The Truth About KPIs: They're Not Meant to Be SMART

Not SMART, But SMARTER: Rethinking KPIs and Goal Setting

In business conversations, it's common to hear the phrase, “We need SMART KPIs.” Many believe that for a KPI (Key Performance Indicator) to be effective, it must be SMART. While the intention behind this thinking is good, it reflects a misunderstanding. KPIs measure progress. It’s the goals behind them that should be SMART. The KPI is a tool that measures how well you are progressing toward those well-defined goals.

Let’s dig deeper into what this means and how to apply it practically in any business environment.

What Is a KPI?

A Key Performance Indicator (KPI) is a quantifiable metric that helps organizations track progress toward specific business objectives. KPIs help decision-makers measure how effectively various departments, teams, or individuals are contributing to overall business performance.

The importance of KPIs lies in their ability to translate abstract strategies into trackable outcomes. They act as indicators of success, showing whether a company is moving in the right direction, falling behind, or outperforming its expectations.

Important distinction: KPIs track progress, but they aren't the goal itself. They reflect the progress toward a goal. For example:

• If your goal is to improve customer satisfaction, your KPI might be “Customer Satisfaction Score (CSAT)” or “Net Promoter Score (NPS).”
• If your goal is to increase sales revenue, the KPI could be “Monthly Revenue Growth” or “Conversion Rate.”

Without a clear objective behind them, KPIs are just numbers on a dashboard. They need a context, and that’s where SMART goals come into play.

Why Goals Should Be SMART

SMART is an acronym that stands for:

• Specific
• Measurable
• Achievable (or Attainable)
• Relevant (or Realistic)
• Time-bound

It’s a framework that turns vague ideas into focused, practical goals. When your goals are SMART, your KPIs become much more meaningful because they are measuring progress against something concrete.

Let’s walk through each element of SMART, with examples and guiding questions.

1. Specific: Define the Goal Clearly

A vague goal leads to vague results. A goal only works if it’s sharply defined and targeted. This helps all stakeholders understand what is expected and eliminates ambiguity.

Ask yourself:

• Who is involved in achieving this goal?
• What exactly do we want to accomplish?
• Where will this be done?
• Why is this goal important to the business?
• Which resources or limitations do we need to consider?

Example:

Not Specific: “Improve marketing.”

Specific: Achieve a 20% increase in traffic from organic search over the next half-year.

2. Measurable: Attach a Metric to the Goal

No measurement means no meaningful progress. Measurable goals allow you to track progress and know when you’ve achieved the outcome.

Ask yourself:

• How much?
• How many?
• How will I know when the goal is achieved?

Example:

Not measurable: “Increase our social media following.”

Measurable: “Reach 2,000 additional Instagram followers before the end of the year”

This is where KPIs come into the picture — they give the data that tells you whether you're getting closer to your goal.

3. Achievable: Set a Realistic Target

Your goal should be challenging but still possible. If it’s too far out of reach, it may demotivate your team. If it’s too easy, it might not bring meaningful progress.

Ask yourself:

• Do our resources, timeline, and team support this goal?
• Has anyone done this before under similar conditions?

Example:

Not Achievable: “Double our revenue in one month with no budget increase.”

Achievable: “Increase revenue by 10% in Q3 through upselling to existing customers.”

4. Relevant: Make Sure the Goal Matters

The goal should align with your broader business objectives. Every department, team, or employee should understand how their work supports the overall direction of the company.

Ask yourself:

• Does this goal support our business strategy?
• Is it the right time to focus on this?
• Does this align with our values and priorities?

Example:

Not Relevant: “Redesign the logo just because it feels outdated.”

Relevant: “Redesign the logo as part of a broader rebranding effort to enter a new market.”

5. Time-Bound: Set a Deadline

Without a timeline, there’s no urgency or structure. Time-bound goals create accountability and help prioritize daily actions.

Ask yourself:

• What’s the deadline?
• What can be achieved in that time frame?
• Are there checkpoints along the way?

Example:

Not Time-Bound: “Launch the new app.”

Time-Bound: “Launch the new app by October 15, in time for the holiday season.”

Bringing It Together: SMART Goals Drive KPI Success

Let’s take a practical example and combine everything:

Goal (SMART):

“Increase the customer retention rate by 15% within 12 months by launching a loyalty program targeted at our top-tier clients.”

Supporting KPIs:

• Monthly Retention Rate (%)
• Participation Rate in Loyalty Program
• Repeat Purchase Frequency
• Net Promoter Score (NPS)

This makes the relationship clear: the goal is the result you want to achieve, and the KPIs are the measurements that tell you if you’re on track.

Evolving from SMART to SMARTER

Some modern goal-setting frameworks extend SMART into SMARTER, adding two more elements:

• Evaluate: Continuously monitor your progress. Are the KPIs indicating success? Do you need to adjust your approach?
• Revise: Be flexible. As you track performance, you might find that market conditions, customer behavior, or business needs change. Be ready to refine your goals accordingly.

This shift recognizes that success isn’t about setting a goal once and forgetting it. Continuous review ensures relevance and responsiveness.

Common Mistakes to Avoid

When setting SMART goals and choosing KPIs, here are a few pitfalls to avoid:

1. Using KPIs without clear goals
2. KPIs without context are just numbers. Always anchor them to a specific objective.
3. Choosing vanity metrics
4. Metrics like “likes” or “followers” may look impressive, but they don’t always correlate with business outcomes.
5. Setting unrealistic goals
6. Overreaching targets often lead to frustration instead of progress. Ensure your team has the resources and bandwidth to execute.
7. Ignoring qualitative outcomes
8. Not everything important is easy to measure. Customer sentiment, brand perception, or employee satisfaction may need thoughtful approaches beyond numbers.
9. Failing to revisit goals
10. A goal set six months ago might no longer make sense. Review and revise regularly.

Final Thoughts

To summarize: KPIs are not SMART. Goals are. KPIs are tools to measure progress, and they only make sense in the context of clearly defined, SMART goals.

The SMART framework brings clarity, focus, and structure to your goal-setting process. When done well, it ensures that your KPIs are tracking something meaningful and that your teams are aligned around what success looks like.

So next time someone says they want “SMART KPIs,” steer the conversation toward creating SMARTER goals and let the KPIs do their job of measuring progress.

Have questions? Drop a comment or reach out. Let’s make your goal-setting process sharper, more strategic, and ultimately, more successful.