It is easy to fall into the trap of expecting that a single metric can tell you everything about how well your company is doing. Additionally, assuming that because some numbers are trending in the right direction, everything else will fall into place is another common error many people make.
Fortunately, these common errors and others can be easily fixed once recognized.
Take a look at these 8 common mistakes people make with their KPIs and prep your data for improvements for your company.
1. Not defining a KPI before starting the project
KPIs are important because they provide a baseline measurement of how well the company is progressing. If KPIs aren’t defined, it can be difficult to determine which metrics are making an impact on the company’s performance and which are not.
A lack of a KPI will also make it hard for you to create goals and measure your progress over time. Without a starting point for the project, measurements of progress are difficult or inaccurate.
2. Not understanding what the KPIs are telling you
It’s important to understand what the KPIs are telling you before making any changes or taking any action. For instance, if a certain KPI is trending upward but there have been no corresponding improvements in conversion rates, it might not be an issue with product demand and instead could be due to customer experience metrics.
Knowing what the KPIs are telling you can make the difference between a successful project and one that isn’t meeting expectations. Not understanding KPIs can lead to poor choices in strategy, product development, and marketing initiatives that may have unintended consequences for your company’s performance. It is a common mistake to oversimplify or overcomplicate a KPI and not understand what the measured data is actually telling you.
3. Using too many metrics to measure the success of an initiative
It’s important to understand what each metric you are measuring means, where it comes from, and what the significance of that KPI is the initiative. When measuring too many metrics, this data can get cloudy or fail to provide a clear summary of the success of an initiative.
Unfortunately, more data is not always better and can create difficulties in determining the success. It can also make it difficult to work towards the objective if there are multiple target points the team is trying to reach for each initiative. In many cases, a clear and simple KPI can be more powerful than the measurement of several.
Additionally, achieving the one main KPI, when set up correctly, can lead to other goals being met as well.
4. Focusing on only one metric and ignoring all others, even if they’re more important or accurate than the chosen metric
The importance of a KPI is not always the same for different stakeholders. For example, some companies may prefer to focus on revenue or engagement rate while others might see more value in customer retention rates or time spent per visit.
You can’t ignore other metrics even if your chosen metric seems like it’s telling you all that matters. This is especially true when you’re just getting started with metrics and don’t have years of data to analyze.
Before relying on any one metric, take the time to research what other key performance indicators might be relevant for your business or project. Then, take a look at which KPIs are important to you, and to the various stakeholders, before deciding which ones should dictate a measure of success.
5. Relying solely on data from one source (such as Google Analytics) to make decisions about your business’s performance
The only way to make sure you’re getting a complete picture of your company’s performance is by collecting data from various sources. That means taking the time to figure out which KPIs are important for each part of your business and then making sure that all those metrics are being tracked accurately in their respective tools. One KPI may need to be measured between several data sources.
Leveraging the data from a single source (such as Google Analytics) is not enough to make informed decisions about how well your company is doing. This can lead to conclusions that are either too broad or narrow as well as the potential to ignore metrics that may provide more accurate information than those used in the analysis.
For example, revenue is typically calculated by taking the sum of all customer payments and then subtracting returns. In order to track accurate revenue numbers across multiple sources such as Stripe and PayPal, you’ll need to consolidate your data to see the full picture.
When taking digital into consideration, you may want to incorporate metrics such as conversions, page views, visits, and visibility as well as a traffic source and quality of the traffic.
6. Expecting that a single metric can tell you everything about how well your company is doing
While a metric such as profitability is an important one in determining the health of a company, there are many additional metrics that are key indicators of performance. An organization may have a high percentage of profitability, but if those numbers are low, the additional income may not support future growth.
Even in understanding one KPI, there are usually multiple metrics involved. For example, revenue is typically calculated by taking the sum of all customer payments and then subtracting returns. In order to track accurate revenue numbers across multiple sources such as Stripe and PayPal, you’ll need to consolidate your data to see the full picture.
While this may be helpful data to know, it does not provide the full picture of the health of the company.
7. Forgetting to measure KPIs in real-time (daily, weekly, monthly) instead of just once per quarter or year.
It can be easy to set KPIs, but consistently measuring them at set intervals to measure projects takes a bit more work. Depending on the size of the data, tracking it more frequently will tell you more about what is going on than a quarterly or yearly check-in could.
Additionally, waiting until a yearly or quarterly review may be too late to take action on an item that could make an impact to the bottom line.
For example, a decrease in sales calls towards the last week of the month can only be seen when reviewing weekly or monthly data.
8. Being inconsistent with measurements from month to month
This can be a mistake with KPIs in that you can’t tell if performance is improving over time or getting worse over time. It is the classic example of comparing apples and oranges.
With so much data available, it can be difficult to truly compare apples to apples. Keeping one metric that is measured the same way to view at the same time is the best way to truly understand the trend in that piece of data.
For example, comparing week over week data before a week has been completed may show incomplete data. Or, tracking the total number of sales calls one month than looking at a number of only answered calls the next month could skew the data.
In summary, although these mistakes are commonly made, they are easy to avoid. Better data is better for your company.
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