Why KPIs fail
Have you ever been part of a KPI definition strategy session?
These types of meetings often end on a high note—your KPIs have been defined, you’ve got a rough outline on how to hit your targets, and your team is pretty clear on how to measure progress.
But when it comes to implementing a performance measurement strategy, the reality is often quite different than your lofty objectives.
KPIs do fail. In this post I’ll look into 5 ways KPIs typically fail:
- Poorly defined
- Lack accountability
- Aren't achievable
- Lack specificity
- Too hard to measure
Poorly defined KPIs are doomed
A well-defined KPI is one that stands the test of time. I recommend checking out this post on defining KPIs and seriously following the SMART exercise mentioned there.
The truth is that a well-defined KPI is structured and incorporates feedback from multiple areas of your business.
Cookie-cutter KPIs are a good starting point. But a KPI must address the unique challenges and opportunities of your business. Your unique KPIs ought to be a window into your current performance as it relates to your performance objectives.
Want to grow the business 2X this year? Then your KPIs should be aligned around that goal.
KPIs often fail when they’re ill-defined. The most common pitfall at the definition stage is defining your organization's KPIs without outside feedback.
A KPI should be recognizable and properly communicated outside of your business unit or department. And of course achieving your KPI target should have a clear and measureable impact on the business.
KPIs fail without accountability
You’ve defined a killer KPI that you know is going to move the needle for the business. Congrats! Now, who owns that KPI?
Each KPI you define must have an owner, someone who is responsible for tracking and achieving the target associated with that KPI. It may sound strange, but KPIs require nurturing and nourishment. An isolated KPI will wither and die on the vine.
When defining KPIs, ensure you also define a clear owner. If that person’s job performance is tied to that KPI, even better. Incentivizing achievement of KPIs is a recipe for success.
KPIs must have achievable targets
So you want to grow revenue to $50 million this year? Sounds great.
But if your starting point is $5 million, you may be setting yourself up for a KPI fail.
A good way to set up targets for KPIs is to associate targets with a specific timeframe. I like to take my main KPI, such as New Wins, and break it out by monthly and annual targets. This allows me to track progress on an ongoing basis and continually take corrective action.
The real value of this, however, is giving your team and the business a near-term target that can be achieved, one that contributes to the achievement of an annual KPI target.
KPIs without specific targets will fail
As a runner, I love challenging myself to run faster or longer than ever before. It’s a lot easier for me to achieve my goals if I set out specific milestones. It’s simple, but there's a huge difference between saying I want to run a faster 5KM race and saying I want to run 5KM in 30 minutes.
Business outcomes benefit from the same degree of specificity. Rather than channeling our inner Sisyphus and always challenging ourselves to improve, give yourself a specific target so you know when you can stop pushing the rock up the hill and start working on the next rock.
The KPI is too hard to measure
The most common reason KPIs fail is because they can be hard to measure. KPIs blend data, business objectives, and departmental targets to act as guideposts for success. Without that first piece—data—your KPIs are abstact and conceptual.
Data is what grounds your KPIs, so you better make sure you can actually measure and track your KPIs over time.
A great example of this is the desire to measure “wins influenced by social media.” It’s a brilliant concept that social media marketers rightfully laud and work towards.
However, measuring this isn’t easy. Social engagements often eschew the measurement technology traditional digital marketing teams have in place. Tracking cookies and inferred acquisition paths fail to demonstrate the real value of a positive social interaction.
I’d rather roll out simpler, eminently measurable KPIs than abstract, aspirational KPIs that are impossible to measure.
What do you think? Why else do KPIs fail?
What have you seen work in your organization? What KPI failures did I miss here, and what do you think folks just generally need to know about KPIs before working to establish them? Let me know in the comments!