KPI

How to get the most out of KPIs

18th December 2018

Last Modified: 9th January 2019

Kpi V4

Your Business As Usual is everything you need to to do to maintain the status quo. Business As Usual typically consists of processes that you execute on an ongoing basis.

A KPI, Key Performance Indicator, is an outcome-based tracking mechanism that defines the results your Business As Usual is required to accomplish. A KPI, therefore, defines what your critical Business as Usual is (or should be) and enables you to easily monitor if it’s successful.

A KPI is an important instrument for every results driven organization. To get the most out of KPIs, you need to be sure you are working on the right KPIs. And you need to be sure that everyone in your organization and team understands the KPI. This article explains how to achieve that.

Before we proceed, make sure to also check our article The anatomy of a KPI so that you understand the different components that make up a KPI.

Making sure everyone understands a KPI

To make sure everyone understands a KPI, you need to provide proper context and ensure that it’s not open to more than one interpretation.

For each KPI, answer the following questions:

  1. Why is this a KPI?
    This question forces you to think critically about the KPIs that you are creating for your Team or Company. Your explanation for why you believe this should be a KPI helps others follow your train of thought and put the KPI into context, which is especially valuable in larger teams and organizations where you don’t have the chance to talk to everyone directly.
  2. How is the Current Value calculated?
    When people see the Current Value for a KPI, they need to know which dataset the value is based on. If one of your KPIs is the Customer Renewal Rate (see example below), you can calculate the Current Value in many different ways. You can look, for instance, at the Renewal Rate for the past 12 months, or you can look at the rolling 90 days. Keep in mind that the longer the time period that you base the Current Value on, the more time it usually takes for the value to change. In other words: it will (usually) take longer to get feedback.
  3. Explain the Target or Threshold Value
    Every KPI should have a Target or Threshold Value, and everyone needs to understand why that is the Target or Threshold Value. Sometimes this value is derived from your strategy, other times it’s based on industry benchmarks. For B2B/SaaS companies like Perdoo, for instance, it’s a well-known industry benchmark that Gross Churn should not exceed 2%.

In Perdoo, you can store the answers to these questions in the Description field of each KPI, so that they’re easily accessible to everyone:

KPI Description In Perdoo

Making sure you’re working on the right KPIs

There is only one way to make sure that you’re working on the right KPIs and that is to regularly review them. At Perdoo, we review our Company and Team KPIs at the beginning of each quarter.

Sometimes we realize that we never looked at a particular KPI, which could be an indicator that the KPI wasn’t really important. Other times we realize that the KPI didn’t influence our behavior, which could be an indicator that it wasn’t set up correctly.

Regularly reviewing your KPIs is also important because what could be the right KPIs for your team or organization for one year, doesn’t automatically mean that they’re the right KPIs for the next year.

Need help setting up a KPI?

Have a look at this article that explains the anatomy of a KPI.

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