Difference between Metrics, KPI's and Critical results
Usually, people use these terms, metrics, KPI’s and key results interchangeably as if they all mean the same, but these are different terms. So, let's learn these with transparency.
The word metric means the measure or something used to measure, and it is derived from the Greek word Metron. Thus, the word measurement is encapsulated in term metrics.
“Metrics is a standard or system of measurement or it’s a tool to measure something.”
In the business world, metrics are called a set of figures or statistics that measure the software development results at different phases.
To measure the success of a product, different metrics are used like:
- Customer renewal rate/ Customer churn rate
- Net promoter score
- Monthly active users
These metrics are used to measure the financial performance of an organization.
- Cash flow
- Burn rate
A metric always contains a value called its current value (the value that the metric has at this current moment). For some metrics, the way of calculating the current value may different form organization to organization.
For example: For calculating exact value of customer renewal rate you can use formula’s
However calculating current value makes it critical to understand how the value is calculated. Metrics are used in both KPI’s and key results but these are two different terms that create lots of confusion. So, let’s learn them precisely.
KPI = Key Performance Indicator. Setting your KPI defines the key areas of business, and a metric is used as a target value that indicates how the key area is performing.
The KPI consist of the following components:
- Current value
- Target value
Target value:- It is the maximum of minimum value of the metric
Title:- It consists of the target and metric value.
Key results kill two bird two birds with a stone as they have a clear specific objective. Key result areas (KRA)are general metrics or parameters fixed by the organization for a specific role.
- Due to clarified objective key clear doesn’t contain ambiguity.
- It also quantifies what success for an objective looks like.
- Key results help to measure progress towards that objective.
An objective is a target or description of something that you'd like to achieve in the future, or it's a short-term goal to achieve the final goal. It's easy to achieve an objective because an objective doesn't contain a metric.
An objective usually has two or three critical results for the same reasons GPS needs two or three satellites to pinpoint your locations accurately.
The key result and KPI are similar(autonomy vise), but the main difference is that KPI always except that key results have a target value different from the start value. Remember, there is always a positive impact of the key result on the metric.
The key result consists of the following component:
- Start value
- Target value
- Current value
Start value:-It is the value of the metric at the start of a specific timeframe.
Target value:- It is the intended value of the metric at the end of the time frame.
Title: Title bundles all the components of the key result. For example, if a good title has an MPS metric with a Start value: 20, Target value: 40. Therefore it indicates that the title will increase MPS from 20 to 40.
Note: A key result id anatomically is a bit different form KPI. A KPI and key result each serve a different purpose that why it is essential to clarify these terms. A metric used in KPI can also be used in the key result.
Conclusion: Metric, key results, and KPI's are essential tools, but they are slightly confusing since they have to overlap them.
|Metric||It is a tool for measurement something|
|KPI||A KPI consists of a metric required to measure how a key area of business is performing.|
|Key result||The key result always makes use of metrics. KPI is a tool that impacts the performance of a metric.|
KPI and Key results always use metrics, but they are much more than just a metric.