Understanding The Difference between KPIs, Goals, and Targets

Understanding the Differences Between Goals, Targets, and KPIs

While goals, targets, and KPIs may seem similar, they play distinct roles in achieving your business vision. Let’s break down each term:

Goals are the overarching objectives you have for your business. They provide a clear direction and purpose, guiding the organization’s efforts. For example, a common business goal might be “improving sales.”

Targets are the quantifiable benchmarks you set to achieve your goals. They provide concrete milestones that keep teams focused and motivated. In the context of the “improving sales” goal, a target might be “closing 10 deals per week.”

Key Performance Indicators (KPIs) are measurable values used to track progress toward a goal. Unlike singular metrics, KPIs are tied to specific business goals and can include multiple metrics. For the target of “closing 10 deals per week,” the KPI would be the number of closed deals.

Goals, Targets, and KPIs: Which Comes First?

Given the close relationship between these concepts, it’s crucial to establish a logical order for setting them. Based on a survey of business professionals, including those in B2C services/products (40.43%), B2B services/products (34.04%), and marketing/digital/media agencies (25.53%), the preferred sequence is as follows:

1. Goals: Start with defining your goals. These provide the strategic direction and framework for everything else.
2. Targets: Set targets that align with and support the achievement of your goals. These should be specific, measurable milestones.
3. KPIs: Finally, establish KPIs to measure progress towards your targets and goals. KPIs should be carefully chosen to reflect critical aspects of performance that directly impact goal attainment.

By following this structured approach, you ensure that success is not only defined but also measurable and achievable.

Why Set Goals First?

The respondents who set goals first highlight two main reasons for their approach: facilitating long-term decisions and creating a foundation for KPIs and targets.

Facilitating Long-Term Decisions

Charles Cridland of YourParkingSpace emphasizes the importance of long-term decision-making. “All our decisions are long-term oriented, so we determine the strategic goals first. The next step is to set KPIs that help in creating a direction for our employees and how their performance will be evaluated. Finally, the targets are set so that employees know the milestones required to achieve,” Cridland explains.

Creating a Foundation for KPIs and Targets

Ruben Gamez of SignWell prioritizes setting goals to establish quantifiable KPIs. Gamez states, “You need the strategic goal first so you can then ask: ‘How will we know we reached the measurable goal (the second ingredient in the SMART format)?’ Is it when we’ve reached 3,000 MQLs? A 30.5% CTR in emails? 12 new customer reviews this month?”

Gamez adds, “Your KPIs need to be quantifiable, which means, if you can’t reduce it to a number, it’s already too convoluted. Then, as the cherry on top, we ask, ‘Is this a vanity metric?’ to ensure we’re only measuring actions that move the needle to the end goal.”

Lily Wili of inBeat Agency also starts with goals to set effective targets and KPIs. “Once I determine my strategic goals, I put myself in a better position to decide which targets and KPIs to follow with. For instance, if one of my strategic goals is to increase my overall sales, a few of my consequent KPIs would be revenue per client, profit margin, and sales volume per location,” Wili shares.

These insights illustrate the importance of setting strategic goals first to guide long-term decisions and establish a solid foundation for KPIs and targets.

Why Set Targets First?

While it might seem unconventional to set targets before goals and KPIs, certain contexts make this approach valuable. Here’s why some businesses prioritize setting targets first:

Customer-Centric Approach

Charles Musselwhite of Musselwhite Marketing emphasizes a customer-centric strategy. “We approach marketing from a prospect/customer-first perspective. In our experience, focusing on anything other than targets first is like malpractice. Remember, prescription before diagnosis is malpractice!” Musselwhite advises. By setting targets first, they ensure their strategies align closely with customer needs and behaviors.

Flexibility in Objectives

Mark Osborne of Country Hardwood highlights how setting targets first can enhance flexibility in achieving objectives. “This measure allows us to look at our business goals from a different perspective. We set realistic targets, which allows us to focus on short- and long-term objectives. When the targets are set, we can create a strategy that can help us achieve our business goals,” Osborne explains. This approach allows for a dynamic strategy that adapts to immediate and future business needs.

These perspectives illustrate how setting targets first can provide a focused and flexible approach to achieving business goals, particularly when prioritizing customer needs and adaptable strategies.

Why Set KPIs First?

When establishing KPIs for goals, it’s often optimal to use more than one. While nearly none of our respondents set just one KPI per goal, the majority — 62.77% — set between two and four KPIs. A little over a quarter assign five or more KPIs to a goal. Given the close relationship between KPIs and goals, why do some companies choose to set KPIs first? This approach can help create a data-informed strategy.

Creating a Data-Informed Strategy

Zephyr C of Better Tools emphasizes the importance of impactful KPIs in shaping overall strategies. “Determining my KPIs first helps me understand what I need to look at in order to measure my company’s success. I observe KPIs such as engagement, customer satisfaction, and product quality, to name a few,” C explains.

Zephyr C concludes, “This helps me figure out how well my business is faring. If there is low customer engagement or satisfaction, I can instantly know about it and adjust my strategies to improve the buyer journey. As a result, I boosted my brand image and loyalty, and also increased overall customer retention rates.”

Adjusting Objectives Based on KPIs

Chris Gadek of AdQuick focuses on specific KPIs to refine the sales team’s objectives. “We prioritize increasing our team’s customer retention ratings. While our sales team is working to track down leads and land new accounts, they are also working to strengthen relationships with existing customers.”

By identifying and prioritizing KPIs first, organizations can continuously monitor and adjust their strategies to meet evolving business needs. This KPI-first approach allows companies to remain agile and responsive, ensuring that their strategic goals are always aligned with measurable performance indicators.

TIP: Discover the differences between metrics and KPIs to understand how they can be used to measure the performance of a business or organization.

8 Ways to Set KPIs and Targets That Will Support Your Business Goals

Now that you understand the factors to consider in the order of setting goals, targets, and KPIs, what other guidelines can you follow to create a successful path to your business goals? Our respondents shared eight valuable insights for setting impactful KPIs and targets to achieve your goals:

1. Start With Your Business Objectives Define your overarching business objectives first. This provides a clear framework for setting relevant KPIs and targets that align with your long-term vision.
2. Measure Your Current Performance Assess your current performance to establish a baseline. This helps in setting realistic and achievable targets and KPIs.
3. Involve Your Team Engage your team in the process of setting KPIs and targets. Their input can provide valuable insights and foster a sense of ownership and commitment.
4. Use Quantifiable Metrics Choose KPIs that are quantifiable and can be tracked accurately. This ensures clarity and precision in measuring progress.
5. Follow the Money Focus on KPIs that directly impact revenue and profitability. Financial metrics often provide the most tangible indicators of business success.
6. Be Particular Be specific in setting your KPIs and targets. Clear and detailed KPIs help avoid ambiguity and ensure everyone understands what needs to be achieved.
7. Make Your KPIs Dynamic Keep your KPIs flexible and adaptable. Regularly review and adjust them based on changes in business priorities and market conditions.
8. Conduct a SWOT Analysis Perform a SWOT analysis to identify your strengths, weaknesses, opportunities, and threats. This helps in setting KPIs and targets that leverage strengths and opportunities while addressing weaknesses and threats.

By following these guidelines, you can establish effective KPIs and targets that support your business goals and drive organizational success.