A business which does not define, monitor, and learn from Key Performance Indicators (KPIs) is for all intents and purposes flying blind. KP’s provide a tangible means for organizations, departments, and managers to understand how they are performing against current goals, set future goals, and measure success. Generally speaking, KPIs are consumed in a snapshot, dashboard setting meant to provide a quick yet comprehensive look at business performance.
Various departments may focus on select KPIs relevant to their roles, but many are useful at any organizational level. Following is a review of how some KP’s can be used.
KPIs Improve Company-wide Knowledge
Numbers are a universal language of sorts, and by identifying KPIs and sharing information about them and how departments are performing relative to goals, leadership will have fast access to pertinent information.
Consider an eCommerce business. A valuable KPI might be landing page views, particularly when combined with another KPI, conversion rates. Having an understanding of this, and sharing this information, can help an operations manager understand what products are selling well and which are underperforming. This knowledge can in turn improve her ability to make production decisions in response to consumer demand.
While KPIs themselves are not, strictly speaking, business goals (though I would argue this, and perhaps win), they do provide insight to if and how goals are being met. In every instance this is relevant to a business. For example, consider a marketing department’s goal of an ad campaign in which the acceptable cost per click (CPC) is set at $3.00. This figure has been evaluated as the maximum amount the company can spend, given historic conversion rates - another KPI - and still make money on a sale.
A week into the campaign, however, the digital marketer notices CPC is running at $4.00. By discovering this information early, the marketer can adjust the audience targeting parameters or call to action, for example, in an effort to bring CPC down to acceptable levels. Thus by understanding the KPI in question, the marketing department has the opportunity in real time to avoid a company-wide loss.
Traditional Information Sharing
Today, businesses must share information amongst their departments and teams quickly. How do these information shares happen? In many organizations departments assume their own unique identities and can become isolated from others, so that the company appears to have many individual silos, each independent of the other.
In a setting like this, an information request is likely to bubble up to the Director of Department A, who will then send a message to the Director of Department B, from which the request trickles down to someone who can compile the information needed. Once the information has been found, the process reverses until it lands in the hands of the original requestor.
There are countless ways this method can be considered inefficient. It can take a long time and involves too many people. Worse still, when the information finally makes its way to the requestor, there is a reasonable chance it is not exactly what was originally asked for. Details may have been lost or unnecessarily added during the many stops along the way.
This leads to lost or wasted time and acts as a hindrance to high performance.
Introducing the Hub and Spoke Method
Perhaps there is a better way. The Hub and Spoke Method of information sharing, particularly with regard to digital analytics, can accelerate and standardize the way teams send and access information. In it, departments request information from a central place - the hub - which formats the request and retrieves the necessary data on the requester’s behalf.
A model such as this has several benefits, such as:
There are other benefits to the hub and spoke model as well. By its very existence single-department silos begin to morph into a connected part of the whole. This creates a far more unified approach and enables departments to share and contribute to the company’s strategic vision. Further still, it can encourage automation.
Automate Tasks to Addressing Stakeholders’ Needs
Subject matter experts operating in the hub can and should make a point to understand the unique needs of organizational departments. While departments must regularly share information, it is likely they will apply knowledge differently. By understanding what information stakeholders must have and where it can be found, coalition and delivery of such data can be automated, significantly reducing time investment and thus demonstrating a measurable savings in company resources.
Information from a central hub also can help keep stakeholders informed on company direction and progress. Through regular updates each department can begin to understand trends and, over time, position itself to be agile and responsive to the company as a whole.
KPIs Help You Understand Your Customers
To succeed for any length of time a business must understand who it’s customers are and what products and services are important to them. There are many KPIs which offer insight on this subject; two that might stand out are social engagement and number of returning site visitors.
Social engagement can help a company understand how and what its customers think; often it seems people willingly offer opinions on social channels which can provide great insight. Such information can be particularly valuable as a means to narrow more generic market research and provide clues on how, when, and where to target an audience.
Likewise, a returning website visitor is an indicator a person has found value previously. It also can identify a customer’s specific product interests, buying habits, and spending tolerance. All of this information can be used to measure how well the company is presenting its products from a marketing standpoint, how well the IT department is doing to provide a good user experience, and how relevant the company’s products are to its target audience.
The Role of the Digital Analyst
Digital Analysts provide an important function when acting inside the hub portion of this model. To be effective they must have an understanding of both the strategic direction of the company and the tactical processes of its departments. Such knowledge translates into increased efficiency: Understanding and delivering information with speed and precision is what propels the business forward.
Summarizing the Benefits of KPIs
KPIs may differ among departments and organizations, but should have a few things in common. They should be easy to grasp, quantitative, conducive to action, and practical. Ultimately they can clearly illustrate whether a company is meeting its goals, and identify both areas of strength and those which need improvement.
A company well-informed with regard to clearly stated KPIs likely will have significant advantages over one unaware or otherwise not paying attention.