Relying on Key Performance Indicators has become the norm in many business operations. And why not? Properly defined and managed, KPIs help businesses focus on the right priorities and chart progress towards their goals.
But even well-designed KPIs have their limitations. By their nature, they’re not greatly insightful (they’re indicators, after all). The problem is that very often, KPIs are used as if they are.
One of the attractions of focusing on KPIs is their simplicity. Managers love boiling things down to concise, action-oriented statements and phrases. We hear it all the time from senior leadership. “Give us the bottom-line finding,” they emphasize.
“Business by bullet-point,” if you will.
But here’s the thing: Because of their distilled simplicity, KPIs can lure many a businessperson into overestimating the insights that they’re able to provide.
KPIs do provide a jumping-off point, but the underlying “why” is often still conjecture or a hypothesis. It takes discipline to look for deeper insights and corroborating evidence to really understand what KPIs are saying to us.
Addressing this issue, Shiv Gupta, data analytics specialist par excellence and head of Quantum Sight, has noted:
“Anyone who has worked on developing KPIs knows that it is a game of balance and compromise based on business objectives. The need for actionable information battles with the desire for simple metrics.”
Database marketer Stephen Yu of Willow Data Strategy makes another great point when he writes:
“We all have seen many “death by KPI” [situations] when organizations look at things the wrong way. When someone is lost while driving, [to] keep looking at the dashboard of the car won’t get the driver out of trouble. In a time like that, one must turn on a navigator. Different solutions call for different analytics, and popular KPIs – no matter how insightful they may have been – often do not lead to solutions.”
What have been your experiences in working with KPIs in your business? How have they helped … or not? Please share your thoughts and perspectives with other readers here.