Product Thinking: Smart founders make smarter KPIs

Having worked in sales roles for nearly 20 years I have formed a career-long relationship with KPIs which has (at times) been turbulent. From an energetic sales trainee moving to the city on a promise of eye widening OTEs, through to managing teams of my own - responsible for surpassing commercial targets, as well as keeping the businesses lights on through tougher times. KPIs have been the heartbeat of the performance management process throughout my professional career and much like a heartbeat, they go unnoticed when functioning correctly, but if you miss a beat, run at the wrong pace or stop, it can have adverse effects. Over time KPIs should become instinctive, even unconscious but just as we try to eat the right foods and exercise to keep our heart healthy, it is important to maintain healthy KPIs. Below are some of the KPI health check fundamentals as a good place to start.

Key Performance Indicators (KPIs) are expressions of what you want to do by when. They are quantifiable, outcome based statements that show progress against strategy.

Before getting all Glengarry Glen Ross and putting arbitrary numbers on a digital screen (chalkboard) and screaming ‘just smile and dial’, there are a few fundamentals that are worth considering so that your businesses KPIs are not just tracking performance but driving it.

Specific Measurable Attainable Relevant Timebound

‘’Selecting the right measure and measuring things right are both art and science. And KPIs influence management behaviour as well as business culture.’’ So, when setting your KPIs make sure they are smart and I mean actually SMART:

• Specific
• Measurable
• Attainable
• Relevant
• Timebound

There are two types of KPI, ultimately those that track what has happened and those that serve to influence what will happen:

• Leading KPIs - A thing that can influence what will happen (pipeline or stage in the pipeline)
• Lagging KPIs - A thing that has already happened and is now in the past (eg sale or new user acquired)

 The table below is a useful sense check for each and every KPI you set. The more specific and intentional you are with your KPIs the clearer the story the stats will tell giving you early signals as to where efforts may need to be ramped up.

 RAW NUMBERSPROGRESSCHANGEMEASURENumber of new customersPercentage CompletePercentage Increase
eg. Year on YearTARGET£1,000,000100%

22%^

SOURCECRMProject Milestones

P&L

FREQUENCYMonthlyQuaterly

Monthly

Here’s a little anecdote from previous sales experience to illustrate how KPIs should adhere to all of these smart measures as well as have someone keep a finger on the pulse so that they remain smart and keep your business ticker healthy.

One particular business I joined (which shall not be named), had set two specific KPIs presumably around the time Glengarry Glen Ross came out (1992). Both were extremely common in sales as they are indeed measurable:

• 1 - Make 50 calls a day
• 2 - Achieve a minimum of two hours a day on the phone.

They feel instinctively attainable and very much timebound. The basic assumption being that the more attempts to call a potential client, the more likely you will eventually speak to (and pitch to) a decision maker and this in turn, should convert to sales. These KPIs had been put in place and left to run, unchecked, for years.

The business ran okay, about half of the more senior sales team hit their financial target each month and were never questioned on their KPIs, the other more junior half did as they were told and worked hard to make 50 calls and be on the phone for 2 hours…

Photo by Alexander Andrews on Unsplash. Shows a phone that was modern technology at about the same time the speaking clock was a relevant reference...

Eventually though, the junior team's interest wavered as the ultimate goal of making sales became secondary and felt unachievable. Eventually they spent their afternoons wracking up call time by calling the talking clock (remember that?) to try and keep their job while inching dial by dial closer to losing it. They were simply focused on the wrong metric and no one took the time to analyse what was actually working to update the KPIs!

It turned out a simple switch to a more specific and relevant KPI of ‘6 scheduled decision maker meetings per week’ increased sales by 25% within three months. The team were able to use their own ingenuity to organise meetings (most chose a combination of personalised email automations, LinkedIn, and networking at events) and felt more engaged through having more actual sales conversations, and felt more empowered through trust and autonomy. The senior support team's time was then focused on sales training and further qualifying rather than beating a broken KPI drum.

So what were the key learnings?

1. Make your KPIs relevant in house as well as to clients
2. Fresh eyes on your KPIs can uncover systemic but hidden failings, so be open to a relevance check. Speaking to the team on the front line is a good place to start.
3. Get buy-in from the entire operation and make sure they understand the purpose of the KPI, the value of their contribution and their incentive to succeed.
4. The interplay between the leading and lagging KPIs must be joined up and leave no room for ambiguity. Always ask what the leading KPI is leading to?
5. Be as specific as possible with KPIs. include timelines and a point of comparison - whether it’s against previous like for like time, another product, competitor or person.
6. Track your KPIs accurately and report them transparently where appropriate
7. Make sure all leading KPIs are relevant to your sector and drive toward the primary goal.
8. Create a supportive ecosystem of training to hone the quality over quantity.

At hex we collaborate with start-up's on their digital strategy but know how important it is to look at the entire business ecosystem. We always consider the bigger picture inclusive of commercial strategy and culture when appropriate. Spending the time to get fundamentals like KPI's right from the beginning can be crucial to frictionless scalability. We like to practice what we preach and always agree and implement Hex KPI deliverables for our client projects. Whether it's User Acquisition milestones, Minimum Viable Experience or Atomic network benchmarks we think smart. 

Next up in our Product Thinking series: Network Effects - Learning from the animal world.

If you'd like to discuss how hex can collaborate on your start-up, book a meeting here.

Featured image photo by Vadym on Unsplash