How Is My Business Doing?
How Is My Business Doing?
The Power of Well-Defined KPIs
Business Metric Measurement
In the General Chemical Co. story above (true by the way), it was pretty easy to tell that the business was not doing well that day.
But on a normal day, how do you tell if business is going well or not?
For most companies, there’s no official definition for their Key Performance Indicators (KPIs)1.
Without a clear business goal, each departments defines their own successes.
Marketing might use “Impressions” or “Comments on Social Posts” as KPIs
Sales might use “Qualified New Leads” or “New Accounts Created” as KPIs
Customer Service might use “Time to Resolve Ticket” as their KPIs
The C-Suite might use “Revenue” as their KPI
All of those sound like reasonable metrics to choose for each department individually.
No one could be pointed to as the single point of failure for corporate visibility if something goes wrong.
BUT….
Imagine if an Instagram advertisement for a credit card company that accidentally forgot a decimal place when showing the given rewards after 3 months. ($800.00 became $80000)
Customers flood into the system from the post, generating a lot of
Impressions and Comments as they discuss the rewards in the post
New Accounts Created as they sign up for a new card
Customer Service is able to Quickly Resolve easy questions from new customers with simple “Yes” and “No” answers
Revenue increases as new card users make purchases
Things look great!
Each department is excited and everyone expects a big end-of-year bonus. Some of the more impulsive sales guys decide to go in on a 30 foot fishing boat together to celebrate the good quarter.
All raucous parties come with a hangover—financial parties are no exception.
90 days from the (in)famous Instagram ad, the first new cardholders get their promised statement rewards.
Furious at the paltry sums auto-applied to their account, they quickly form a class-action lawsuit to enforce their promised terms.
The $800 statement reward for spending $5,000 in the first 90 days becomes an eye-popping $80,000.
$80,000 per customer
That boat’s underwater now.
Metric Design
While the allure of having multiple dashboards to track each department’s KPIs may seem appealing, the reality is that having too many can be counterproductive.
You just saw how having seemingly reasonable, department-specific KPIs leads to (normal) failure.
Unused dashboards lead to clutter, confusion, and dilute focus.
Instead of providing meaningful insights, they create distractions and hinder decision-making processes by providing too much data and too little information.
What To Do Instead
Focus on Relevant Metrics: By having a few well-defined metrics, employees can focus on the most relevant metrics that align with their specific goals. A streamlined approach ensures that the dashboards provide clear and meaningful information, guiding the company towards effective strategies and informed decision-making.
Simplify Data Interpretation: Well-defined dashboards present data in a concise and digestible manner. They use visualizations, charts, and graphs to simplify complex information, making it easier to interpret and draw meaningful conclusions. This approach reduces the opportunity for misinterpretation and time to decision.
Promote Alignment and Collaboration: When teams have access to a few shared dashboards, it promotes alignment and fosters collaboration. Having a common understanding of performance metrics enables teams to work together towards shared objectives, improving communication and coordination across different marketing functions.2
Streamline Reporting and Analysis: Instead of spending excessive time pulling data from various sources, consolidating information, and creating multiple reports, a single source-of-truth approach allows for efficient monitoring and reporting of key metrics.
Data is a powerful asset, but only if you know how to use it.
By adopting a few well-defined metrics, marketers can simplify insights, focus on relevant metrics, and streamline their reporting and analysis processes.
Quality over quantity is the key here, as having a few actively utilized dashboards is better than more raw data.
Remember, it's not about having many metrics, but rather about having the right dashboards that provide actual information for success.
If you see bad metric design in your company, or know someone who does send them a link to this post
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Just be careful! A bad common metric will lead to bad outcomes. See Goodwin’s Law