Understanding The Difference between KPIs, Goals, and Targets

Author's avatar Analytics Aug 23, 2023 19 minutes read

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    Peter Caputa

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    How do you measure success?

    Well, marketers have struggled for ages to explain this to their clients, as have marketing departments to their CEOs. Luckily, we now live in a data-driven age, and we can easily show numbers that mark our success.

    Goals, targets, and KPIs let you decide what your organization’s progress looks like and how you want to capture it in metrics. Now we know that at times, the terms key performance indicator and goal are used interchangeably.

    In most cases, it is to describe what you need to measure to show that you have reached the pre-set outcome.

    But KPIs are NOT the same as goals.

    So while the goal is the outcome you hope to achieve, KPIs represent metrics that measure how well you are doing and how close you are to achieving your goal.

    But where do these concepts fall in your company planning? In what order should you set your goals, targets, and KPIs?

    We consulted 90+ B2C, B2B, and agency professionals about their approaches. Here’s what you’ll learn from them:

    HubSpot Sales Manager KPIs Dashboard Template

    What Makes Goals, Targets, and KPIs Different?

    While business goals, targets, and KPIs seem similar at first glance, they all have different roles to play in achieving your business vision. Let’s break down each term.

    • Goals are the overarching objectives you have for your business. One example of a goal is “improving sales.”
    • Targets are the quantifiable benchmarks you want to reach to meet your goals. Using the “improving sales” goal, we could build a simple target of “closing 10 deals per week.”
    • KPIs (key performance indicators) are measurable values used to track progress toward a goal. They’re different from singular metrics because they’re tied to business goals and can include more than one metric. In the “closing 10 deals per week” example target, the KPI is closed deals.

    Goals, Targets, and KPIs: Which Comes First?

    With these three concepts so closely tied together, how do you figure out which one to set first? We surveyed business professionals about their preferred order. Out of the experts we surveyed, 40.43% work in B2C services or products, 34.04% deal in B2B services and products, and 25.53% serve marketing, digital, or media agencies.

    Goals, Targets, and KPIs: Which Comes First?

    Most opt for goals first. Almost three-quarters (71.28%) of respondents start with strategic goals. Meanwhile, 15.96% choose targets first, and 12.77% decide on KPIs.

    What causes different companies to choose a goal, target, or KPI first? Let’s learn about their reasoning.

    Related: What Is Strategic Reporting? 4 Report Examples to Get Inspiration From

    Why Do Companies Set Goals First?

    Whether or not they set business goals first, the professionals we surveyed tend to stick to quality over quantity. Almost half of the respondents have five or fewer business goals, while 30% have five to seven.

    Why Do Companies Set Goals First?

    The respondents who explained why they set goals first have two main reasons for doing so: facilitating long-term decisions and setting a foundation for KPIs and targets.

    YourParkingSpace’s Charles Cridland opts for goals first for better long-term choices. “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 says.

    At SignWell, Ruben Gamez sets goals first for more quantifiable KPIs. Gamez explains, “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 continues, “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 creates goals first to set up successful 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 says.

    Reasons Why Businesses Set Targets First

    Since targets fall between goals and KPIs, some folks might find it confusing to set them first. But, some contexts make it worthwhile to set them up before goals and KPIs.

    At Musselwhite Marketing, Charles Musselwhite sets targets first in a customer-centric approach. “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.

    Country Hardwood’s Mark Osborne highlights how a target-first strategy can lead to flexibility in 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.

    Why Do Organizations Set KPIs First?

    When setting KPIs for your goals, it’s often optimal to use more than one. While nearly none of our respondents set one KPI per goal, the majority — 62.77% — set two to 4. A little over a quarter assign five or more KPIs to a goal.

    Why Do Organizations Set KPIs First?

    So, if KPIs are so closely linked to goals, why do some companies set them first? A KPI-first setup can help you create a data-informed strategy.

    Zephyr C of Better Tools looks for impactful KPIs in business metrics to adjust 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 tells us.

