Establishing Key Performance Indicators (KPIs) is a sensible goal for any company in the midst of a digital transformation exercise. The digital transformation context is one that is particularly in need of well-defined KPIs as having a consistent direction across the organisation can help teams direct different context, and skillsets towards the achievement of a common goal. Given this, it comes as little surprise that having a wrong KPI established can doom your digital transformation efforts from the very inception.
In this article we examine 5 ways teams often get KPIs wrong in embarking on digital transformation.
Bad KPIs Are Based On Wrong Desired Outcomes
Companies should consider carefully the intended outcome of digital transformation to be achieved before designing the KPI accordingly. A mistake in identifying the desired outcome is often the reason behind bad KPIs. This could be due to insufficient consideration over the features of the product or the context of the situation,
For example, a company undergoing digital transformation may want to use the time spent on product as a KPI for how well the digital transformation is going. However, it may be that the time spent on product may not be a good metric. For example, in the case of life saving medical diagnosis equipment, it may be that there is a optimum usage time. Too short a time may mean the technician is not utilising it well while too long spent using the product is likely to mean inefficiencies in usage rather than satisfaction. A better KPI is time spent per incident tracked against a successful incident resolution rate. This would give a more meaningful KPI for usage.
Bad KPIs Measure The Wrong (But More Noticeable) Thing
When it comes to KPIs, an easy response is to look at the information that is already easily available to us. However, the problem is that these KPIs do not always reflect the intended end goal of the organisation in question when carrying out digital transformation
One example is companies seeking to improve their marketing and sales processes. A common practice is looking at leads generated as the KPI. While leads generated for example by measuring the web traffic to a webpage can be an easy number to access. However, that number does not directly contribute to the company’s objective. The problem in this case is that the quantity of leads generated does not automatically lead to an increase in total number of conversions. It may be a case where instead quality is more important and the correct metric given the goals of the company is conversion rate. The latter is ultimately closer to the company’s end goals if viewing it from a bottom-line perspective. On the other hand, leads generated by measuring web traffic may be a more suitable metric if the goal is to increase visibility.
Bad KPIs Measure The Wrong Part Of A Valuable Thing
Another common mistake in using KPIs is to use the wrong part of a valuable thing as the KPI.
Attendance, one of the most common metrics in the workplace and is often used as an analog for performance. However, the post-Covid 19 and the global advent of tele-commuting as a alternative to standard work practices has meant that attendance has increasingly fallen by the wayside in lieu of measuring productivity via output rather than clock-in and clock-out times. Indeed, attendance does little to measure the things that actually impact productivity such as creativity, synergy or collaboration.
While attendance may have a part to play in work output, it is clearly not the most important. Other alternatives such as work tasks completed or billable output would make more sense. Critically, using attendance as a KPI could result in alienating truly performing individuals who do not conform well to traditional schedules.
Bad KPIs Are Not Focused On The Long Term
KPIs are intended to align a company to achieve long term objectives, however companies may often select KPIs that achieve short term goals at the expense of long-term benefits.
For example, a common KPI when starting a digital transformation project is adoption rates. This may be measured by reference to activation events such as login frequency. However, this doesn’t reflect the return on investment on technology as it doesn’t measure the value being generated through use of the software. Login rates may be high but if users arecompanies utilising systems to help with hiring processes may use the hiring rates as a KPI for performance. However, this says nothing about the longer-term suitability for the roles to be filled. It is likely that an amalgamated KPI taking into consideration the latter would be a more suited KPI to be used.
Bad KPIs Are Not Measured Accurately
Some KPIs are bad because of miscalibration. This leads to a lack of accuracy and thus is not as useful for achieving intended end goals
For example, companies seeking to track the stickiness of users may use a customer health score that is an amalgamation of different touchpoints such as activation rates, logins, tasks completed etc. By its nature, the health score relies on judgement in setup and a mistaken calibration may mean the health score is not accurate for the desired use case. For example, a health score focused on appropriateness for upselling may be very different from one calibrated for evaluating likelihood of churn.
Good KPIs Can Help Deliver Better Results
Ultimately, defining measuring and refining the right KPIs should be a focus of every company’s leadership team. Oftentimes, this may mean taking the time to have enterprise-wide dialogues on how this KPIs will be used and what the long-term goals of a company are in undergoing digital transformation efforts. KPIs should not be utilised as one-off metrics for determining the success of any one individual project. But rather function as steering guidance for longer term organisational goals.
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