Statistician and Management Scientist W. Edwards Deming said it best.
Gone are the days of making arbitrary business decisions or using data as “evidence” to support calls already made to make ourselves feel better.
The future of business is data-driven. And that is a very good thing.
You need analytics that present your targets clearly and let you know at a glance whether you’re on track or if you need to support a decision to reroute. Plus, gut feelings aren’t always correct, and figuring out your hunches are off is the first step to discovery.
But how do you translate abstract business goals into measurable data?
With KPIs, of course!
Just as your business needs clear direction, so does your data. Key performance indicators give you and your BI the guidance needed to make the best possible data-driven decisions.
Great BI tools are completely designed around your KPIs and can offer up relevant data insights in easily digested dashboard visualizations.
But with so many objectives, how do you carve out your KPIs? What’s the difference between KPIs vs. metrics? Exactly where do you draw your lines? Here’s how it all breaks down.
There are four tiers of the KPI hierarchy. Each of these should be laid out from the very beginning of your BI implementation workflow, in the planning phase.
A general strategy statement that describes a long-term end result attributed to the entire group or organization.
Example: The business goal for the HR department is to improve employee retention.
Breaks down the goal into specific, short-term actions that are more tangible and can be measured.
Example: Increase employee retention from an average of X years to an average of Y years.
Measurable indicators that define the expected end result in terms of specific targets, such as number and/or date.
Example: Number of employees enrolled in career development program.
Support the above by indicating the smaller steps and outcomes on the way to achieving the main goal.
Example: Number of career development promotions sent from HR to employees.
Here’s another example using the marketing department, and here you can see a KPI dashboard template for digital marketing. (See other dashboard templates for every industry here).
Still confused about just what the heck qualifies as a KPI?
Ask yourself the morning question. You know. That question your CEO or supervisor asks you right when you come in. It usually sounds something like, “How are we doing with blank?”
For finance, it could be ARR and for marketing, it could be your conversion rate. Whatever is your most valuable measure, the one everyone in the organization wants to know about, that’s your KPI.
(Want a little more on this topic? Check out this must-read on how to define KPIs in four easy steps.)
First, outline your goals and objectives. Then, you and your teams gather all the requirements needed to determine exactly what to measure in order to get the most relevant insights from all your data.
Don’t feel limited by disparate data sources. A great BI solution can access any and all of your data, wherever it is and even have built-in data connectors.
