As a business owner or C-suite executive, it’s easy to fall into the trap of expecting a single metric to tell you everything you need to know about how well your company is doing. However, this is a mistake. As is assuming that because some numbers are trending in the right direction, everything else will fall into place.
Fortunately, these common key performance indicator (KPI) mistakes and others can be easily fixed once recognized. Take a look at the 8 common mistakes people make with KPIs in business and prep your data for improvements in your company.
KPI Mistake #1. Not defining a KPI before starting the project.
Key performance indicators are important because they provide a baseline measurement of how well the company is progressing. If KPIs aren’t well defined from the start, it can be difficult to determine which metrics are making an impact on the company’s performance and which are not.
A lack of a KPI will also make it hard for you to create goals and measure your progress over time. Without a starting point for the project, measurements of progress will be difficult or inaccurate.
KPI Mistake #2. Not understanding what the KPIs are telling you.
It’s important to understand what the key performance indicators are telling you before making any changes or taking any action. It is a common mistake to oversimplify or overcomplicate a KPI and not understand what the measured data is really telling you.
For instance, if a qualified lead generation KPI is trending upward but there have been no corresponding conversion rate improvements, it could be an issue with product demand or customer experience metrics. It is often not what is expected.
Knowing what the KPIs are telling you can make the difference between a successful project and one that isn’t meeting expectations. Not understanding key performance indicators can lead to poor choices in strategy, product development, and marketing initiatives that may have unintended consequences for your company’s performance.
KPI Mistake #3. Using too many metrics to measure the success of an initiative.
While it is important to understand what each metric you are measuring means, where it comes from, and what the significance of that KPI is to the initiative, measuring too many metrics is a common mistake. Unfortunately, more data is not always better and can create difficulties in determining success. It can also make it difficult to work towards the objective if there are multiple target points the team is trying to reach for each initiative.
In many cases, a clear and simple KPI can be more powerful than the measurement of several. Often, achieving the main KPI leads to other goals being met.
KPI Mistake #4. Focusing on only one metric and ignoring all others, even if they’re more important or accurate than the chosen metric.
We just talked about how powerful one KPI can be and how important it is to not use too many metrics when working toward a goal. The same can be true in reverse. The importance of one KPI is not always the same for different stakeholders. For example, some companies may prefer to focus on revenue or engagement rate while others might see more value in customer retention rates or time spent per visit.
You can’t ignore other metrics even if your chosen metric seems like it’s telling you all that matters. This is especially true when you’re just getting started with metrics and don’t have years of data to analyze.
Before relying on any one metric, take time to research what other key performance indicators might be relevant for your business or project. Then, look at which KPIs are important to you, and to the various stakeholders, before deciding which ones should dictate a measure of success.
KPI Mistake #5. Relying solely on data from one source (such as Google Analytics) to make decisions about your business’s performance.
The only way to ensure you’re getting a complete picture of your company’s performance is by collecting data from various sources. That means taking the time to figure out which KPIs are important for each part of your business and then making sure all those metrics are being tracked accurately in their respective tools (i.e., CRM, marketing automation system, productivity systems, financial monitoring platforms, etc.). One KPI may need to be measured between several data sources.
Leveraging the data from a single source (such as Google Analytics) is not enough to make informed decisions about how well your company is doing. This can lead to conclusions that are either too broad or narrow, as well as the potential to ignore metrics that may provide more accurate information than those used in the analysis.
For example, revenue is typically calculated by taking the sum of all customer payments and then subtracting returns. In order to track accurate revenue numbers across multiple sources such as Stripe and PayPal, you’ll need to consolidate your data to see the full picture.
When taking digital operations into consideration, you may want to incorporate metrics such as website or contact form conversions, traffic source, and the quality of the traffic (leads). Do the metrics you're measuring help you reproduce results or make decisions that lead to customer advocacy?
KPI Mistake #6. Expecting a single metric to tell you everything about how well your company is doing.
