There are 14 essential attributes of a KPI you need to specify and maintain to make them reliable for your decision-making.
The power of a good Key Performance Indicator lies in its simplicity. Green is good. Red is bad. But how sure are you that you can really trust your KPIs? Do you have the vital information and procedures in place to ensure all data is correct? Here is a list of the 14 essential attributes of a KPI to keep them trustworthy and consequently, to make people feel comfortable relying on them for their decision-making.
The right KPI
According to Investopedia, a KPI is “A set of quantifiable measures that a company or industry uses to gauge or compare performance in terms of meeting their strategic and operational goals.”
Executive management can use KPIs to communicate the focus of the company to its employees and stakeholders and to make sure everybody is aligned towards the big goals. Generally, you should not have more than six KPIs per organizational unit to keep the information easily digestible. Which six depends on the organizational goals they reflect.
Say you’ve managed to pick a suitable traffic light; one that reflects organizational goals. How can you tell if its signal can be trusted? Is green really good? Is red actually bad?
The right data
Like the traffic lights at the corner of your street, you’d better be able to count on your KPIs. KPIs can be utterly worthless if they show the wrong numbers. If the mechanics are incorrect, and the color of the traffic light does not reflect reality, accidents will happen. Traffic lights that cannot be trusted are ignored in no time, turning them into Christmas trees without any value. This obviously has to be avoided in both traffic and business, and it can be.
The attributes of a trustworthy KPI
Once KPIs are chosen the attributes of a KPI need to be defined and agreed upon within the team. They then need to be populated with source data on a predefined and continuous basis. Who is going to do this, how and when?
Here is the list of 14 essential KPI attributes to specify to make your KPIs trustworthy:
1. KPI Name: the identifier. Keep it short and clear. E.g. Unique website visitors, Net Promoter Score…
2. Description: the area to elaborate on the context of the KPI. E.g ‘This KPI reflects the organizational goals in the following ways ….’
3. Scale: the concept used to arrange, measure or quantify events, objects in a sequence. E.g. Dollars, %, days…
4. Measurements: the formula describing how the KPI is build up. E.g. Conversion Rate = Leads / Unique Visitors
5. Frequency: the number of times data is updated and refreshed during a particular period. E.g. real-time for Conversion rate. Quarterly for brand awareness...
6. KPI Owner: the person responsible for the availability and accuracy of the KPI:g. Individual XYZ...
7. KPI Supplier: the department responsible for delivering the source data: E.g. Brand Management, E-commerce…
8. Data source: the location where the KPI data originates from: E.g. Salesforce.com, MS Excel…
9. Extraction-moment: the point in time when the source data is fed into the KPI dashboard: E.g. at every transaction, at midnight CET, Each first day of a calendar month…
10. Unit: the dimension which is measured: E.g. per country, per website, per banner …
11. Graphic Type: the format in which the KPI is visualized: E.g. Gauge, Traffic light, Pie chart…
12. Boundary green/target: the KPI value which is considered to be a success: E.g. KPI-X <2$,…
13. Boundary orange: the boundary value where green turns into orange: E.g KPI-X >2$ but <3$…
14. Boundary red: the boundary value where orange turns into red: E.g KPI-X >3$
How well defined are your KPIs? Do you trust your KPIs like you trust the traffic light at the corner of your street? If not, check which of the 14 essential KPI elements are missing and take action.
Now you know what a good KPI looks like, pick your favorite KPI from out Marketing KPI library.
