The "K" in "KPI" is not for "1,000"
At the core of any effective performance measurement process are key performance indicators, or KPIs.
Did you catch the redundancy in that statement? Performance measurement uses performance indicators. What gets my goat — because it drives report bloat and the scheduled production of an unnecessary sea of data — is how often the “K” in KPI gets ignored. More times than I can count, I’ve been sent a “list of KPIs,” that, rather than being a set of 3-5 measures with targets established, is a barfed out list of metrics and data:
I had a self-humoring epiphany last week that, perhaps, marketers get confused by the acronym and think that “K” stands for “1,000” rather than for “key!” Through that lens, perhaps they’re falling short — lists of 20 or 30 KPIs are still well short of 1,000! My favorite response to my idle ephiphany (shared on Twitter, of course, because that’s what Twitter is for, right?) was from Eric Matisoff:
Not only did I realize that I’d seen the phrase “key KPIs” used myself…I saw this phrase in writing two days later!
NO, people! No. No. NO!!!
This bothers me (obviously!) — not just when it happens, but the fact that it happens so. So, why does it happen, and what can we do about it?
The History of Digital Analytics Does Not Help
As an industry, we are stuck with a pretty persistent albatross of history. When I started in web analytics, the data we had access to was generated once a month when our web analytics platform (Netgenesis) crunched through the server log files and published several hundred reports as static HTML pages. The analysts needed to know what those reports were so that they could quickly find the ones that would be most useful in answering the business questions at hand. When no such report was in the monthly list of published reports, we would either dive into a cumbersome (hours to run a simple query) ad hoc analysis tool, configure a new report to be added to the monthly list, or both.
We might look at the new report once or twice over the next few months…but the report never went away.
It got to the point where it took the first 10 days of each month for the ever-growing list of monthly reports to be published by the tool. In many cases, data from those reports was getting pulled into other reports with data from other sources. We got to that dreaded point where the report for any given month was often not published until 3 weeks into the following month. Egad!
But, in some ways, it was our only option. We didn’t have quick and efficient access to ad hoc queries of the data that we now have on many front. So, the reports were, really, mini data marts. High latency, expensive, and low value mini data marts, but mini data marts nonetheless. Somehow, though, we often still seem to be stuck with that mindset: a recurring report is the one shot we have to pull all the data we might want to look at. That’s silly. And inefficient. Our monthly (or on-demand) performance measurement reports need to be short (one screen), clear (organized around business goals), and readily intepreted (“at a glance” read of whether goals are being met or not).
KPIs Are Actually Quite Simple (if not Easy) to Identify
KPIs are the core of performance measurement. They’re not there for analysis (although they may be the jumping off point that triggers analysis). They’re not the only data that anyone can ever look at. They’re not even the only data that will go on a dashboard (but they will get much more prominent treatment than other metrics on the dashboard). I use the “two magic questions” to identify KPIs:
- What are we trying to achieve?
- How will we know if we’re doing that?
The answer to the second question is our list of KPIs, but we have to clearly and concisely articulate what we’re trying to achieve first! And that question gets skipped as often as Lindsey Lohan dons an ankle monitor.
I like to think of the answer to the first question as the conversation I would have with a company executive when we find ourselves riding on an elevator and making idle chit chat. She asks, “What are you working on these days?” I (the marketer) respond:
- “Rolling out our presence on Twitter.”
- “Creating a new microsite for our latest campaign.”
- “Redesigning the home page of the site.”
- “Expanding our paid media investment to Facebook.”)
She then asks, “What’s that going to do for us?” (This is the first of the two magic questions.) I’m not going to start spouting metrics. I’m going to answer the question succinctly in a way that expresses the value to the business:
- “With Twitter, we’re working to put our brand and our brand’s personality in the minds of more consumers by engaging with them in a positive, timely, and meaningful way.”
- “We will be giving consumers who find out about our new product through any channel a place to go to get more detailed information so that they can purchase with confidence.”
- “We will make visitors to our home page more aware of the services we offer, rather than just the products we sell.”
- “We will introduce potential customers to our brand efficiently by targeting consumers who have a profile and interests that make them likely targets for our products.”
As marketers, we actually tend to suck at having a ready and repeatable answer to that question. If we have that, then we’re 75% of the way to identifying a short list of meaningful KPIs, because the KPIs are then viewable through the lens of whether they are actually metrics appropriate for measuring what we’re trying to achieve.
A KPI Without a Target Is Not a KPI
“Visits is one of our KPIs, and we had 225,000 visits to the site last month.”
Is that good? Bad? Who knows? In the absence of an explicitly articulated target, we simply look at how the KPI changed from the prior month and, perhaps, how it compared to the same month in the prior year. That’s fine…if the target established for the KPI was based on one of these historical baselines. All too often, though, there is no agreement and alignment around what the target is.
If we accept that KPIs have to explicitly have targets set (and those targets aren’t necessarily fixed numbers — they can be based on some expected growth percentage or compare), then the list of KPIs automatically gets shorter. Setting targets takes thought and effort, so it’s not practical to set targets for 25 different metrics. If we hone in on 3-5 KPIs, then we can gnash our teeth about the lack of historical baselines or industry benchmarks to use in setting targets…and then set targets anyway! We will roll up our sleeves, get creative, realize that there is a SWAG aspect of setting the target…and then set a target that we will use as an appropriate frame of reference going forward. It’s not an impossible exercise, nor is it one that takes an undue amount of time.
Did I Mention that “K” is for “Key?”
Perhaps it is a quixotic quest, but I’ll take any company I can get in this battle for sanity. Let’s get the “key” back in KPIs! If you’re up for saddling up and tilting at this particular windmill, feel free to snag a copy of my performance measurement planning template as one of your armaments!