Tag Archives: measurement 101

Are You Sure Your KPI is a KPI?

Invasion of the fraudster metrics

Most of us have been in a meeting of this sort. You’re working out the details of a program and the conversation turns towards metrics and the need for KPIs. By the end of the meeting you have a list, somewhere between thirteen and twenty-seven different KPIs. Someone is tasked with putting together an excel sheet to track everything and you commence an ongoing saga of trying to visualize the results onto less than three slides in a PowerPoint deck.

Stop.
Drop the PowerPoint and step away from the Excel file.

I don’t need to know your brand, or your tactic or the planned executions.; but I can tell you right now that you’re doing it wrong.

If you’ll let me help you, it’s time to stop the KPI insanity.

All KPIs are metrics, but not all metrics are KPIs

KPI - you keep using that word.  I don't think it means what you think it means.

Or put another way; not all things that can be counted, count. KPI is an acronym for Key Performance Indicator. It is the one measure that shows that you have achieved what you set out to achieve.

It is natural for people to want to include more. When you see that jam-packed PowerPoint slide filled with charts and graphs and tables filled with numbers, it feels all very impressive.

Look at all the numbers! Everyone must have worked ever so hard for there to be this many numbers and charts moving up and to the right.

But it’s all just surface razzle dazzle. Those that know what they’re doing are going to be less than impressed by attempts to baffle your way through the numbers. And those people tend to be C-suite execs with their fingers on the purse strings for next quarter’s budget.

You can’t set your KPIs before you set your objectives

Putting the cart before the horse

Most people don’t realize this – as everyone tends to skip past terms of service and just check off ‘OK’ – but it is a basic part of every single employment agreement that anyone who recommends setting KPIs before objectives are identified must go up to the rooftop on a rainy day and run forty laps around the circumference of the building.

Okay. So, maybe not. But it would certainly stop short the useless exercise of defining what success looks like in advance of defining what you’re trying to do.

A KPI is a metric that the program hinges on; a metric inexorably linked to your objectives. When you look at your KPI it is a no-brainer as to whether you achieved what you set out to do.

 Your KPI is a unit of measure, not a specific measure

When asked, “What are some good marketing KPIs if the objective is to create a positive association with our brand?” you will never find that the answer is 27. Or 1.32. Or 1,589.

Your KPI will always be a unit of measure, and not a specific number. The specific number is your target or goal.

For example, if you ran a shop, your KPIs might be cash flow and net profit. These are the indicators that your business is thriving or not. Within cash flow you would set a specific number that ensures you can maintain operations as a target. If you have an eye on expansion you would set a goal within net profit that will allow you to achieve that expansion.

You should be able to count your KPIs on one hand

If you need more than one hand to count your program’s KPIs, then you have let a metric slip in masquerading as a KPI. You need to be ruthless with respect to KPIs and slice out measures that people toss in because, “wouldn’t it be interesting to know?

Your KPIs should all fall into the category of, “we absolutely have to know.” Rare is the program that needs more than one measure to determine pass or fail. I’ve yet to encounter a program that truly required more than a half-dozen measures to track performance.

The easiest way for you to suss out the frauds is to honestly ask yourself and your team, “If this KPI came in really high, or came in ridiculously low, would it change our reaching the objective?”  If it doesn’t matter, then it shouldn’t be counted.

Why does it even matter?

Why get picky about what’s a metric and what’s a KPI and if they ought to be numbers or not? What’s all the hub-bub?

Information is vital. If your information is poor, then your decisions will likewise be poor. If you end up, like all too many of us do, tossing aside all of the information because it’s just a hodge-podge of number soup you end up acting purely on instinct and gut-feelings.

Steering the ship based on your gut may keep you free and clear of the rocks most of the time, but the bigger your ship and the more people you carry along with you, the more tragic a single misstep can become.

As vital as information is, however, every dollar spent on watching what you’ve done is a dollar you can’t spend doing something.

Instead of measuring everything, the smart business person looks to what they are trying to achieve and focuses their resources towards measuring that and measuring it well.