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Bureaucrats love them key performance indicators (KPIs) – metrics that supposedly allow them to evaluate the health of varied business activities. And admittedly, they can be very worthwhile as a part of an overall strategy that prioritizes data evaluation and data-driven decision making.
But listen. There may be a giant problem with glorifying KPIs – or a minimum of relying too much on them. Too many corporations fall into this trap today.
The “right way” to see KPIs
Okay, let’s be reasonable here. KPIs can be useful – and powerful in guiding your organization. When used accurately, KPIs are objective, easy to interpret, and measured with specific intentions. These are really reliable data points that can be used to strengthen decision making.
Nonetheless, even on this hypothetical ideal scenario, it is vital that organizational leaders use these metrics accurately. It is best to never use a single metric to make decisions, and you should not use metrics alone to drive all your visions for the longer term of what you are promoting.
You can consider KPIs as various kinds of food in a well-balanced eating regimen, or as different assets with different strengths and weaknesses inside an overall investment portfolio. They’re extremely useful, but they’re only a part of the decision-making power within the organization.
Related: How Key Performance Indicators Can Actually Kill Key Performance
KPI monsters we have created
Why have we departed from this vision? There are several explanations price exploring. Personally, I feel it’s mostly a disproportionate assessment. Together, we now have come to imagine that KPIs are more powerful and informative than they are surely. That is to not say they are not powerful or informative; it’s merely a press release that we now have overestimated and misinterpreted them. Let’s take a take a look at among the specific ways this manifests itself.
An exercise in vanity
Vanity metrics are a primary example of how KPIs can be misused and misinterpreted. Put simply, vanity metrics are metrics that make you are feeling good a few certain end result or strategy without really providing details about how things are going.
For instance, the variety of followers is an often tracked indicator of vanity in social media marketing. This has some value, and it’s actually good to see a rise in followers. However the variety of followers has little to do with more quantifiable aspects equivalent to follower engagement, brand awareness, conversions or revenue generated.
Ambiguous meanings
Sometimes KPIs have an ambiguous meaning. Take a commonly used one on the earth of customer support and customer experience: Net Promoter Rating (NPS). Hypothetically, NPS helps you gauge consumer sentiment, and also you measure it by asking people how likely they’re to recommend what you are promoting to others. But sometimes those answers have little to do with consumer sentiment. It’s nice to know that a few of your customers would hypothetically recommend what you are promoting to others, but why would they? What drives them? And what’s the probability that they may proceed to accomplish that?
Almost every KPI requires difficult complexity; trying to scale back large, complex topics to a single measurement is futile.
Misleading data
You can use the information for support pretty much any argument you wish. For instance, for example we use data to match the effectiveness of various marketing strategies. There may be one strategy that may be very difficult to execute, but in case you use it successfully, it’s incredibly powerful. If you must argue that you must use this strategy, you can select the most effective case studies and prove how powerful it can be. If you must argue that you should not use this strategy, you can measure the typical scores and show that it’s always not price using this strategy.
In this manner, data points can sometimes develop into primitive tools with which we simply confirm our pre-formulated opinions. At their best, KPIs should challenge us and force us to think critically.
Almighty gradual change
Built-in Growth Commitments (EGOs) drive countless corporations, forcing them to grow, grow, and grow. And on a smaller scale, organizations are sometimes held back by a spotlight on incremental change, fettered by KPIs that guide them.
When you discover that a KPI is vital, the organization becomes motivated to further increase that KPI. The goal is frequently to see a change of a minimum of a couple of percentage points after each predetermined time frame. After all, incremental growth is positive usually, but sometimes it’s higher to embrace a short-term KPI loss in pursuit of a more fundamental, disruptive change that leads to higher long-term results.
In other words, an obsession with incremental change can limit a company’s true growth potential.
No motion possible
One final issue with KPIs to notice is that they generally lack the actionability or “so what” factor. It’s great that your organization has the next CSAT, but what does this mean for the organization, how should it change the decision-making process and where are you headed?
None of this is supposed to suggest that you must stop tracking KPIs or use them as a part of your organizational decision-making approach. But we’d like to essentially take a look at our obsession and misuse of those sometimes trivial and sometimes misleading data points.
Let’s be higher data analysts.