Optimizing KPI Review

In the world of metrics, KPIs, and new business lingo, it can be hard to know why and when your numbers matter. Often, companies are measuring because they think that they are supposed to. However, to be effective, you need to know what you’re measuring, how you’re measuring it, and whether the results mean anything.

The Four Questions

Anytime you are starting to measure performance, you will be inclined to pull out the metrics you’ve seen before and figure out how to apply them to your business. Yet, you’ll find weeks and months later that you aren’t really sure why the KPIs aren’t working like they used to. Here is a guide to resetting your KPIs and setting yourself up for success. There are four key questions that you need to answer, in order, to best ensure your metrics have meaning and can lead to business success.

Question One

(1) What is our target outcome?

Your first response might be to say “make more money, obviously!” and then laugh because you think this is so elementary that it’s stupid. It’s not. It’s a great answer. However, this is only the first layer of reviewing your target outcome. Start with that first answer and then ask yourself “how?” three times afterwards. Within those answers, you’ll find what you should be measuring. Here’s an example below.

Guidepost Advisory Example

Let’s dive into an example of the answer to this initial question and our three follow up hows:

(Q) What is our target outcome?

(A) To make money

(Q) How?

(A) By providing the best financial services to SMB businesses and scaling startups

(Q) How?

(A) Through the creation of efficient solutions that provide easy to adopt recommendations at the lowest burden to our clients

(Q) How?

(A) With constant iteration on our products, requests for customer feedback, and production of better results, faster

By asking “how?” three times, we now can set our target outcomes as:

(1) constantly receive positive customer feedback

(2) produce tangible outcomes for our clients sooner

(3) create products that provide easy to action recommendations

Converting Outcomes into Measurements

Now that we have identified our ideal outcomes, let’s tie these to metrics that we can track alongside these core objectives. In order to measure success, we will need to create SMART goals: specific, measurable, attainable, relevant, and time-bound. Here are two examples of how we can do that with the outcomes we called out above for Guidepost.

(1) Constantly receive customer feedback:

Metric: NPS Scores and customer feedback

• Specific: NPS survey responses from our current and recently closed client engagements

• Measurable: NPS scores are quantitative by nature, other responses qualitative

• Attainable: Easy to request NPS survey from clients

• Relevant: NPS scores show customer satisfaction with our services

• Time-bound: Request NPS scores every 3 months for all clients for first year, every 6 months after that

Desirable outcome: maintain an NPS score of > 30 for the 2024 year

(3) Iterative work products that provide easy to action recommendations:

Metric: Time to deploy financial solutions to a new client

• Specific: Deployment time of budget, cash flow forecast, monthly budget vs actuals, and monthly and quarterly financial reporting

• Measurable: Time from client engagement to fully deployed solutions

• Attainable: Creating better products allows for us to deploy more quickly

• Relevant: We are hired to provide financial insights

• Time-bound: Regular delivery of all 5 core reports within 3 months of engaging with client

Desirable outcome: deploy regular delivery of 5 core reports to clients within 3 months of engagement at 100% success rate

Question Two, Three, and Four

Once we have identified our preferred outcomes, we want to dive into the next three questions in order. For these, we want to reflect on how well we are currently achieving these outcomes today, today compared to yesterday, and our expectations for tomorrow.

(2) How are we performing today?

Now that we know what outcomes we want to produce, we can start looking, qualitatively, if these outcomes are being delivered today. With this, we can identify which of our targets are already being successfully accomplished and which we need to hone in on.

(3) How has that performance trended?

Okay, for some of our outcomes, we’re hitting them now and that’s great. For these, where we’re coming from is less important than continuing what we were doing. For others, we need to see if we are improving on these outcomes from last period to this period.

(4) Is there clear visibility to future improvement?

Well, we used to do poorly with these and we still do, too. However, what are we doing to improve the future outcomes?

Company Example

Let’s dive into what those answers may look like for a customer today when reviewing NPS scores (note: this is a generalized example)

Metric: NPS Scores

Today: Over the last 3 months the firm’s Net Promoter Score has averaged at 10 with a response rate of 60%

This number means nothing to me, yes it’s defined by NPS creators that > 0 is good, but I need to know how this compares to prior results.

Trending: Over the past 12 months, our NPS score has averaged 0 with a response rate of 40%

Now, I have a bit more context about our performance. I know we are getting more responses and better responses. However, these are still not great results — how do I know what to do next?

Future: We are hiring a Director of Customer Success that will focus on implementing better client management practices and ensure stronger long term relationships.

Okay, now I have the context of (1) our score is in the positive territory (2) it has improved over the past 12 months and (3) there is a plan in place to continue improving. By answering these three follow up questions, I now know that I can put my efforts elsewhere.

Alternatively, if we found the answers unsatisfactory, it’s important to then go back to the question of “what is our desired outcome?”. Maybe, our results are bad because only companies that don’t like us are responding. Ultimately, we want to make sure we know our initial goal so that we track the metric in how well it represents our actual performance.

Summary

If you got this far, thanks for reading. The most important takeaway here: don’t measure performance for the sake of having measurements; measure to understand how we'll you’re achieving what your business is set out to do.