The Anatomy of Effective KPIs

Leading tomorrow’s enterprise with yesterday’s KPIs is like using a compass instead of a GPS.

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Strategic Measurement

Strategic Measurement examines the role of key performance indicators (KPIs) as a leadership tool.
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Let’s take measuring the digital future seriously. In a big data, machine learning, and customer-centric era filled with dynamic disruption, are an organization’s legacy key performance indicators (KPIs) good enough to manage change? Do serious investors anywhere believe that Amazon, Facebook, Alibaba, Netflix, Apple, or Tencent rely on “ordinary” or “typical” KPIs to shape their customer futures and future customers?

The questions answer themselves. Leading tomorrow’s enterprise with yesterday’s KPIs is akin to using a compass for guidance instead of a GPS — yes, it can be done, but why disadvantage yourself that way? KPIs can and should be a critical leadership tool and technology. Our 2018 strategic measurement global executive study strongly suggests that KPIs — as most executives have known them — are becoming analog anachronisms. The smartest, most sophisticated, and successful organizations we surveyed are actively rethinking the role and purpose of their KPIs. CEOs intent on profitably maximizing KPI influence and impact should pay heed.

Aspiration, Accountability, and Alignment

Redesigning KPIs for digital effectiveness requires advancing the organization’s aspirations, accountability, and alignment. These metrics were basic to the original formulations of Drs. Robert Kaplan and David Norton’s balanced scorecard and Intel’s adoption of OKRs. But more data, better analytics, and keener competition require new tools for the situational awareness that enables ongoing improvement.

Our report is filled with anecdotes and vignettes illustrating how leaders with aspirational KPIs focus the organization’s strategic intent on its key processes and customers. CMO after CMO told us that KPIs measuring customer satisfaction and/or customer loyalty aren’t good enough anymore. They want KPIs that assess their customers and clients as influencers and evangelists for the enterprise. Companies as diverse as GE Healthcare, Adidas, and Airbnb increasingly look to go well beyond sales-funnel conversions to turn customers into brand advocates.

While aspiration embeds strategy and purpose, accountability defines managerial and leadership obligation and responsibility. As digital platforms cut across silos and cross-functional collaboration predominates, KPIs become essential mechanisms for creating accountability. C-suite executives stressed how innovative KPIs facilitate accountability across functions and teams, which often addresses an organization’s most sensitive and volatile issues.

Topics

Strategic Measurement

Strategic Measurement examines the role of key performance indicators (KPIs) as a leadership tool.
See All Articles in This Section

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