Get SMART on KPIs
It’s not enough to create KPIs for your company, you need to make sure that they are SMART.
In the previous post we dissected the term KPI. We looked up close at each letter, and what it stands for, in order to better understand what is required of a practical, focused and action-driven KPI. If our chosen KPI doesn’t propel us into action, does’t get us closer to achieving our goals, then we need to re-examine how we define our KPIs.
A method we apply to any KPI in order to check its validity is the SMART criteria. The word ‘smart’ is seeing an unparalleled renaissance in recent years. We all have SmartPhones by now, our tablets have SmartCover and the streets of our cities are flooded with SmartCars driven by individuals wearing SmartWatches. Appliances manufactures are promising to fill our houses with SmartTVs, SmartFridges, SmartWashingMachines… the only category that still can be non-smart is our pets; we love them nonetheless.
So in this ever-smarting world we live in, our KPIs must keep up, and be SMART.
Let’s Break It Down
S — Specific
The more specific a KPI is, the more valuable and telling it will be. Avoid generalities when defining a KPI and be detailed — use numbers, connect to the person or department responsible, and make sure it measures one thing, not three.
M — Measurable
Almost goes without saying, a KPI should measure actions, not behavior. Looking again at the KPI we mentioned in the previous post, Customer Satisfaction, it is definitely not measurable. How can you measure satisfaction? You can’t. You can measure actions that will indicate on how satisfied your customers are; willing to provide testimonial for our website, signed on for additional services, terminated the service with us — all our measurable actions.
A — Achievable
It is common practice to aspire to more than we can achieve. We’ve been told numerous times to set our goals higher that we can ever imagine is possible, that way we always stay hungry and wanting more. All is true and valid, and works wonders, but not when defining a KPI. An unachievable KPI will put you in the red for indefinitely and just temper with the team’s feelings of self-worth. So set your KPI to an achievable target and once that is achieved, turn it up some more.
R — Relevant
A KPI should not only be relevant to the information we are seeking (how satisfied my customers are) but also to the person or department that is being measured. Number of times account managers contact their customers isn’t relevant to their overall satisfaction; a technical problem can lead to numerous phone calls between an account manager and her client, a number that as it increases has the opposite effect on satisfaction.
T — Timely
Setting a time frame for accomplishments goes without saying, and so it goes for defining KPIs. It can be the time frame within the target that must be met, or the point in time in which the performance need to be measured. Continuing with customer satisfaction, this cannot be tackled at the beginning of a project obviously. The Timely aspect of a KPI goes hand in hand with its level of Achievability — make sure to set reasonable, realistic time frames.
You Are Reading This Online
The Internet is a dream world for KPI (or maybe hell?) Every company with a site can measure a million things — how many visitors, how many uniques, how many registered to the newsletter, how many left their email, conversion rate, quality of leads, correlation between size of banners and their effectiveness… the list goes on and on. But how do we find the right ones? What’s important to keep in mind is not only to measure the indicators that provide you with a view of the past, but ones that tell you about the future.
The most basic thing to measure is number of visitors to your site. You KPI it, get the data, and then let the marketing guys create a campaign that will increase this number. Many more clicks are heard, your conversion rate is climbing, but than you realize that behind those ‘clicks’ are the wrong kind of visitors, visitors that aren’t your potential customers.
Basically everything went as it should. You did your KPI work, you measured traffic, saw that you wanted more, you even measured the number of leads the marketing campaign generated, you witnessed with excitement the traffic to your website spikes and then — nothing. No new customers, no increase in revenue, no goal was achieved. Why? Because you weren’t SMART enough.