    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 fix my strategies to improve the buyer journey. As a result, [I] boosted my brand image and loyalty, and also increased the overall customer retention rates.”

    By focusing on a specific KPI, AdQuick’s Chris Gadek can adjust the sales team’s objectives to improve it. “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.”

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

    Gadek continues, “We can better understand the number of touchpoints our reps should make each quarter to secure those long-term clients by comparing the average length of client relationships with the number of interactions they’ve had with customers. Keeping on top of how many customers are sticking around long-term helps identify potential pain points and the work required to resolve them.”

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

    Now that you know what factors to consider in your order of goal, target, and KPI setup, what other rules can you follow to create a successful path to your business goals? Our respondents had eight insights to share for setting impactful KPIs and targets to meet your goals.

    1. Start With Your Business Objectives
    2. Measure Your Current Performance
    3. Involve Your Team
    4. Use Quantifiable Metrics
    5. Follow the Money
    6. Be Particular
    7. Make Your KPIs Dynamic
    8. Conduct a SWOT Analysis

    1. Start With Your Business Objectives

    If you’re unsure what direction to go with your KPIs and targets, try starting with your business goals. As you learned previously, most organizations start with goals in the first place. Narrowing in on your KPIs from your targets and goals helps you connect everything logically.

    “Determining KPIs to study depends entirely on what your specific business goals are,” says Roy Morejon of Enventys Partners. “If you’re trying to optimize operations within your company, you should study KPIs regarding order fulfillment time; how long it takes to process the order, fulfill the order, and deliver it to the customer. If your goals are to increase your website traffic, you should be studying how many users visit your site, how long they spend, how many pages they view, and the bounce rate.”

    Morejon shares an anecdote: “When my business was starting up, we focused on utilizing social media to promote our service to potential clients. With this in mind, we tracked a collection of data related to our social media pages; follower counts, audience growth rate, shares, likes, comments, and engagement rates. Studying these KPIs allowed us to learn what posts were favored among social media followers and which ones were most likely to garner attention.”

    “KPI targets should align with the company’s vision to make them more effective,” adds Mike Ward from The Finances Hub. “We follow a pyramid system where our strategic vision is at the top, feeding down to specific actions at the bottom. In the middle are KPI targets that are derived from our overall vision. It is important to keep the targets streamlined to our long-term goals. This ensures that all our departments and their performance targets are pushing towards one unified goal.”

    Rajat Chauhan of Ace Infoway Pvt Ltd says, “We set KPIs to measure the most impactful benchmarks to reach the targets of our SaaS business. We are clear about the goal and we know how to reach there, that’s why we’ve set the KPIs that are aligned with our business objective. To be precise, I would say this has made us efficient to reach the goal.”

    “Two things work for us:

    1. Set the strategic direction first and the rest will follow [and]
    2. Tie performance KPIs and incentives with the strategic direction and company goals,” explains Jordan Brannon from Coalition Technologies. “For example, we set certain targets in terms of revenue, and one way of sustainably achieving that is through client retention. We then set certain retention targets and tie in our performance incentives based on the achievement of those targets.”

    2. Measure Your Current Performance

    As you set targets and KPIs, remember to keep your current performance in mind. You’ll want to create targets that bring you ahead of today’s numbers, but are not so ambitious that you can’t reach them at all. Analyze your performance data to understand your future KPIs’ direction.

    “We’ve found that analyzing our current performance is the best way to determine KPI targets,” says Elisa Bender from RevenueGeeks. “Setting targets for KPIs out of the blue isn’t realistic at all. In order to set targets that we can achieve one day, we need to look at how we’re doing right now. This helps set honest targets that aren’t entirely impossible and can be achieved effectively.”

    3. Involve Your Team

    KPIs don’t have to be a solo endeavor. In fact, you should get stakeholders on your team involved. They’ll know their current experience with potential KPIs and offer ideas for realistic targets.

