Five Categories to Focus Your KPIs

Research shows greater KPI transparency and clearer alignment are key to overall KPI effectiveness.

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Strategic Measurement

Strategic Measurement examines the role of key performance indicators (KPIs) as a leadership tool.
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Most organizations use key performance indicators (KPIs) to monitor and track performance — that’s the norm. However, MIT Sloan Management Review’s recent research report, “Leading With Next-Generation Key Performance Indicators,” shows that maximizing the business value of KPIs requires different kinds of leadership commitment. Two distinct but related best practices powerfully influence enterprise KPI effectiveness: greater KPI transparency and clearer KPI alignment.

Greater KPI transparency means organizations make their most important metrics — marketing, sales, financial, project, process — more available company-wide. Picture, for example, dedicated Slack channels for KPI review and comment. Transparency facilitates clearer KPI alignment across the enterprise; teams can literally see what KPIs might be most relevant to their people and purpose, and respond accordingly. In interviews, brand-oriented companies as varied as Adidas, Colgate-Palmolive, and GoDaddy articulated this silo-busting KPI ethos. But we also saw organizations like GE Healthcare using KPIs to improve top-down, bottom-up vertical effectiveness. Transparency of hierarchical KPIs informs every level of the enterprise. Our research suggests sophisticated data-driven companies not only share KPIs, but also expect managers to (re)organize around them.

We found shared KPIs explicitly used to promote cross-functional collaborations. In other words, KPIs are being used to lead change as well as manage it. Analytically superior organizations use algorithms to identify and weight KPI attributions to desired marketing or customer outcomes. After reading the report, one executive in a multibillion-dollar industrial conglomerate reached out to acknowledge that the company was better at sharing customer data internally than sharing its diverse customer-engagement KPIs. In this context, KPIs aren’t just data but crucial metadata as well. They offer organizations new insights into holding themselves accountable.

The essential takeaway: The “KPI future” increasingly depends on how leaders define and drive KPI transparency and alignment in their organizations. The innovation trajectories of big data and analytics strongly suggest that tomorrow’s digital transformation challenges will likely revolve around five strategic KPI domains. Each domain is special and essential, and could either be tightly — or loosely — coupled with the others. That’s why high-impact KPI innovation will require as much leadership art as data science. Leaders need to choose, prioritize, and emphasize which metrics should matter most. They need to encourage and empower talent to redefine what kinds of performance and indicators deserve to be “key.

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Strategic Measurement

Strategic Measurement examines the role of key performance indicators (KPIs) as a leadership tool.
More in this series

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