Key Performance Indicators (or KPIs) often get confused with metrics and analytics. The word “key” is the primary differentiator. Not all metrics are created and treated equally. Key Performance Indicators are a TYPE of metric. They are meant to show how well a business objective is actually doing. They are critical. Think vital signs for your business. It drives me crazy to hear people use these terms interchangeably. A metric is not necessarily a KPI but a KPI IS a metric, it’s just a more important one. Let’s take this a step further. A performance indicator could also be either “leading” or “lagging”.

A leading indicator or metric tries to help an organization predict a result or future outcome. It is meant to “lead” or “drive” the team forward and identify a future event. For example, in business, customer satisfaction may indicate future growth in sales. A high employee engagement survey score may indicate a better employee retention rate. The opposite of “leading” is “lagging”.

A lagging indicator shows a result after-the-fact. They are usually easy to measure but they offer us “delayed” information, something historical in nature that we can’t impact or change. For example, a common business lagging indicator is a 2nd quarter revenue review while a common HR lagging indicator is the workforce absenteeism rate. There are quite a few resources available that make the case for organizations to move away from lagging indicators and utilize leading indicators.

However, both are really necessary to understand the true state of the business. Together they provide valuable information for making the right decisions.