    As Soxy’s Howard Birnbaum puts it, “We try to practice inclusivity when it comes to setting KPI targets.” Birnbaum elaborates, “By involving team members in the reviewing process, we are able to attain valuable and unique insights on what metric would benefit our company. Adopting a democratic approach works best as success is best shared and collaborated. We have been using this method to practice transparency and discussing KPI targets for a year now, with immediate results.”

    “I’ve learned that the best way to create effective KPIs is by involving all concerned parties in developing the metric,” adds Tom Leighton from Sofary Lighting. “Inclusivity increases buy-in from employees, allowing for easier implementation and progress monitoring. Involving everyone in the setting of KPIs also ensures that the bigger picture is presented, guaranteeing that the right indicators are developed and implemented.”

    Here’s how that process happens at Sofary Lighting: “I normally hold quarterly strategic meetings with my entire team to assess the impact and alignment of existing KPIs on business goals, develop new ones if needed, and determine the support each team member needs in attaining their assigned targets for each KPI.”

    4. Use Quantifiable Metrics

    Remember that KPIs and KPI targets should be quantifiable. You should have a KPI that you can measure in numbers and a target with a defined goal number.

    “We set measurable metrics for our KPI targets,” affirms PT Pioneer’s Tyler Read. “Each quarter we select a KPI of “X” new clients, and we expect to meet or exceed that numerical value. When we do not meet that goal, we go back to the drawing board to figure out how to pivot and improve to get closer to that goal.”

    “If you don’t have measurable metrics, you are throwing darts at the board with your eyes closed,” Read urges. “Have measurable KPIs and have a game plan for tracking and using the data to improve.”

    Related: KPI Development: 13 Tips on How to Create KPIs That Reflect Your Strategic Priorities

    5. Follow the Money

    How do you determine which KPIs are worth tracking versus vanity metrics? Look for KPIs that affect your bottom line.

    “In my experience, the best way to set KPIs is to follow the money, not vanity metrics,” advises George Tsagas from eMathZone. “KPIs measure performance and are only relevant to the extent that they will help your business. When determining the best KPIs for your business, identify how your business makes money and how you can measure it. Then identify the variables that determine revenue and make those your primary KPIs. Secondary KPIs will be factors that influence your primary KPIs.”

    Danny Browne of HARO Links explains, “I’ve tampered with a number of methods for measuring KPIs, but ultimately I’ve found that the best ones need to directly affect your bottom line. Our business is one that acquires press coverage through producing copywriting for journalists in return for coverage and PR for our clients, and our business model is based on results, so we only get paid when we achieve results.

    We get multiple opportunities to achieve this every day, but I found we were missing opportunities quite regularly, and what’s worse is that our competitors were snapping these opportunities up instead. So I made sure to set KPIs of a minimum of so many pieces of copy produced and sent to prospective journalists to avoid missing out on so many opportunities.”

    “The result wasn’t favorable,” Browne continues. “In fact, whilst the number of prospects we’d contacted went up, the amount of coverage for our clients went down. What had happened was that our staff members had become so focused on this new KPI that the quality went down. In fact, the staff members who were achieving the KPI on a regular basis were the ones who were contributing to the bottom line the least. In the end, we set out our KPIs for results.”

    The lesson learned? “Your KPIs must never compromise the quality of your product, and this initial KPI I had set for team members had done. My advice would be to set KPIs based on the end product, try not to worry about the micro-operations of the business, and focus on the macro. ” Browne concludes, “when you’re a small business, cash flow and bottom line is everything.”

    6. Be Particular

    While many organizations assign more than one KPI per goal, don’t set more KPIs than you absolutely need. Since KPIs are such a crucial method for measuring business progress, setting unnecessary ones can put too much weight on less important metrics.

    How do you balance measuring KPIs on multiple dimensions with staying within reasonable limits? Michelle Tresemer from Foundations First Marketing offers guidance. “It’s tempting to track too many KPIs. To mitigate this, we look at the vision or goal of the company. The KPIs are the way to measure progress towards that singular vision or goal,” Tresemer begins.

