectives or goals. The keyword in the phrase is “key”, meaning that they have a special or significant meaning. KPIs act as measurable benchmarks with respect to defined objectives. The metrics within a particular organizational or industrial context are KPIs.
However, it is necessary to distinguish between KPIs (key performance indicators) and IPs (performance indicators). Most companies have too many “KPIs”. KPIs are derived from the company's strategy and value engines; they are few. The rest may be important, but not strategic and should not be defined as KPIs.
Establishing, monitoring and reporting on your key performance indicators allows you to have a clear picture of your performance. While KPIs measure progress toward specific objectives, metrics are measures of the company's overall health. If you want to base your business decisions on data, it's vital to understand the difference between KPIs and metrics. The definition of a key performance indicator (KPI) is a measurable value that demonstrates how well a company achieves its key business objectives.
Metrics can mean that you are focusing on an incorrect measurement, creating confusion around your goals and influencing decisions that real data may not support. For example, you can track website visitors as a metric, but unless it's linked to a specific key business objective, it's a metric, not a KPI. KPIs can be comprised of a variety of different metrics that give you a complete picture of your or your team's progress toward a goal. On the contrary, a retail chain might value in-store sales more, as the best KPI metric to measure growth.
By knowing how well your team generates leads online through several key metrics, you can determine how successful the website is in achieving this specific strategic objective. As the needs of companies and customers change, KPIs should also adapt and certain numbers, metrics and objectives change in line with operational developments. If you missed this incident in the news, selecting certain metrics and objectives caused hundreds of employees to open unauthorized customer accounts. It's common, even in the field of business intelligence, to hear that KPIs and metrics are used interchangeably, so let's clarify that.
Given the time pressure that everyone feels in the business world, it is very tempting to assign the task of selecting KPIs to a person and ask them to suggest a list of metrics for the company or business area to use as key indicators.
