The Quest for a Killer KPI
How radically simplifying performance metrics helped one company align employee behavior with organizational goals, make smarter investments in the business, and foster a culture of learning and cooperation.
Performance metrics are among managers’ most powerful tools: Setting the right goals and tracking progress accurately can help you take your business where you want it to go. To be effective, though, goals and metrics need to be clear and simple, and the fewer the better.
In our growing company, we’ve learned that simplicity increases our odds of achieving what we want. When our goals were too numerous and too complex, employees’ decisions didn’t sync up within or across teams, which meant groups and individuals were tugging in various directions and failing to produce desired outcomes at scale. So we set out to identify a single key performance indicator that would unify behavior within one major customer-facing group — the unit that designs, creates, and manages our online storefront — and could also serve as a shared currency across teams, enabling us to make smarter investments in the business. But we realized that going all in on a KPI without putting some sort of check on it could have serious unintended consequences. We knew that any primary goal had to be bounded by a constraint, as in, “Maximize X without reducing Y.”
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This is the story of how Agoda, the Asia-based subsidiary of the Booking Holdings online travel group, made its way to a single “KPI + constraint” approach that helps us run a good bit of our business.1 It took some trial and error to get there; the KPIs we developed and tested along the way promoted both positive and counterproductive behaviors and outcomes. Gradually, however, we found our guiding principles, implemented them, improved our business outcomes, and fostered a culture of learning and cooperation in the process.
Because we believe that our experiences and insights may be helpful to other companies, both within e-commerce and beyond, we’re sharing them here.
We Tested Our Way Toward a Metric
Since the company’s earliest days, Agoda has focused on continuously improving its front end, or storefront — the website and mobile apps through which customers search for, select, and purchase travel products — to convert website visits into sales. By increasing its conversion rate, a digital business can target its marketing more effectively, because existing customers are easier to engage than new ones.
1. Agoda, which is independently run, has offices in more than 35 countries. It provides operations and marketing support to other Booking Holdings companies globally.
2. One is Canary, a front-end analytics tool that operates somewhat like Google Analytics but is specifically designed for our systems. Canary summarizes customer activity, letting us see how many people hover, interact, click, book, and drop off for every element of our hotel page (images, maps, ratings, and so on). When an element converts well, we find ways to emphasize it and increase its effectiveness through design choices like size, color, and position. Canary also learns automatically when new elements are added to the front end.