Advertisements

Terminology Primer – Goals, Objectives, Measures, Metrics, Key Performance Indicators (KPIs), Meters

The essential purpose of business intelligence is to provide information that will allow people throughout an organization to make informed decisions relevant to their business processes and responsibilities.  This post is a simple terminology primer that describes the meaning of a few terms commonly used in business intelligence, and explain how they relate to each other, and their relevance to supporting the overall goals of an organization.

Goals are a business’ desired outcomes. They are typically around growth, cost savings, innovation, improvement in efficiency, the company’s workforce, and the competition, but may include a lot of other things.
Goals help a company to stay focused by providing team members within a company with an aim to work towards.

Objectives are specific strategies and steps that a business needs to take to achieve the goals that have set. These objectives are usually specific and measurable.  Success toward achieving objectives usually indicates progress toward achieving goals.
Objectives are sometimes referred to as Critical Success Factors because they are critical to the success of achieving the goals.

Measures are numeric representations of various transactions that occur through various business processes. For example, when the company makes a sale (during the sales process), some measures that are generated in that transaction are:  sales amount, discount amount, number of items sold, and number of items discounted.  Then from this, other measures can be determined, such as total sales for all customers, total number of items sold, total number of sales for each customer, and so on.  Measures are numeric and therefore can have mathematical calculations performed on them – such as sum, avg., min, max, etc. – to generate metrics.

Metrics are calculations derived from one or more measures. For example, as mentioned in an example above, you may have the measures “Discount Amount” and “Number of Items Discounted”, and you may use these measures to calculate a metric of “Average Discount Amount per Discounted Item” or “Average Discount Amount per Sale”.  As another example, you may simply add up all the Discount Amounts over a specific time period, such as month, to get a “Total Discount Amount by Month” metric.

Key Performance Indicators (KPIs) are metrics that measure how well a company is doing toward their objectives. Companies will have hundreds or thousands of metrics, but there will be a few key ones that the executive team wants to keep a close eye on for the overall company or divisions, and other managers will want to keep an eye on KPIs relevant to their respective departments.  Those key metrics are the KPIs. All KPIs are metrics, but not all metrics are KPIs.

Meters are a group of metrics that collectively provide a broader, overall view of a subject area.
For example, you may have individual metrics for Sales to Date, Sales in Pipeline, Number/Value of Expiring Contracts, Avg. Time to Close Sales, etc. Putting these all together in a Meter presents the user with a lot of related information that provides a broad, overall picture of sales (and loss of sales) which would allow for analysis such as determining the chances of meeting sales targets. The Meter in this example could be called “Sales Forecast” for example.

Thanks for reading!

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: