“Not everything that can be counted counts, and not everything that counts can be counted.”
The blessing and the curse of business in the 21st century is that we all have easy access to data. Mountains of data. Oceans of data. In and of itself, this is an unalloyed good. More information is always better than less.
The problem arises in what people do with it. With access to so much data, and with significant investments made in CRMs and other tech to collect this data, the bias among leadership is always to do something with all this information. This often leads to two outcomes:
One common way to attempt to harness the tidal wave of data is the use of Key Performance Indicators, or KPIs. The idea is to hook the data pipeline into the metrics that matter most for your business. Want to see how many new leads your sales team is producing? Plug your data into a KPI and watch it go up or down (hopefully up!)
Used correctly, KPIs are an effective method to measure performance, track changes over time, inform better decision-making, and predict future success.
However, all too often, KPIs are misused. Companies may not have sufficient data to measure what they want to track; or they have data that is misaligned to their metric; or the chosen metric may not be the best fit for their objective. In such cases, KPIs can impede progress, or even lead teams in a completely wrong direction.
Companies often think about this problem backwards. With so much data at their fingertips, they wonder: “How can I collate all this information?” The real question is: “What are my key business objectives?” Data is only a tool, and it must be used precisely. Companies should use data in a highly targeted way to track the objectives most important to their success. A shotgun approach to KPIs will waste time and create frustration.
If you are in leadership, be humble about the KPIs you choose. Having a defined business objective is a great start, but you may not actually know which activity will help you reach that goal, and therefore the ideal metric may be eluding you. Make sure you have buy-in on all KPIs from your team, since they have the tactical knowledge that may inform the best approach to performance management. Also, make sure that the levers that drive each KPI are fully controllable by the people who are affected by their results. Otherwise, you might create wrong-headed incentives and instill bitterness in your teams.
Above all, make sure that KPIs help guide your discussions without becoming your discussions. I can’t tell you how many sales and marketing meetings I’ve sat through where someone just rattles off a list of KPIs. These discussions could literally be an email! All team members should come into meetings already aware of where the KPIs stand—CRMs make this very easy to accomplish through dashboards—and then be prepared to add context for why we’re up here, down there, or why the real story is being obscured by a red or green dot.
In sum: clearly define your core business objectives, select the fewest number of KPIs possible, and don’t let the colored dots dictate every meeting.
