05

Feb

By Dennis R. Mortensen
19 comments
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:

Cheers.. Off to Iceland! :-)

  • Kristine

    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.

  • Julien

    new KPI: ratio of diet cokes over red bulls? ;-)

  • SteveJ

    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. :)

  • Dennis R. Mortensen

    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

  • Dennis R. Mortensen

    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

  • Web Analytics Europa

    Very good way of bringing content into presentation.

    ralf haberich.

  • Dennis R. Mortensen

    Hi Ralf,

    Thanks for the thumbs up.
    Will you be at the German WAW event this month?

    Dennis

  • Moses Sena Kpetigo

    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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  • http://businessintelligence.me we are cloud

    To compliment this article, here are a few examples of some business performance indicators (kpis, metrics) that an organization could measure: http://bit.ly/cPEXbu

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