Establish a Culture of Measurement With Realistic KPIs
April 01, 2014
Key Performance Indicators (KPIs) have been a buzzword in business for years, but when applied methodically and realistically, the path to a culture of measurement is achievable.
Data is nothing new to business; managers always use some metric to gauge success. Today, with the era of Big Data, management is enabled to have an accurate view of business activities by establishing a valid and realistic culture of measurement.
Central to making a measurement culture work in an organization is the exercise of boiling down high-level business objectives into tangible measurements.
KPIs are a way to measure the important factors that contribute to meeting business objectives at a higher level
Why you need a KPI Framework
All digital businesses have key business objectives (KBOs), and these vary depending on product, market, resources and numerous other factors.
Your KBOs, whether it is a focus on maximizing revenue or customer loyalty, have to be viewed as an ecosystem of many small factors. In order to tackle this, it is necessary to establish a broad framework for measurement that can be tailored to the capabilities and ambition of any organization.
Why organizational alignment is critical
Fairly often, in digital businesses, KPIs are not directly aligned to company objectives. In this situation, the KPIs will exist in a vacuum and be a distraction within the organization.
Therefore, it is essential to establish measurement as a cultural trait of the business through clearly communicating the benefits of this framework. The KPI framework must involve the whole organization, regardless of seniority.
How to establish the right KPIs
In order to establish metrics that can measure your organization, it is important to clarify and discuss the KBOs, as your stakeholders perceive them. When this fundamental exercise is done, the leap to measuring the success or failure of your objectives is made much easier.
After you set your KBOs it’s time to determine the “actions” you want your customers to do, or the Most Wanted Response (MWR).
Next is the hard part – translating the actions into measurable indicators of business success. Obviously, there are a myriad of ways to track online performance. Do not be overwhelmed; you do not need a profusion of KPIs. You look only for critical and fundamental numbers.
As context, think about the KPIs in everyday life, outside of business. During a check-up, your doctor will measure such factors as blood pressure, heart rate and body mass index. These numbers are in fact key performance indicators of your health!
An example of the KBO-MWR-KPI process:
To sum up; moving to a culture of measurement is only possible through the use of a clear framework and focused measurements. KPIs rooted in the KBOs of an organization will drive management to support the approach, and keep it focused on only those metrics that are essential to success.