Setting Key Performance Indicators (KPIs) is not easy.
Whether you’re deciding the One Metric that Matters or a mix of KPIs, it can be a long, iterative process to determine the precise metrics that best measure team performance or the success of your business.
In fact, when we finally do get to the end of this process, we could be forgiven for thinking the hard part is over.
But it isn’t.
Because a good team KPI doesn’t just live in a strategy paper. It takes root within your work culture. It informs decision making and is the subject of continual reflection and discussion.
But this is where many leaders fail. They overestimate how meaningful team KPIs are to the people doing the work (i.e. the team). And underestimate the leadership role they need to play to build KPIs into team culture to promote employee engagement.
Even good leaders, who likely brought their colleagues into the KPI-setting process itself, will still have work to do at this point.
So how do you know if your KPIs have taken root? Well...you need to get RUDE.
The RUDE test
RUDE is a series of questions so simple, you feel slightly rude even asking them.
It’s a litmus test that challenges your own assumptions; reveals to what extent your team is aware of your KPIs; and indicates just how much performance measurement is informing the day-to-day activities of the team.
It’s not a prescriptive process. You can run it formally, or informally, 1:1 or with the whole team. Just remember, it’s not a test of your team’s competence – it’s a test of how successfully you have embedded KPIs into your team culture.
- R – Remember
- U – Understand
- D – Describe
- E – Evaluate
Remember – Can everyone remember the KPIs?
This question is so obvious it probably does feel like a rude question. But that’s exactly why it’s worth asking. Teams with a data-driven culture can reel off their KPIs instantly. When teams can’t (or can only recall some) it demonstrates that some or all of your KPIs haven’t stuck.
Understand - Does everyone understand each KPI?
Do they understand how they are calculated? Where is the data taken from? What’s it measuring? What isn’t it measuring? What’s the time frame (or is it used in real time)? Is it 100% reliable? Why isn’t it reliable?
Most KPIs are not intuitive. They need to be explained. That’s because they are often contextual to your company or industry, or because they involve specific calculations and set parameters.
Just because you’ve used KPIs like MRR, CSAT or ROI for many years, doesn’t mean everyone will understand them fully (...or at all). It’s easy to nod along. But it takes courage to be the one to say you don’t understand. Which is why most people don’t.
Describe - Can everyone describe each KPI?
You’re not asking for detail here, but... can they describe the general patterns and trends? Has Conversion Rate gone up or down? What’s a good CSAT on a normal day? Has AOV stayed steady this month?
By using KPIs, we can say, with confidence, when performance is changing – and to what extent. However, if people can’t describe basic trends in your KPIs, it means their awareness of them is only very shallow. And it’s unlikely the KPIs will ever inspire meaningful action.
Evaluation - Can everyone evaluate performance using KPIs?
We’re not talking about the dreaded annual employee performance review. We’re talking about something more akin to what John Doerr calls Continuous Performance Management
Does the team evaluate performance using KPIs on a regular basis? Does it happen informally and sporadically? Are there feedback loops using KPIs that promote continual improvement? Do KPIs feature in monthly or weekly 1:1s? Are people able to describe how and when their work affected a KPI?
It’s one thing for your team to be aware of – and understand – your most important data. But the real value only comes when people actively use that data to improve team performance or business performance.
What can I do to embed KPIs into team culture?
If you tried the RUDE test and didn’t like what you found, you might now be thinking about what you can do to create a more data-driven culture.
Well, clearly this is a huge question (and one we’re not going to be able to answer in the remaining few hundred words of this article). But, as a starting point, here are six leadership lessons, which any manager can incorporate into their leadership style to encourage a more data-driven culture.
Lead by example
David Waller, Head of Data Science at OW Labs, writes on the subject of creating a data-driven culture. Many of his points relate to organizational structure and skills, but his points about leadership stand out. Especially the age-old lesson: lead by example.
Data-driven cultures start at the top. If you want your team to value KPIs, you need to value KPIs – and be seen to be doing so.
In particular, get in the habit of explaining your analytical choices. Most choices we make using KPIs are not self-evident. They require us to balance many competing factors.
Spending time walking team-members through your own choices, in all their complexity, is one of the most engaging ways to create buy-in for the use of data in day-to-day situations.
It’s been said many times, but great leaders repeat themselves. And when you’ve repeated yourself so much you start to get bored of your own voice, well, I’m sorry, you’ve probably still got to repeat yourself some more.
KPIs are no different – they are also a form of communication. You’ve chosen them for a reason – because they’re important. As self-conscious as it might make you feel, the best way to highlight their importance is through repetition.
Beware the Curse of Knowledge
The Curse of Knowledge is a cognitive bias. Essentially it means that when we know something, we can’t ever imagine not knowing it. This affects the quality of our communication because we unreasonably assume background knowledge, which isn’t there.
Setting KPIs (which includes personally understanding exactly what those KPIs are and why they are the right KPIs) can be a long process. Therefore, to assume your team would need any less comprehension time than you did is a logical fallacy.
You need to create space and time for this understanding. If you don’t, it means you have fallen prey to the Curse of Knowledge.
Kill the fear
Often, teams aren’t just unaware of KPI, they’re subconsciously avoiding them. As Stacey Barr writes,
“When people have a fear of KPIs, of under-performance or bad decision-making being exposed, performance cannot improve. We have to kill the fear of KPIs.”
The fear stems from a belief that individuals are solely responsible for KPIs, and will be judged for poor performance. This is a myth, and one that gets in the way of a data-driven culture.
As leaders, it’s our job to dispel this myth and kill the fear. When we do, it creates the conditions for people to start bringing KPIs into their day to day work.
Visualize your data
You’re very unlikely to create awareness and understanding for your data if it’s inaccessible. Using data visualization tools such as KPI dashboards can create feedback loops that help your team keep KPIs front of mind.
Don’t forget new joiners
Should an overview of your KPIs be part of the new joiner plan? Probably.
Is that new joiner plan already overloaded with a million and one other things for them to get up to speed on? Almost definitely.
When it comes to new joiners, all of the above points apply, except more so. Just be aware it will take longer for them, and never assume they would pass the RUDE test, just because they haven’t asked about your KPIs.