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KPIs vs. Metrics: 5 ways to monitor performance

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KPIs vs. Metrics: 5 ways to monitor performance

Key Performance Indicators (KPIs) and metrics are both essential tools in performance measurement and management, but they serve slightly different purposes.

In this blog, we explore the key differences between KPIs and metrics, why they’re essential for achieving your business goals and the vital role business planning & analytics software can play in achieving them.

The key differences between KPIs vs metrics

What are KPIs?

KPIs are high-level metrics that offer a snapshot of a business' performance against its strategic objectives. They are crucial for decision-making and strategic planning. As quantifiable measurements, KPIs can indicate how effectively an organization is achieving its key business objectives in multiple areas including sales, finance and inventory.

Examples of KPIs include sales revenue vs. forecast, net profit, profit margins and win rate.

What are metrics?

On the other hand, business metrics, are broader and cover a wide range of quantifiable measures that help organizations understand and improve various aspects of their operations. They provide detailed information on specific business processes or activities and contribute to a more comprehensive understanding of overall performance.

Put simply, metrics are for operational use and track broader business activity that may not be a business objective or specific goal like a KPI would be.

Examples of metrics might include your business’ Net Promoter Score or NPS, stock on hand, delivery in full on time, the conversion rate of your sales team, number of new customers versus customer churn, social media performance and website traffic.

KPIs vs metrics – a quick summary

In summary, KPIs are used to help you track your progress, ensure your company is working towards its overall plan and hitting target along the way. KPIs establish context for your metrics; however, there are clear differences between the two. KPIs are connected to the business strategy and the overall success of the business. Whilst metrics drive improvements and help businesses focus their people and resources on what counts.

KPIs are actually a subset of metrics that are specifically chosen for their direct relevance to business objectives. For many organizations, metrics help them to establish their KPIs.

Although like metrics, a KPI can be measured on a weekly, monthly, quarterly and yearly timeframe, they are intrinsically linked to the business objectives for the financial year, and even beyond. For example, KPIs would be the form of measurement of a three or five year plan.

So which is best, KPIs or metrics? In practice, you should aim to use a combination of business KPIs and metrics to gain a comprehensive view of performance. Together, they help to keep your organization on track to achieve its strategic goals and business objectives.

Establishing KPIs and metrics

Ultimately, KPIs and metrics are most effective if they are measuring data points that are simple, actionable, and perhaps most important, relevant to your business. That’s because there isn’t a ‘one size fits all’ formula for establishing what your KPIs and metrics should be.

Why? Because KPIs and metrics should be aligned to your business goals, the sector that you’re operating in and ultimately how your organization functions. Although there will be common KPIs and metrics that are the benchmarks within your industry, there will also be KPIs and metrics that are exclusive to your business. Likewise, what is a KPI to one business may only be classed as a metric to another and visa versa.

For example, let’s think about the distribution industry. A traditional distributor (with a branch network and sales team) will operate very differently to an e-commerce distributor. They may both share the KPI of hitting their gross profit targets, but how they get there might be very different and as a result, the metrics that are important to them will differ. The distributor with branches and a sales team to manage might be more focused on customer retention-related metrics and protecting gross profit margins. Whereas the e-commerce business might put more emphasis on digital marketing metrics such as website visitors and paid social media advertising conversion rates.

KPIs and metrics will also vary by department and role. For example, the finance team will have a set of financial KPIs and metrics that, whilst there will naturally be overlap, may differ in priority to the KPIs and metrics the executive team, sales team or marketing team are focused on. A good example of this is reducing debtor days. Whilst it’s a critical metric for finance to have efficient credit control, good cash flow management and overall financial stability, this won’t be a high priority metric for the marketing team if they have little to no influence on its performance. Likewise, the finance team are unlikely to be focused on how many registrations marketing have achieved for a webinar.

Read more: what makes a good KPI?

The importance of measuring KPIs and metrics

Although different, what KPIs and business metrics do have in common is that they should be measured.

Measuring KPIs and metrics is crucial for organizations navigating the dynamic business landscape. These quantitative assessments offer valuable insights into financial health, operational efficiency, and customer satisfaction. By regularly measuring KPIs and various metrics, businesses gain real-time data for strategic decision-making, identifying strengths and weaknesses and driving incremental improvements in business processes.

Business planning & analytics software can help to establish, monitor and measure KPIs and metrics related to a specific department function — whether that’s at executive-level, or individual teams such as sales, marketing, operations, finance or human resources. An intuitive BP&A solution like Phocas offers management teams more than numbers. Unlike static spreadsheets, imagine KPIs and business metrics coming to life with user-friendly interactive data visualizations and dashboards that can be easily shared with stakeholders.

Let’s take a closer look at the top five ways in which business planning & analytics software can help you and your team get a better understanding of your KPIs and metrics and set you up for success.

