Being aware of what impact your product, service or brand has on your customers is fundamental to knowing why they like or dislike you, in other words, why they buy from you or do not buy from you.
Without elements that allow you to measure their experience, it will be impossible for you to understand your customers’ behaviour, whether it is in your favour or, above all, whether it is against you. As William Thomson said, “Anything that cannot be measured cannot be improved”. Therefore, if you do not have the elements to measure the quality of your product or service, or the quality of your customers’ experience, or the quality and functionality of your internal processes, it will not be possible to detect what you are failing at, let alone determine the optimal strategy for improvement.
In any case, to measure you need objective data that explains what, where, how, how much and when. These data are the key performance indicators (or KPIs) of what you want to measure and are like the fever thermometer. Another important piece of information is why, which will come out of your analysis, giving you a very accurate diagnosis, which will provide better results.
How do I know which indicators to use?
Implementing the right indicators seems easy if you know more or less what you want to measure. In general, we tend to measure everything so that nothing is missed. Thus, we start from the idea that the more we measure, the more we will know our clients. However, as often happens, excesses are not good and there may come a time when the trees do not let us see the forest.
Frequent mistakes in creating and managing KPIs: So that you don’t get stuck in the middle of a measurement and stop being effective, I share with you 10 common mistakes when choosing and managing your KPIs.
1. Measurement does not lead to corrective or improvement actions
The implementation of KPIs involves a commitment to precise and rigorous monitoring, without which they lose their functionality. If a KPI is not evaluated or is not followed up correctly; if it does not serve to make improvement actions, or the actions are not carried out, the indicator is simply useless.
Often, the vortex of daily work or the lack of clear responsibilities for KPI measurement makes its usefulness null and void.
2. Diogenes Syndrome
The habit of measuring everything makes us accumulate a lot of KPIs that do not add any value. It seems to us that the more we measure, the more we know, and it turns out that we get indigested by the indicators!
When we shuffle too many indicators, it’s impossible to manage them because their evaluation and monitoring takes too much time. Let go of that burden and balance the value of the KPI with your information management skills!
3. The dream collector
Man is a creature of habit. And it is the same with indicators. We often keep the same KPIs because they are the ones that have always been used. The question you should ask yourself then is: haven’t my clients or my company changed over the years? Remember to renew your wardrobe and keep only those KPIs that are useful to you today. Stick to a few: only those who provide you with valuable information to help you make decisions.
4. Falling into the silo
The indicators must be created on the basis of an overall view of the process. When we create KPIs thinking about the interests of our department and not in a transversal way and focusing on the client, we are falling into what is called the “silo effect”; that is, we become Golums who only look to conserve their treasure. Communication between departments stops flowing, there is no longer coordination and rivalries appear, putting the achievement of global objectives in check.
5. The perfume of vanity
We all like to look good in the picture, cover up our embarrassments and save ourselves a scolding from the boss. That’s why we are tempted to “make up the results” based on data obtained with vain KPIs, whose data suggest that everything is going well, but do not give us any real value. They are very dangerous, as they do not reflect reality and can push us to make decisions based on incorrect analyses.
6. Chronic myopia
When indicators focus on one part without taking into account the whole, it is easy to draw biased conclusions that make us take wrong decisions. For example, if a repair department detects, through a poorly defined KPI, a high level of stock and decides to reduce it in order to save on the cost of fixed assets, it may mean that the technical assistance service must repeat the number of interventions (more costs) and a loss of customers (!)
To think that we already know what to measure without having listened to the customer is a huge mistake. A restaurant measured the quality of its service with several indicators that valued the uniformity, image and education of its staff. They were not measuring, however, the average waiting time of customers between the first and second course.
8. Cheating on Solitaire
This can happen when the indicator eventually becomes the goal; that is, when the indicator stimulates a target or counterproductive behaviour in people. These are usually indicators that are associated with bonuses or financial compensation. For example: a commercial productivity indicator that measures the ratio between offers presented and offers accepted may cause the commercial to stop presenting some offers so as not to harm the ratio.
9. Stones on the roof
The indicators must be aligned with the objectives. When KPIs conflict with objectives, operational inconsistencies occur. For example: an indicator that measures the speed of delivery (no. of deliveries in 24 hours) may conflict with an indicator of logistical optimisation, such as “maximum utilisation of transport capacity”. Thus, in order to achieve a good result in the indicator of on-time deliveries, we under-utilise logistic resources, with truck departures without full loading, which means an increase in costs and less profitability for the company.
10. Buying a pig in a poke
The last of the most frequent errors occurs when measuring unreliable or unrepresentative values, as they do not add value to decision-making. Whenever we extract data, we must ensure that both the sources and the method of extraction of that data are reliable. If we extract data from a sample, this sample must be representative and extrapolated to the total data.
From Consulting C3, we advise you, to begin from being aware of these frequent errors in order to create and manage functional indicators, which are useful for decision making within your company.
But this is only the tip of the iceberg. If you want to go deeper into the creation and management of KPIs, you can consult us to find a tailor-made training adapted to your needs, which will help you to establish effective indicators based on strategic and operational criteria, as well as to know the definition, creation and implementation phases. In order to do so, do not miss our course on creation and management of KPIs.