KPIs: Use them properly, or else
KPIs, KPIs, KPIs. Is there any other aspect of business operations so widely spoken about, furthermore contested? It’s a divisive subject in the business community – where some live by them, others dispute their place altogether; some employ but largely ignore them, either way.
Whether you utilise them day-to-date or oppose them entirely, if you work in the corporate world, you’ve come across KPIs at some point.
The fact is, the reason they’re so highly contested is that KPIs are seldom implemented effectively, or used properly.
It’s not about the ‘numbers game’ – it’s about business efficiency.
Let’s stop thinking about KPIs as targets, first off. There’s a clear distinction between the two.
The definition of a KPI is, as it says on the tin, a key performance indicator – a figure which is (or should be) derived from information your business is providing you.
KPIs should be used to evaluate the activity a business needs to undertake in order to achieve its targets – not as a target in and of themselves.
Let’s put it into real terms.
Your business currently has 10 sales execs. The team’s target is to generate $100,000 in revenue each month, so each individual’s target is $10,000. Currently, each person is achieving $8,000 per month; upon drilling down into their activity, you find that they’re each making 8 phone calls per month.
What can you take from this?
Your business is indicating that your team’s activity needs to increase in order to reach target, and is telling you, hypothetically, how much it needs to increase by.
Analyse these tricky figures and you’ll find it makes sense that, were they each to make 10 phone calls per month, everyone would hit that $10K, no problem. But here’s the thing – there’s no need to now storm onto the sales floor and inform the team that they had all better hit those 10 calls, or else. Not in that fashion, anyway. You’re not setting this as a target: your business is doing it for you.
It’s a KPI, not a target. See?
KPIs should be in place to motivate, not condemn.
Information is king, or so they say, and it’s our job as leaders to use it to our advantage. Particularly in sales and marketing, numbers do play a big part in the performance sense – from calls made to appointments booked, website clicks to conversion rates, your team is constantly running through figures in their mind.
Adding a panel of KPIs into that mix, specifically when posing them as targets/must-hits, definitely creates potential for the pot to boil over from time to time. However, if you were to go to your team and say, “Hey, we’ve collated some really interesting info here which we think is going to help you do your job better/more efficiently, want to take a look?”, any employee worth his/her salt will be clambering to see your notes.
Keep targets and KPIs separate; monitor them both as equals.
Your KPIs should be based on fact and fact alone.
Here at Certus we get to know our clients well, and I’d be lying if I said we don’t sometimes have to do a little – err – re-education, shall we say. Often, businesses blindly set their KPIs based on industry standards or what their competition appears to be doing which, fundamentally, doesn’t make sense. Just because Oracle’s techs have to sit four appointments per day, doesn’t mean that your hyper-growth, disruptive SaaS start-up should be doing the same.
In fact, we need to move away from this idea of ‘setting’ KPIs altogether – I reiterate, your business sets them itself. Monitor activity, productivity, operations, all aspects of your business, over time to understand what your KPIs are and where they should sit in terms of activity. Don’t pull numbers out of the air and ‘set’ KPIs based on what you think you should be doing – base them on what you are doing, and the improvements that you want to make.
Remember, more doesn’t always equal more.
Numbers and humans behave in very different ways. When a calculator does a complex mathematical equation, it doesn’t need to take into account that, maybe, number 3 is recovering from a bout of the flu, or that number 4 is off on holiday for two weeks this month.
So, when you take a look at your figures and see that 25 calls equals 1 appointment, don’t think it’s as simple as commanding your team to make 50, and expecting them to achieve 2 appointments as such. It just doesn’t work that way.
I’m not saying that we as leaders shouldn’t always strive for excellence and improvement – but, alas, we are humans managing humans. And that needs to be at the forefront of our approach, always.
We shouldn’t be setting KPIs, we should be running our businesses based on the information it provides us – looking at them as the dataset they are, rather than another number to hold over our teams’ heads.
As ever, love to hear your opinions – what’s your approach to KPIs, and are you making the most of them across your business?