Metrics are not KPIs!

Key Performance Indicators (KPIs):

  • Key - these are the most important things to pay attention to
  • Performance - based on some outcome you want to happen
  • Indicators - for meaningful insights about the raw numbers and how to interpret and act on them

Contrast that with a metric. Metrics are just a number. A measurement. Data, not information. They don’t have any meaning beyond that. You have to interpret metrics to derive some meaning from them.

Just because you measure something doesn’t make it a KPI.

KPI = metric + target

A KPI does involve some metric. But it also needs some target to indicate the value (or range) which is “good”.

Think 📈 + 🎯. Plot the metric as a line on a graph and the target could be a horizontal line. Maybe the metric is revenue ($) and the target is some specific $ARR that your business is aiming to grow quarterly sales.

A metric moves up and down over time. A KPI moves into or out of the target range over time.

A KPI could have multiple metrics that are used to determine the desirable target range. You might shoot at a target but fall just below the bullseye. The x-axis metric was on target, but not the y-axis metric.

Some metrics are useful for diagnostic purposes. They allow you to break down the components and drivers which influence the KPI.

Why did the arrow fall short of the bullseye?

  • Arrow speed was too low? ➡ pull the bow back more strongly next time
  • Wind speed was stronger than anticipated? ➡ aim higher next time

Metrics need to be interpreted. You need to understand the dynamics for how all the factors interact and influence each other.

It surprises me how often people confuse this and misuse the word KPI. Maybe they come up with a list of KPIs for things that are actually just metrics and not directly related to the outcome they want. And often I’ve found, it’s not even clear what they want to achieve, or why.

If you find this interesting, you should read the book Measure What Matters. I highly recommend it. It introduces the idea of Objectives and Key Results (OKRs) which were all the rage in business for the last decade or so. I’ve seen more unsuccessful uses of OKRs over the years than successful examples. If you keep in mind the core insight I explained above, you’ll be more likely to hit the mark.