    According to Tresemer, “KPIs should be:

    1. Simple and require no context to be understood (such as average order value, new customers, revenue).
    2. So serious that jobs depend on it (positions will be created specifically to affect the KPI, and staff may be terminated if they aren’t successful).”

    “KPIs are serious business,” Tresemer stresses that last point. “They are so important that they are how people are hired and fired. As in, if you’re not contributing to the KPI then you get replaced. I realize this sounds harsh, but here’s a common scenario to explain what I mean.”

    “If you have ‘website traffic’ as a KPI (and yes, I see this a lot) and the numbers go down over the quarter, is this an indicator that the CEO should lose sleep and that something is horribly wrong? Probably not. In many instances, a dip in website traffic could be because we didn’t send out an email campaign that quarter. Or because our SEO has gotten so much better that we’re getting less traffic overall, but it’s much higher quality and therefore converting better,” Tresemer explains.

    “Should the digital marketing manager get fired for website traffic dipping? Absolutely not, especially if revenue is steady or growing. Do you see how ridiculous it is to have something like ‘website traffic’ as a KPI? It is not a key indicator of performance. It’s just an interesting metric to keep an eye on, but certainly not at the leadership level,” Tresemer concludes.

    7. Make Your KPIs Dynamic

    KPIs are static numbers, so you should set a variety of KPIs that reflect the ins and outs of a modern business. They should match the different levels of challenge in your work and grow with your company.

    At PandaDoc, Yauhen Zaremba tries to set KPIs that encompass the dynamic nature of work. “I always try to check two boxes when setting KPIs for myself and team members:

    1. KPIs in different tiers. Not every KPI needs to be at the same level and take the same amount of time and effort to achieve. You should set KPIs that stretch across different tiers and channels. Some KPIs should be shorter projects, while others will be more intense and time-consuming,” Zaremba tells us.
    2. Tracking progress. I really like KPIs that can be tracked over time and not just checked off the list at completion. If your KPI is to achieve goal A, you should also be able to track your progress as you proceed through the tasks and projects. It keeps you motivated, allows everyone to make sure you’re on the right track before it’s too late, and even be able to provide regular updates,” Zaremba explains.

    Zaremba adds, “Of course, the other important things come into play as well, like making sure they are specific, measurable, relevant, and more. But these additional checkmarks help me create the best KPIs for us.”

    8. Conduct a SWOT Analysis

    In addition to helping you compete with your past self, KPIs help you improve against competing businesses. Keep an eye on your competitors using a SWOT analysis — an overview of your and your competition’s strengths, weaknesses, opportunities, and threats. You’ll get inspiration for KPIs that’ll put you ahead of the rest.

    “One of the best ways I have found for setting KPIs to reach my business goals is to analyze my competition and use it as a benchmark for setting KPIs,” says Gatis Viskers from Ambition Digital. “By conducting a SWOT analysis, I know what my company’s strengths and weaknesses are, and by carrying out the same for my competitors, I am able to see where the threats and opportunities lie.”

    Here’s how Viskers used a SWOT analysis to inform KPI targets: “Because I made SEO such a big part of my business, I started with auditing the competition and discovering opportunities for us such as high volume, low competition keywords. We set ranking for these as the KPIs of our SEO strategy in timeframes of 3, 6, and 12 months. It provided us with a clear-cut strategy which we could stick to while monitoring our own, as well as our competitors’ performance.”

    HubSpot Sales Manager KPIs Dashboard Template

    Visualize Your Progress Toward Your Goals in Databox

    After you set your goals, targets, and KPIs, how do you track them efficiently? Let Databox help.

    Databox’s goal tracking feature lets you compare your goals to your current performance to see your KPI targets play out in real-time. It automatically breaks your goals down into smaller time frames to guide your short-term actions. Plus, when you want to set new KPIs and targets, you’ll have your performance history to guide you.

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    Article by
    Melissa King

    Melissa King is a freelance writer who helps B2B SaaS companies spread the word about their products through engaging content. Outside of the content marketing world, she writes about video games. Check out her work at melissakingfreelance.com.

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