How to identify your KPIs
Published 2017-07-25, updated 2023-03-10
Summary - KPIs do not begin to impact your business until the moment you've identified which ones are most important. Here's how to do it.
The term KPI (key performance indicator) seems like a stodgy one reserved for executives and managers. This is a common misconception.
True, most KPIs are defined at an organizational level and pertain to your business’s ability to execute its game plan. You know, things like revenue, customer success, and financial outcomes.
These big-picture business KPIs can be awfully boring for practitioners that don’t have a seat at the management table. And identifying KPIs can seem like an exercise in futility particularly when it’s hard to see a straight line from your work to business outcomes.
The truth is that the line from your work at a departmental or team level often looks more like a zig-zag than...
But does that mean identifying KPIs for your team is a waste of time?
Let’s set aside the jargon and excess baggage of KPIs for a moment, and consider how we can think of our performance relative to positive outcomes.
Identifying KPIs as an act of self-assessment
In the world of measurement and analytics, there's a tendency to try to measure everything that is measurable.
All of a company's data goes into a great repository, and maybe you’re lucky enough to have a data scientist sift through it to find meaning. At a fundamental level and as it relates to KPIs, however, this process defeats the purpose of the "key" part of key performance indicator.
Data-driven professionals instinctively want to track their KPI performance and use that data to see if they’re improving or not. It’s quite simple, yet complexity is an art form many of us blindly practice. I’m certainly guilty of this.
I suspect that the root cause here is we feel like more is, well, more. More KPIs means we add more value. Let me challenge you to think about this differently.
I’ve challenged my team to identify a single KPI that they are accountable for that is meaningful and that they can directly improve. We’re not executives, but KPIs have helped us rally around our performance in a way that produces positive outcomes for the business.
Rather than soul-searching whether a particular KPI directly impacts business performance (though it should), we challenge ourselves to see the process of identifying KPIs as an exercise in self-assessment.
The story of identifying our marketing KPIs
Marketing has no lack of potentially meaningful KPIs and metrics. I can riff for days on the value of tracking web visitors, leads, MQLs, keyword acquisition, blog subscribers, trials, customer referral rates, and goal conversion rates.
Like so many other marketers, I could draw a picture of the funnel and point to a dozen critical metrics that, if improved, could have an impact on the business.
It’s a tiring exercise and one that has dubious outcomes. Does it grant you greater clarity and focus on what matters? Maybe, but likely not.
So, we decided to take a different route. We viewed KPIs as indicators to drive focus and guide behavior. That’s it.
And we started with one KPI per person because we knew this would lead us to make better decisions and deliver better outcomes.
On identifying KPIs and performance reporting
The first step in identifying KPIs is removing all the data noise in your team.
Focus not on what you can measure but what you must measure.
Ask yourself: if I didn’t have this KPI, could I adequately report on my performance?
From a professional standpoint, I challenged myself to think of a single KPI I’d point to if I were renegotiating my salary. As in, take a look at this improvement! Not bad, huh?
Start by thinking of the process or program or project you manage. While you may do a lot of work to support that activity, what’s the outcome of all that work?
Identifying tricky KPIs
A recent example nicely demonstrates the challenges contributors face in identifying KPIs. I work with an extraordinarily talented web design team; they challenge themselves every day to improve, iterate, and optimize. They’ve been effective at using data to affect positive outcomes for our business.
But when it comes to brass tax, I challenged the team to answer the question every child (in their infinite, innocent wisdom) asks:
Why are you redesigning the homepage? Why are you testing this button? Why work on this section of the website instead of that section?
Suddenly, things that weren’t apparent came into perspective.
A bit of defensiveness can be a healthy sign, and the process of identifying KPIs tends to introduce the type of friction that can generate such defensiveness.
Which is why it's important to make sure you temper this friction with effectively communicating why this is not about shaming and is all about the growth of your colleagues. This may be a new process for your team, just as it may be new to you.
Our team did what all good marketing teams do: we researched and looked at what others in the industry measured. We also talked internally to determine how individual metrics could serve as a lever for the entire team.
Ultimately, we decided the best KPI for our design team would be website conversions. It describes the best of their work and challenges them to think differently about design decisions.
It also directly impacts our lead generation efforts and empowers our SEO and content marketing strategies. It’s a great KPI for our team.
During this process, we identified other potential KPIs that may have served us equally well. Metrics such as bounce rate, time on page, and time on site were all serious contenders.
Identify KPIs that change behaviors
Why did we choose website conversions as our primary web design KPI? Because we knew that tracking it would influence our behavior and force us to vet projects differently.
In a website as large as ours, there is no shortage of work that can be done. All of that work, by the way, is valuable. But we need to define value. That’s the power of KPIs.
Identify new KPIs for new roles
Internal promotions and new hires provide an opportunity to get a fresh perspective on familiar processes. When we promoted Val Hamilton to Customer Marketing Manager, we took the opportunity to decide what KPI made sense for her to track.
Again, research gave us real insight into industry standards, but we wanted to know how best to distill all these KPIs into a single rallying call.
Customer marketing is awash with potentially meaningful KPIs. Imagine, for example, a customer marketing lead influencing monthly active users, feature adoption, MRR, LTV, and reducing churn.
All good things, but are they the right metrics to influence the right actions? Again, the answer here (as it was for us) is that it depends on your team and your business.
In identifying our customer marketing KPI, we decided that we wanted a KPI that would influence holistic decisions. Val’s job isn’t to extract more MRR from our customers—doing so would fly in the face of our brand and voice.
No, we decided the role was about ensuring customers who had a paid subscription of Klipfolio were happy customers. That changes things from simply seeing expansion opportunities to cultivating genuine experiences with awesome customers.
The KPI we identified was Customer Referral Rate. We felt as though this KPI would promote positive behaviors from our team and positive outcomes for the business.
How do you get a referral? Sure, you can point to a program and some in-product logic, but that only drives success for so long. Referrals occur when someone sees so much value in your product that they feel compelled to share.
Identifying this KPI focused our efforts on outcomes and gave Val the latitude and space for creativity that she needed to be effective.
Identifying KPIs is an exercise in behavior analysis
KPIs must drive behavior to achieve results. It’s that simple. A KPI without action is devoid of meaning, abstract, and, ultimately, useless.
KPIs fail when they lack champions, lack accountability, lack relevancy, and are removed from business outcomes. In your process of identifying KPIs, tackle these problems head on.
Above all, if you’re a manager, avoid defining KPIs for your team.
Start the process in an open, collaborative environment so you can foster the development of an internal champion. When someone tells you what they think is important, they’ll be driven to achieve the targets they set for themselves.