It’s easy to fall into the trap of looking at one metric, like profitability. “If we’re profitable, that’s all that matters.” Well, not so much. While a metric such as profitability is an important one in determining the health of a company, there are many additional metrics that are key indicators of performance.
For example, have you factored customer retention and referral KPIs into the equation? Without knowing those measurements, profitability will stall. You may have a high percentage of profitability, but if actual profit dollars are low, this may not support future growth.
Even in understanding one KPI, there are usually multiple metrics involved, such as customer acquisition cost (CAC) KPIs. If you don’t measure the cost of lead acquisition (CLA) by source, lead-to-MQL ratio, or average time to close, you will not have the full picture of your true CAC.
KPI Mistake #7. Forgetting to measure KPIs in real-time (daily, weekly, monthly) instead of just once per quarter or year.
It can be easy to set KPIs and forget about them, which is a mistake. Nothing provides answers to questions and solves problems better than real-time metrics. Consistently measuring KPIs at set intervals to measure projects takes a bit more work, but it’s worth it. Depending on the size of the data, tracking it more frequently will tell you more about what is going on right now than a quarterly or yearly check-in could.
Additionally, waiting until a yearly or quarterly review may be too late to act on an item that could impact the bottom line. For example, a decrease in sales calls towards the last week of the month can only be seen when reviewing weekly or monthly data.
The good news here is that KPIs can be measured and viewed at a glance with a dashboard. Once the dashboard is in place with the right metrics, monitoring company-wide, interdepartmental, or even individual metrics is much easier.
KPI Mistake #8. Being inconsistent with KPI measurements from month to month.
Being inconsistent with monthly KPI measurements is a mistake. When you can’t tell if performance is improving over time or getting worse because you’re comparing apples to oranges and there’s too much data to sift through, it’s impossible to understand trends.
One metric measured the same way all the time, viewed at the same time every month or week, is the best way to truly understand the trend in that piece of data. For example, comparing week-over-week data before a week has been completed may show incomplete data. Or, tracking the total number of sales calls one month than looking at the number of only answered calls the next month could skew the data.
KPIs in Business – Avoiding Common Mistakes Adds Value to Your Data & Impacts Profitability
Although these 8 KPI mistakes are commonly made, they are easy to avoid. When you know what you’re trying to achieve from the start, you can set up essential KPIs in your tracking tool(s), regularly review the data, make changes to the KPIs per project or per area as needed, and, with a well-defined data dashboard, understand the minutiae without the potential mistakes that come from manual entry per person, per department.
To determine if your teams are making KPI mistakes, run through this list and adjust as necessary.
- Are you defining a key performance indicator or more than one KPI before starting the project?
- Do you understand what the KPIs are telling you?
- Are you using too many metrics to measure the success of an initiative?
- Are you focusing on only one metric and ignoring all others, even if they’re more important or accurate than the chosen metric?
- Do you rely solely on data from one source (such as Google Analytics) to make decisions about your business’s performance?
- Do you expect a single metric to tell you everything about how well your company is doing?
- Do you measure KPIs in real-time (daily, weekly, monthly) instead of just once per quarter or year?
- How can you best be consistent with KPI measurements from month to month?
Expert Help with KPIs and Data-Driven Growth
If you’re not sure which quality KPIs are best for you to be tracking, this is an Atomic Revenue specialty. We understand which KPIs to measure to get you where you need to go. We're also software and dashboard agnostic, so no matter what system you’re using, we can help you determine the metrics that matter to your B2B business, how to track and use them to your benefit, and how to achieve consistent growth using great data. Be sure to contact our data team today for a no-obligation conversation. We’re here to help!
About the Author
Liz Campbell, Chief Data Advisor at Atomic Revenue, is dedicated to developing technologies that make business data more accessible and comprehensible. Liz helps companies align their internal systems to make sure they're capturing the right data for their unique business needs, and then automates the reporting process to ensure each business has insight into the data and analysis they need to truly understand their revenue generation process.