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Rob Petersen

12 experts define Key Performance Indicators (KPIs)

Tuesday, July 22, 2014

Key Performance Indicators (KPI's) are one of the most over-used and little understood terms in business development and management. They are too often taken to mean any metric or data used to measure business performance.

The role KPI's play is much bigger and more important. In fact, KPI's are one of the most important guideposts for any business. Every business should have them.

Here's one of the best definitions I've heard: KPI's are an actionable scorecard that keeps your strategy on track. They enable you to manage, control, and achieve desired business results.

You don't need a lot of metrics, but you do need to carefully select, report, and take action from the handful you choose. Let's break down this definition so it's useful for your business, especially considering the guideposts available on the internet.

Desired Business Result

Always begin the construction of KPI's with a clear understanding of the desired results. There's nothing wrong with starting by saying you want to sell more of what you make. But try to be a little more specific. How will you do it? Will you:

  1. Shorten the sales cycle by half
  2. Generate 50% more leads
  3. Create a new usage occasion
  4. Get loyal customers to buy 30% or more
If you are clear about where you are going, you can construct KPI's that get you there.

An Actionable Scorecard

Pick the handful of measurements (generally no more a half dozen or so) that you believe are most important to the achievement of this goal. For example, if you wanted to shorten the sales cycle by half, you could measure:

  1. Keyword search for the term(s) that describe the need your brand meets
  2. Unique visitors to your website
  3. "Bounce Rate" to determine if your site is relevant and people view more than one page
  4. Sales (if products are sold on your site)
  5. "Average Shopper Value," since buying more can help determine if you're meeting your goals

Keep your strategy on track

(The rest of the Whiteboard):

Figure out the "Source" for the "Raw #'s" and how frequently ("Freq") you report. Then, in the second column, set goals to measure "Progress" that seems realistic to the achievement of the desired results. Finally, in the third column, pick a comparison period like the previous year, or the previous month if you are a start up. Now, the key measurements are more than raw data; they are actionable metrics.

Of course, that's one opinion, but there are others.

Here's how 12 experts define Key Performance Indicators (KPI's).

  • "A metric that helps you understand how you are doing against your objectives." - Avinash Kaishik
  • "Measures that help decision makers define and measure progress toward business goals. KPI metrics translate complex measures into a simple indicator that allows decision makers to assess the current situation and act quickly." - KAIZEN Analytics
  • "A KPI: 1) Echoes organization goals, 2) is decided by management, 3) provides context, 4)

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About the Author:
Rob Petersen is President of BarnRaisers, an online marketing solutions company using social media, the power of community and the proven principles of relationship marketing. Rob was EVP/Chief Strategy Officer for Omnicom and has held leadership positions at FCB, Euro RSCG and Saatchi & Saatchi.

Rob has been recognized by the American Marketing Association for building billion dollar businesses multiple times. He has developed game changing consumer relationship platforms that have propelled brands from Abbott, Coca-Cola, Johnson & Johnson, MasterCard and Pfizer to market leadership.
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