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BIO Analytics Corp.

KPIs, Metrics, and Measures


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I recently tapped into a LinkedIn Business Intelligence group discussion on the difference between KPIs, metrics, and measures.  It was a good discussion, but it pointed out that there is still a lot of confusion around these terms.  The response I like the best on this string was given by Bjorn Bjolseth , a senior manager at PwC Consulting in the Oslo area of Norway.  Mr. Bjolseth differentiates the terms this way:

“Measure—anything that is measured, e.g. number of customers, total revenue, etc.  The key thing is that there is nothing inherently good or bad with a measure.

Metric—a value typically derived by a combination of two or more measures, e.g. financial ratios, total revenue over time, etc.  Metrics do provide the notion of whether the values are good or bad.

KPI—brings in the business context.  Metrics within a particular organizational or industry context are KPIs.  However, you need to distinguish between KPIs (key performance indicators) and PIs (performance indicators).  Most companies have far too many “KPIs.”  KPIs are derived from the strategy and value drivers of the company; they are few in number.  The rest might be important, but not strategic and should not be defined as KPIs.”

I’d like to add one more piece to that.  According to Wayne Eckerson in his book, Performance Dashboards: Measuring, Monitoring, and Managing Your Business, a KPI should also drive behaviors that are consistent with the objectives and strategy of the organization.

In fact, Mr. Eckerson identifies twelve characteristics of effective performance management metrics:  they should be strategic, simple, owned, actionable, timely, referenceable, accurate, correlated, game-proof, aligned, standardized, and relevant.  Although most of these appear to be straightforward, you can read a full discussion of these characteristics in his book.

The upshot is that defining the few performance metrics that are actually key performance metrics for your organization takes careful consideration and should be done in concert with developing the strategy and objectives for your organization.  Once developed, KPIs are worth monitoring very carefully.

BIO business intelligence will allow you to use the data you have in your Microsoft Dynamics ERP, combined with any other data in your organization, to calculate KPIs and other performance measures and present them in role-based, interactive dashboards for near-real time monitoring.  So if something starts deviating from targeted performance levels, you can take action before it gets seriously out of whack.  With BIO, you can do just about any analyses you think of--right from the dashboard--with just a few clicks.  BIO lets you drill down, aggregate, and look at trends, correlations, and outliers to help you understand what’s going on and determine what actions to take to correct problems or exploit favorable trends.

Join BIO for a free business intelligence webinar to get to see how BIO business intelligence software can help you meet your dashboard needs. And please contact me at 203.705.4648 or by email at sandi@bio4analytics.com if you have any questions about BIO or business intelligence in general.

Read the LinkedIn Business Intelligence group discussion about KPIs, metrics, and measures here.

If you found this post useful, you might like Wayne Eckerson’s book, Performance Dashboards: Measuring, Monitoring, and Managing Your Business.

By Sandi Forman of BIO Analytics, Corp., Microsoft Dynamics Business Intelligence (BI) Solution Provider

2 Responses to “KPIs, Metrics, and Measures”

  1. Sandi says:

    A very good point, Aleksey. I do think, however, that even a lagging indicator can be used for management by looking at it in context, e.g. trend analysis, and using it to determine a course of action, no? I would be interested in hearing how you use leading vs. lagging KPIs in your organization.

  2. Sandi, thank you for your article and your thoughts in the discussion on LinkedIn. I think the problem is even bigger that just misunderstanding of the difference between metrics and KPIs. Even these metrics that are actually KPIs are in the most cases lagging, not leading. Thus, they can be a good measurement tool, but not a management instrument.