You can measure many different metrics, but not every metric can be “key”. If they are all special, then really none of them are. You should select metrics that are most closely aligned with your critical business objectives. This subgroup of metrics become your KPIs. KPIs keep your focus on the things that matter most to keep your business alive and well.

But don’t think you need to use only KPIs and forget about other metrics. When one of your KPI behaves in a strange way, you need to be able to look at other metrics to properly diagnose the problem.

How to define KPIs

KPIs should follow the SMART criteria. This means the measure has a Specific purpose for the business, it is Measurable to really get a value of the KPI, the defined norms have to be Achievable, the improvement of a KPI has to be Relevant to the success of the organization, and finally it must be Time-phased, which means the value or outcomes are shown for a predefined and relevant period.

Every metric you define should follow SMART criteria

Every metric you define should follow SMART criteria

by Dmitry Salnikov

Follow these steps when defining a KPI:

  • What is your desired outcome?
  • Why does this outcome matter?
  • How are you going to measure progress?
  • How can you influence the outcome?
  • Who is responsible for the business outcome?
  • How will you know you’ve achieved your outcome?
  • How often will you review progress towards the outcome?

For example, let’s say your goal is to increase the viewability of ads on your website. Here’s how you might define this KPI:

  • Increase ads viewability by 20% this year
  • Achieving this goal will make the business more profitable
  • Progress will be measured using ad-ops tools and ad-analytics as an increase in time ads are seen in the view of users
  • The goal can be achieved by redesigning pages, so the design team will be involved and then engineering team will implement the proposed design solution. Design Lead is responsible for design and the Head of engineering is responsible for the implementation
  • Ads viewability have been increased by at least 20% this year
  • The KPI will be reviewed on a monthly basis

Measurement and Evaluation

If you can’t measure it, you can’t manage it.

Peter Drucker

To evaluate your progress and results you need to create a table with following columns:

  • KPI name
  • Target (desired goal)
  • Fact (actual result)
  • Effectiveness ( Fact / Target)
  • Weight (defines how important this KPI in comparison with other metrics)
  • Limit (the minimum acceptable level of accomplishing the goal)

Weight should be more than 5% and never exceed 60%, otherwise this metric will become so important that others become insignificant and can’t be considered as “key” indicators. Total weight of all KPIs must be 100%.

Now let’s create such a table for our imaginary KPIs:

by Dmitry Salnikov

You see that two of the three metrics couldn’t reach the target value, but all of them exceeded limits. Total effectiveness is a sum of weights multiplied by the effectiveness of each KPI. In our example it’s 102.6%, so we can consider this year very productive.

I hope this article helped you better understand how to define, use and evaluate KPIs. Do you use KPIs in your work? Share your opinion with me in the comments section below.