Choosing KPIs can sometimes seem like trying to see the wood for the trees. But since hope has never been a great business strategy, knowing and acting on your key metrics can be the difference between boom and bust.
So, here are four handy blog posts to help you on the journey towards discovering your most important metrics:
1. Designing startup metrics to drive successful behaviour
David Skok, serial entrepreneur and VC at Matrix Partners, says the secret to choosing metrics is to start with the end goal (say, a revenue target) and work your way back from there. That way you get a good picture of all the different elements that have to be working in order to reach the goal and so aware of what levers you can pull to steer you in its direction.
‘Good metrics should be actionable and drive successful behavior.’
Skok suggests choosing KPIs that have the biggest impact – there is no point measuring things you can’t affect or things that vary very little.
Despite the ‘startup’ in the blog title, Skok’s advice is applicable to any kind of business.
2. How to choose the right KPIs for your business
The good people at HubSpot advise you to consider what stage of growth your company is in to help identify which metrics are important at that time rather than blindly following a list of industry standard KPIs. They also warn against measuring too many things and suggest focussing on no more than 4 to 10 KPIs at one time.
‘Choosing the proper key performance indicators (KPIs) to focus on is the first step towards measurable improvement.’
Your company will have core business goals and your key performance indicators should always directly relate back to those overarching company goals. KPIs will also be influenced by your company’s business model and the industry in which you operate.
Finally, you should identify both lagging and leading KPIs because you need to have an understanding of what has happened in the past as well as how you are doing now, how you are progressing and the probability of you reaching your future goals.
3. You Are What You Measure, So Choose Your KPIs (Incentives) Wisely!
On his personal blog, Occam’s Razor, entrepreneur Avinash Kaushik talks about the difference between good and bad KPIs and how giving employees the wrong incentives can dramatically affect the entire organisation.
‘You become what you measure, so why not solve for what actually matters?’
He focusses on six ‘corrosive’ or ‘primitive’ metrics, none of which encourage optimal behaviour or business outcomes. He then helps you rethink them by suggesting alternative, ‘angelic’ metrics in their place. Here are some examples: Page views vs Visitor loyalty, Revenue vs Economic value and Time on site vs Task completion rate.
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