KPI vs. KRI - Providing Better Business Intelligence Insight

 

Editor’s note: This blog post was originally published in May 2013, was updated in 2015 and has again been completely revamped and updated for accuracy, relevancy, and comprehensiveness in September 2019

 

Understanding how your business operates is vital to achieving sustainable success. Nothing will help you understand your business better than properly tracking and analyzing – and understanding how to utilize – your business’ data. This, in a nutshell, is data analysis.

Think of data analysis as a heart monitor. It’s the process of tracking and staying privy to everything your business does – essentially, data analysis provides the foundation for keeping your business’ vitals in check. Without it, you’re totally blind to what’s truly happening. On the surface everything may appear fine, however, your gut feeling is no replacement for the insight and accuracy of the data analysis a business intelligence (BI) tool can provide.

A business’ data is critical to its success

But you already know that. Budgets, Net Operating Income, Inbound Leads, Lead Conversion Rates, Pipeline Performance, Etc. Regardless of your line of business, you know the importance and the benefit of tracking your data. What you may not know, is how to use your data to its full advantage. But first, you need to know the basics.

 

The Differences Between KPIs and KRIs

The objective of this blog is to provide a quick overview of what KPIs and KRIs are – to clear up some misconceptions – and to shed some like on why it’s important to separate the two. We’ll run through some definitions, clear up what is (and what isn’t) a KPI or KRI, dive into the importance of each, and provide a few examples as well.

Now, your metrics can be easily broken down into two main categories:

Performance Indicators (PIs) – Performance Indicators are nonfinancial in nature (i.e., number of calls made as opposed to revenue generated from calls). They’re often measured on a regular cadence (daily, weekly, monthly, etc.) and are the result of an individual activity. PIs provide information on what action must be taken to improve and are useful for creating strategies and aligning goals. These indicators are:

  • Often leading, or forward-looking
  • Understood by all employees
  • Easily actionable

Result Indicators (RIs) – Result Indicators may be financial or nonfinancial in nature. They too are often measured on a regular cadence, however, are not the results of individual activity. They provide a snapshot of a particular result (i.e., monthly sales profits) and are crucial for tracking progress and defining success. These indicators are:

  • Often lagging, or backward-looking
  • Of interest to executives, shareholders, etc.
  • Not easily actionable

Next, you’ve got your Key Performance Indicators (KPIs) and your Key Results Indicators (KRIs). The difference between an Indicator and a Key Indicator lies in its importance and it’s value to you. Whichever a metric is considered is entirely dependent on your business’ priorities. This is why no concrete list of Key Indicators (Performance or Result) exists – they are fluid and always change depending on the business.

Pro tip: If the metric directly impacts your business’ bottom line, it’s ‘KEY’ to your success

What we can all agree on, however, is that Key Indicators (of both types) are incredibly important for day-to-day monitoring, analysis, formulating strategies, and refining operations. What’s most important though, is ensuring you’re using the right indicator for the task at hand.

(Another) pro tip: KRIs track and define success. KPIs break it down and measure it

 

The Importance of KPIs and KRIs

If we revisit our medical analogy from the start of this blog, then a diagnosis would be a Key Results Indicator and diet (for example) would be a Key Performance Indicator. Both are crucial to understanding one's overall health but in two different (but complementary) ways.

Key Results Indicators (KRIs) inform if end goals are being/have been met, along with the progress of these goals/objectives. KRIs are overall company updates; they will let you know if things are going according to plan or have gone awry. They will not, however, tell you why.

Key Performance Indicators (KPIs) are not as flashy as KRIs but focus on the actions that lead to the results. KPIs are the foundation from which successful strategies are built; they are the steps that take us to our KRIs.

Many business’ mistakenly rely entirely on KRIs to provide insight into the overall performance of their business and direction on which actions are successful or what steps to take next. While important, KRIs can only provide a snapshot. They cannot tell you how you got to where you are. Only KPIs can track that steps taken (and those which need to be taken) to ensure the highest level of success.

 

Drop us a line and let us know how your business tracks metrics!

About the Author

Jordan Zenko

Jordan Zenko is the Community & Content Manager at Dundas Data Visualization. As Dundas’ resident (and self-proclaimed) story-teller, he authors in-depth content that educates developers, analysts, and business users on the benefits of business intelligence.

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