The difference between a KPI and a Metric
Summary:
How does one decide if a Metric qualifies as a Key Performance Indicator? and if so, what are the characteristics of an excellent online marketing KPI?
I am actually an extraordinarily positive advocate of creating and using KPIs and I truly believe that one has to understand that using KPI and Metric interchangeable is not only wrong, but it can significantly damage your optimization initiatives!
Remember: a KPI is a Metric but a Metric is not necessarily a KPI!
Without real KPIs an organisation will not perform to its maximum and this is in particularly true for businesses where online performance is a vehicle for success. And I think it is noteworthy to remind us all that It is rarely about financial metrics - They represent the results of driving a good KPI.
Essentially concluding that KPIs are a communication and steering vehicle for management.
I will present the following 7 KPI characteristics at the RIMC conference in Reykjavik later this week.
7 KPI characteristics
1.
a KPI echoes organizational goals
2.
a KPI is decided by management
3.
a KPI provides context
4.
a KPI creates meaning on all organizational levels
5.
a KPI is based on legitimate data
6.
a KPI is easy to understand
7.
a KPI leads to action!
You are more than welcome to challenge me on any of the above, add to the list or send me free diet cokes as a praise of their brilliance :-)
Find a presentation on the above KPI characteristics below:
Other great comments to the KPI debate from my fellow Analytics bloggers:
- Top 10 Web Analytics KPI (Key Performance Indicators) (by: Aurélie)
- Emetrics London Reflections: Triggers, Benchmarking, Identifying Goals & KPI Cards (by: Avinash)
- The big book of KPIs (by: Eric)
- Help Yourself to a KPI! (by: Bryan)
- Measuring Key Performance Indicators (by: Manoj)
Cheers.. Off to Iceland! :-)
February 5th, 2008 at 15:48
What a timely and relevant article. Clients often tell me that they track KPIs, then show me their metrics report. These rules will really help me better define KPIs for them.
February 6th, 2008 at 0:26
new KPI: ratio of diet cokes over red bulls? ;-)
February 6th, 2008 at 0:41
We use 4 rules for KPIs;
1) The metric has a timescale associated to it (i.e. It is reported once a month)
2) The metric has a benchmark
3) The metric has a reason to be reported to an actor
4) The metric has an associated action surrounding it if a problem occurs. (If metric = xxx an action is taken to rectify the situation)
These 4 rules when followed mean that the metrics become KPIs which are infused with business logic as you’ve suggested Dennis.
When someone (the actor - we call them actors because they have the ability to take action on the metric) follows a benchmarked monthly, weekly or daily number and sees a pre-defined flag, then that someone is responsible of taking action.
Actions (also pre-defined) mean that things happen in the business which wouldn’t have happened before. A situation exists which helps you move forward toward your business goals.
At least that’s the idea. :)
February 6th, 2008 at 4:19
Hi Kristine,
Thank you very much for the comment; and the reasoning for writing this very post is essentially based on similar observations to yours.
Cheers :-)
Hi Julien,
Believe it or not; but I ONLY have 2 Red Bulls a day! .. he he - I should definitely increase that ratio
talk soon.
Dennis
February 6th, 2008 at 4:47
Hi,
Great input! Thanks a lot for sharing Steve.
First of all; I am quite happy to see that we essentially agree (…and this reply is probably more for ME :-) than for you).
I created my KPI characteristics without applying attitudes towards operational execution, but I think you applied that extremely well in your response here.
If I were to pool your operational guidelines into my characteristics, it would look like this:
a KPI provides context
The metric has a timescale
The metric has a benchmark
a KPI echoes organizational goals
The metric has a reason to be reported to an actor
a KPI leads to action!
The metric has an associated action surrounding it
Good stuff. I will (with the appropiate credits of course) apply this is my upcomming presentation this week.
Cheers
Dennis
February 6th, 2008 at 7:58
Very good way of bringing content into presentation.
ralf haberich.
February 6th, 2008 at 12:28
Hi Ralf,
Thanks for the thumbs up.
Will you be at the German WAW event this month?
Dennis
April 4th, 2008 at 9:35
Good one KPIs. Below is summary overview of blog… coming soon.
Key Performance Indicators (KPI)
1. Key - It is central to the survival of the organisation (Critical Success Factors-CSF)
Survival – Strategy-Tactics-Values.
Vision-Mission-Objectives-Goals
2. Performance – It is about efficiency and effectiveness
Efficiency - Input vs. output
Effectiveness – Achieving goals
3. Indicators – Measurable vs. non measurable
Figures vs. Words
Metric vs. non-metric
Financial vs. non-financial
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