KPIs are NOT metrics

Let's set the record straight on what a KPI really is. Tons of consultants get it wrong, and I see a lot of cheat sheets etc circulating on LinkedIn where people list metrics as KPIs.

A KPI is not a metric, but a metric is part of a KPI. 

KPI stands for Key Performance Indicator. It’s an indicator of how well a specific area of your business is performing. 

KPIs are the perfect type of goal to easily monitor how key areas of your business are doing. They help you stay on top of your business as usual.

By setting a KPI, you are picking a metric to measure something that is important to you. Such as revenue growth or employee happiness. 

However, just picking a metric isn’t enough.

The metric will have to display a value (the KPI’s progress). And you need to decide what value to strive for (the KPI’s target).

Calculating progress

Calculating progress for your KPI may sound obvious, but each option does have it pro’s and con’s. For example, let’s say that you have a software company and you picked the metric NPS (Net Promoter Score) to measure customer happiness. You install an ongoing survey for your users that is triggered based on usage and time. 

You can narrow progress by filtering for specific attributes, such as ICP (Ideal Customer Profile). 

Or you can adjust the time span: you could look at today’s NPS or the average score for the past 30, 90, or 365 days. Today’s NPS will fluctuate quite a bit, making it hard to spot trends. But looking at the average 365 days will make it hard for you to notice recent upward or downward trends.

Decide how best to calculate progress for your KPI.

Setting a target

Now that you know how progress is calculated, you’ll have to set a target value. Without a target, your KPI wouldn't be able to indicate performance — it cannot fulfill its promise of being a Performance Indicator.

Let's say that employee happiness is important to you. The leading metric to measure employee happiness is eNPS (Employer eNPS). The eNPS score runs on a scale from -100 to +100.

You need to pick what is the desired value for you. It could be 0, it could be 10, it could be 30, it could be 50.

For popular metrics like these, there are good benchmarks that you could look up. These benchmarks could be specific to your industry, size, or geography. These benchmarks will tell tell you what is a good target value to strive for.

By assigning the target value (eg. 30), you have now turned your metric into a KPI:

eNPS ≥ 30
(eNPS should stay at or above 30)

And there you go, that's a KPI.