1. Data consolidation improves KPIs and metrics

Many companies get their KPIs and metrics wrong, either by measuring too much, not enough or simply copying what others are doing. And, getting them right can sometimes feel like an impossible task - from deciding which KPIs and metrics to focus on to agreeing what ‘good’ looks like as they require the input of multiple departments, individuals or datasets. Business planning & analytics software consolidates data from a range of disparate sources, is easy to use, and enables you to make accurate decisions about the future of your growing business.

Beyond helping you to set your KPIs and metrics, analytics software also improves data accessibility so they become easier to track and measure. When critical information becomes accessible to your entire team, everyone can focus more on developing products, people, and places that better serve customers. A modern business planning & analytics solution empowers users of all skill levels to become more discerning about tracking KPIs and business metrics to drive improvement.

2. Interactive data visualizations and dashboards

Business planning & analytics software converts the raw data into dynamic, data visualizations and interactive dashboards designed for ease of use. These dashboards allow users to drill down into the underlying information and find out what is driving the high-level, visual chart, graph, or table on the surface.

The dashboard becomes your single source of truth to track your KPIs and metrics, and allows you to quickly monitor your business performance. An interactive dashboard, rather than a spreadsheet, invites professionals to use data analytics to harness a clear picture of their KPIs and metrics and determine how to maximize each for success. Because they are so easy to use, they also empower non-technical users to self-serve which reduces the reporting demands on finance and IT teams.

3. The ability to customize KPIs and metrics

Every industry can benefit from business planning & analytics software. A modern solution, however, can be customized to meet the needs of your specific industry. For example, food and beverage industry managers have to coordinate perishable goods in their supply chain, and use analytics + reporting daily to make smart business decisions about their stock, their sales, and their customers. The industry requires real-time business intelligence that analyzes product sales, inventory, and financial data to accurately track KPIs and metrics.

Similar to technology platforms, KPIs and metrics require a high level of customization to measure. Companies are well aware of the build vs. buy debate when it comes to purchasing new technology. Developing a bespoke analytics solution in-house may be possible for some IT teams, yet, as with some long-term projects, your company may find its time and resources steered away from its core competencies and ironically, the achievement of its KPIs.

4. Real-time monitoring of KPIs and metrics

Regularly monitoring whether your business performance is improving, or deteriorating, is critical to your ability to make data-driven business decisions and achieve your KPIs and metrics.

It might seem obvious, but a KPI or metric should be easy to measure. An effective one avoids generalized goals like, “improvement in warehouse department.” Instead, it should be based on a solid, focused goal that can produce qualitative and quantitative measures. A good example could be to 'decrease dead stock by 20% within the next quarter'.

One way to measure a business KPI or metric is with a business planning & analytics solution. It aggregates all the data from your various systems and gives you a single source of truth, making it easier to analyze. A business planning & analytics solution will let you ask questions of your data to make critical decisions based on facts rather than gut feel.

Not only will you be better placed to accurately and effectively measure your business KPIs and metrics, you will also have more detailed insights into how your overall business is performing, leading to more informed forecasts and decision making. The Phocas solution also provides in-built automated reporting so there is greater transparency across the business of KPI and metric attainment.

5. Gain a competitive edge

In today’s business landscape where customers expect service and results regardless of whether your team is working onsite at your company headquarters or from a home office, businesses need to find innovative solutions to help them stay ahead of the game.

It isn’t enough to set KPIs and metrics to remain competitive. For them to be truly effective, managers must set KPIs to measure the success of their specific strategy, metrics to drive improvements in business processes and most important of all, establish ways to measure them.

Implementing a business planning & analytics solution like Phocas can do just that. It will offer your team an advantage when it comes to getting a clearer view of your successes, challenges, and new opportunities in order to drive key results.

The future of KPI and metric reporting

As the business landscape continues to become increasingly more complex, dedicated business planning & analytics software like Phocas is a way to make sense of this complexity.

It's not just about data; it's about leveraging data for a competitive edge that makes it easier to set and achieve your KPIs and metrics. The future belongs to those who can adapt, and Phocas enables businesses to stay ahead and make data work for overall business success.

Phocas offers a tool that seamlessly provides data consolidation, interactive dashboards and visualizations, and real-time monitoring of KPIs and metrics. In a future where competition is dynamic, these features position businesses for agility and informed decision-making.

To learn more about the most effective business KPIs, and how you can use them to improve your business, download a free copy of our eBook ‘The top 7 KPIs for CEOs and Executives’.

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Top 7 key performance indicators for executives

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Written by Alison McKenna
Alison McKenna

Before joining Phocas as an in-house tech writer, Ali worked as a freelancer and brings a wealth of industry experience to her writing. She previously occupied a senior management position at a national distributor of plumbing and building supplies in the UK. Ali has a genuine passion for writing about ways to help businesses feel good about data.

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