KPI vs Milestone: Meaning, Examples, Limitation, Importance
Some concepts are extremely crucial when you are operating your business. KPIs and Milestones are two of them. There is usually some confusion between KPIs and milestones, and they are sometimes even used interchangeably, but they are quite different from each other. KPIs are not goals or milestones that many experts mistakenly think at times. In this article, we’ll look into these two concepts, their interrelations, and some relevant examples as well.
Milestones vs KPI:
Milestone is a predetermined hypothetic achievement of a process, while KPI is the result that says whether the project is reaching the milestones or not.
KPI and Milestones Example:
Consider a scenario where a company has set its target of reaching $1 million dollar revenue in a year. The company has divided the timeframe like this – by the end of the 3rd month, the revenue will reach $10000, and by the end of the 6th month, the revenue will reach $100000, and finally, by the end of the year, the revenue will reach $1 million. All of these are milestones that are used as the standards in KPI. KPI will tell us whether the business is doing well or not based on the milestones set by the CEO. KPI is the result and Milestones are the grades of the results. So, I guess you have now understood the differences between Milestones and KPI.
Now, let’s take a deeper dive into them.
A KPI or Key Performance Indicator is a metric that gives you concrete data on how good or bad you are doing towards your business goal. They are used to assess a company’s performance.
For example, Nancy opens a digital marketing agency. She wants to know whether her company is going well or not. She tracks monthly earnings, cash flow, cost, profit, and employee satisfaction of her business. She sets these as Key Performance Indicators. By the end of the month, she understands by checking them whether her business is running well or not.
Importance of KPI:
KPI is extremely important. Without the proper maintenance of KPI, you can’t analyze your business performance. It tells you whether the business is in good mode or not.
On the other hand, the downside of KPI is it can’t predict or tell about the uncertain conditions of the business scenarios. It just shows the results. I would like to give you an example to make it clear. Before the Covid-19, the spending habit was different. The mask-making companies didn’t expect such a huge profit, and the automobile industry didn’t expect such a decline. Their KPIs will tell that their profit is very good for the former and very bad for the latter. As KPIs have generally been fixed beforehand, they do not have any scope to consider the later situation and the changed buying habits of customers in that situation.
As I said earlier, milestones are some predetermined hypothetic achievements of a process, and they are used to assess whether the project is going as planned or not. In fact, a milestone is a point in your project lifecycle when something substantial has been achieved. You can consider milestones as the reaching steps.
For example, Nancy started a digital marketing agency. Her first client told her that she needed to bring 100000 Facebook Page Likes within 120 days. Nancy decided to complete this project within 100 days. She will check the performance after every 10 days. Every 10 days she needs 10000 Facebook Page Likes. This is what milestones are. You decide when you will check the performance and what should be the result.
Now, look at the example again to understand the importance of milestones. If she doesn’t check the performance every 10 days, she may not complete the project. Because she won’t know whether the project is going according to the plan or not, whether the project is yielding expected results or not.
The disadvantage of milestone is it’s not a stand-alone idea. It relies on KPI. It tells us when we should check the results and what should be the results. What it doesn’t give us is the analysis of whether the business is reaching the results or not. This is why we use KPI.
The bottom line of this discussion is – you have to utilize both the KPIs and the milestones properly in your business. The former gives you an analysis of how well your business is going on, whereas the latter gives you the idea when you use the analysis, and what results you should look for from the analysis.