Are you the right KPI for me?
KPI is one of the best-known, most-used acronyms in business; it is up there with the likes of CEO and CRM. Millions of words have been written about it, countless hours around conference tables all around the world have been spent discussing, dissecting and arguing. One would think that by now there is nothing left to be said, or written, in regards. By now every organization in the world should know how to choose the right KPIs that will best measure accomplishments and indicate faults. Well then…
Have you ever tried to break down these three letters?
Let’s start with the third letter and work our way backwards. I. Indicators. When we track performance we get a whole lot of data, numbers, charts, reports… but what to do with all that data? Some of it doesn’t tell us much; some of it is very telling. How do we extract from a barrel full of data the potent intelligence that will put us on the path to improvement? The indicators are our extractors and the fingers that point us at the ‘right’ data; they make sure we don’t just track performance but rather give ourselves hints and pointers on where we excelled, and where we need to improve.
That leads us to the second letter, P. Performance.
That’s what it is all about. Do we want to make sure we perform up to par? No. We want to perform at our outmost best, and then some. The only way to improve performance is by documenting it, reviewing it, and drawing conclusions on where we can do more.
And so we get to the most crucial letter of this legendary acronym, K. Key. As is implied from the meaning of the word, this letter is key to unlocking the secret of KPI. As every organization quickly learns, you can use Indicators to measure any Performance. A company can easily find hundreds of KPIs to monitor. Correction: a company can easily find hundreds of PIs to monitor. That is the Achilles’ Heel of the entire KPI phenomenon – folks tend to give less weight to the K, and just run amok with the P and the I. Understanding how to pinpoint the K, how to separate the key from the chain, is what we’ll try to explain here.
Mind the Trivial Trap
The opposite of Key, in this instance, is trivial. Many companies fall into the trivial trap when choosing their KPIs. Let’s take Customer Satisfaction. Big KPI… huge. How satisfied are my clients? Are they 100% happy with the product and service we provide them, or are they looking around for better suited providers? Not every company can perform routine surveys since they cost a bundle, and you don’t want to bother your clients with on-going emails and phone calls asking for “just a few minutes of your time”.
In an article I co-authored some years back titled “Getting A Grip On Data Governance”, we tracked a telecommunications company in their pursuit of the K in KPI. The corporate strategy of the company focused on raising value for their current customers. For this they implemented, among other things, the following KPI: number of times account managers contacted customers. Any thoughts about this KPI?
It is wrong, for the required objective – raising value for current customers. The quantity of phone calls doesn’t indicate in any way the mood on the other side of the line; probably the opposite was achieved with this KPI, encouraging sales to nudge clients.
Actually, there are many simple KPIs to help a company measure customer satisfaction on the non-trivial shelf. For example:
How many of your customers are willing to provide testimonials for your site?
How many of your customers buy additional services at the end of a project?
How many of your customers complain, or abandon you?
Finding the Blind Spots
Some things are really hard to measure. But finding the right Key Indicators can spur your team into the right kind of Performance. Enforcing action-driven KPIs puts your management team in an active state of mind. Looking at the previously mentioned KPI “How many of your customers are willing to provide testimonials for your site” – can you deduct an active notion from it?
If your managers know that their performance is measured by this indicator it immediately puts them in a “must get a testimonial from a client at the end of the project” state of mind. This propels them into hitting all the right marks along the way to achieve this goal.
With a KPI of Zero Percent Abandonment – no customers should finish their contract with us. Anything above zero would be in the red. Can you think of a better facilitator for top notch client care?
Choosing the best KPIs for your company, the most relevant and most telling, puts your entire team on the right track. As I said earlier, the path isn’t necessarily the highway but can be, more often than not, a narrow side road, with beautiful scenery all around.
In our next post, we look into the SMART criteria and how it gets you a little closer to that big K in the sky…