Good leaders define their KPIs with great care. Here’s how to measure the right thing, and how to measure it right to breed company success.
“People don't do what you expect, people do what you inspect”, says Lou Gerstner, former IBM CEO. What’s measured is one of the most powerful signals you can give your team. Teams act based on what’s measured more than anything else.
Arguably, the moment leaders disclose strategic KPIs to employees and stakeholders is the only time you can be sure everybody’s listening. As a leader, this means defining your KPIs right is one of your most important jobs. Here is how to do just that.As a leader, defining your KPIs right is one of your most important jobs Click To Tweet
Chasing team success, provoking company defeat
Leaders may seize any opportunity to step into the limelight to declare how much the company values customer centricity. But if the KPIs they defined do not reflect that value, things can go horribly wrong.
For example, a marketing team’s primary KPI is simply ‘the number of marketing leads generated’. The team performs well along that measurement, but they may have skimped on ‘lead quality’. The marketing team has ‘performed well’, but their high performance is likely to impede the performance of teams that take the marketing team’s leads as input further down the sales funnel. It’s a discussion many marketers had all too often.Make sure you define KPIs to reflect company values. Click To Tweet
Isolated success should never hinder company wide success, but it should contribute to it. The value of any task performed should be judged by its ability to positively influence higher strategic KPIs. KPIs should be aligned from top to bottom. And it is the leader’s job to make this happen.
To make sure strategic objectives cascaded down and translated into relevant KPIs throughout the organization, use this checklist. It is all too easy to mask an unaligned organization by not specifying what is measured and why.
These 11 required KPI characteristics force you to really think through all KPIs you use on a daily basis, and how they relate to each other.
There are two sections to this text. First we’ll list the 6 characteristics of properly defined KPIs, and secondly we’ll describe how to make KPIs reliable by structuring the collection of data on which KPIs are based.
A. Defining the KPI - measuring the right thing
- KPI Name: how to identify the KPI? Pick a short and concise term or abbreviation. E.g. Gross sales, NPS.
- KPI Description: why is the KPI relevant and suited to measure the pursued goal?
- KPI Dimension: which object is measured? E.g. country A, website B, banner Z.
- KPI Metric: what are you measuring? E.g. Dollars, %, days…
- KPI Performance boundaries: which specific values would yield certain ratings, such as success or failure, or even ‘acceptable’, and when would your traffic light turn orange? E.g. KPI-X >2$ but <3$ = ‘Excellent’.
- KPI Graphic Type: which number visualization format to use? E.g. Traffic light, Pie chart, a gauge.
B. Gathering KPI data - measuring it right
Having defined KPI name, dimension, metrics and boundaries perfectly, and showing it off in a beautiful dashboard won’t do anything for you when the source data is sub par. Your KPIs are only as good as the reliability of the data going into them.
To make people feel comfortable relying on them for their decision-making, you’d better take a structured approach when gathering KPI data.
- Data Source: from where does the data originate: E.g. Marketo, Hubspot, Google Analytics, MS Excel… Or become even more specific by mentioning specific directories or file names.
- Data Extraction-Moment: at which point in time is the data is fed into the KPI? E.g. at every transaction, at noon CET, the first day of every calendar month…
- Data Update Frequency: how many times is the data refreshed per particular period? E.g. real-time for your car’s speedometer, quarterly for brand awareness...
- Data Supplier: which individual or department is responsible for delivering the source data? E.g. Person XYZ, Brand Management, E-commerce…
Who’s tying it together?
Overseeing the whole thing is the KPI owner. It is the individual who makes sure the right thing is measured, and the data gathering is done according to the agreement.
- KPI Owner: which individual is ultimately responsible for KPI availability and accuracy? E.g. Person XYZ.
Good KPIs are simple to understand and reliable. These 11 required KPI characteristics show you the “back end” of simplicity and trust.Good KPIs are simple to understand and reliable, showing these 11 characteristics Click To Tweet
Now you know what a good KPI looks like, pick your favorite KPI from our KPI Library.