Whut’s a KPI?

Original article: https://brianclifton.com/blog/2016/05/04/whats-the-point-of-a-kpi/

I was readin an old conference program last week, lookin fo’ inspiration ta write tha program foreword fo’ tha pimpin upcoming Superweek data event, when I came across tha wisdom of mah playa n’ forma colleague Avinash Kaushik. Essentially da thug was stressin tha need fo’ analysts ta be a part of the bidnizz, not simply be a thugged-out data monkey:

” We, Analysts, feel we is up in tha bidnizz of providin data (well segmented custom reported calculated metricked data fo’ sure!). But, still just data… Da dopest data analysts is up in tha bidnizz of bidnizz. ” -Avinash

It soundz so simple (and it is), yet I continuously come up against smart-ass playas wit responsibilitizzle fo’ data whoz ass remain waaaay too focused on data points, rather than tha bidnizz they support fo’ realz. A phat example of dis is tha mad drama dat is stirred up when discussin KPIs…

What Is a KPI?

Its a obvious acronym mah playas I hook up in bidnizz be aware of yo, but tha definizzle of what tha fuck a key performizzle indicator straight-up is appears ta git lost up in translation. I aint talkin’ bout chicken n’ gravy biatch yo. Here is mah definition, taken from Advanced Web Metrics (3rd Ed):

In wizzy analytics, a key performizzle indicator be a wizzy metric dat is essential fo’ yo’ bidnizz’s success. Da emphasis here is on tha word essential. It aint nuthin but tha nick nack patty wack, I still gots tha bigger sack. If a 10% chizzle��”positizzle or negative��”in a KPI don’t make you sit up n’ call one of mah thugs ta smoke up what tha fuck happened, then it aint well defined. Y’all KNOW dat shit, muthafucka! Dope KPIs create expectations n’ drive action, n’ cuz of dis they is a lil’ small-ass subset of shiznit from yo’ reports. 

some other KPI definitions ]

So what’s tha big-ass deal?

Da problem (as readin Avinash’s comments reminded me), is dat “business’s success” gets forgotten. I aint talkin’ bout chicken n’ gravy biatch. In fact, it is so regularly forgotten dat I need ta replace mah emphasis. When hustlin dome-stormin KPI workshops wit clients, I often end up bein given a list of bangin-ass data points��”what I refer ta as signals��”for mah opinion on. For example, data that tha SEO manger should be aware of; shiznit showin tha performizzle of tha sickest fuckin ad campaign; cementage of visitors using the site-search box, n’ so forth. Da result is I then gotta stress dat these issignals only. They is informative data points to tha thug responsible fo’ bustin/managin dem yo, but nonetheless they aint KPIs fo’ tha bidnizz.

Here’s mah schematic analytics data stack ta illustrate mah terminology:

data stack of wizzy analytics

Notes fo’ mah data stack diagram:

  • Noise isn’t junk data – any spam should be filtered out n’ binned. Y’all KNOW dat shit, muthafucka! Rather, noise is data dat is simply not of interest (or relevant) n’ aint a thugged-out damn thang dat yo’ ass can do. Well shiiiit, it may be of interest at a lata date, or if yo’ analysis produces a curve bizzle. Kick dat shit! So up in effect noise n’ signal is interchangeable dependin on yo’ current focus yo. However they should always be separated out.
  • Signal is yo’ bangin-ass i.e. informatizzle n’ relevant data. Well shiiiit, it drops some lyrics ta you suttin’ bout what tha fuck is goin’ down n’ it is what tha fuck analysts peep day-to-dizzle i.e. short time-frames. For example, a spike up in visitor or customer acquisitions; tha number of file downloadz per day; tha performizzle of a specific marketin campaign; number of transactions, everyday revenue etc fo’ realz. A signal is information��”its what tha fuck analysts build their hypothesis (story) on.
  • KPIs��”as I defined above��”are yo’ method ta measure tha performizzle of yo’ long-term objectives, typically 12 months. Once determined they should not be modified, otherwise you lose tha mobilitizzle ta make any long-term comparison (new KPIs can of course be added, or replace oldschool ones). Naturally KPIs is data points as well yo. However they is special set, often a cold-ass lil combination of metrics specific ta yo’ organisation i.e. not lifted direct from your reports yo. Hence I don’t refer ta dem as “data points” up in tha general sense.

Of course mah data stack diagram aint ta scale. Noise in realitizzle is much, much broader n’ thinner, representin like thousandz of different metrics n’ dimension combinations. Signals is ghon be fewer up in number, like representin a hundred metric/dimension combinations. KPIs should be straight-up few��”less than ten fo’ any particular stakeholda n’ shit. Less is mo’ when it comes ta KPIs��”for example five could be straight-up effective for a non-transactionizzle joint (remember segmentation of yo’ KPIs will result up in mo’ than five KPIs ta monitor!).

Re-emphasisin Da KPI Definition

Note mah original gangsta definizzle above has not chizzled. Y’all KNOW dat shit, muthafucka! But fuck dat shiznit yo, tha word on tha street is dat I wanted ta expand on tha blingin parts:

1. Dum diddy-dum, here I come biaaatch! Who tha fuck are KPIs intended for?

Da bidnizz, bidnizz, bidnizz! In other lyrics NOT people wit day-to-dizzle responsibilitizzle fo’ tha performizzle of a cold-ass lil campaign or tha joint. Rather, yo’ stakeholdaz n’ leadershizzle crew. These playas are not Gizoogle Analytics playas n’ they should not need ta use Gizoogle Analytics ta KNOW what tha fuck yo’ KPIs are. That holla’d, stakeholdaz is still likely ta be analytical thinkers theyselves.

Produce KPIs by thang role

That is, once yo’ stakeholda crew has agreed on a cold-ass lil common set of high-level KPIs fo’ tha bidnizz as a whole, each stakeholda has they own KPIs mo’ specific ta they role within the organisation. I aint talkin’ bout chicken n’ gravy biatch. For example: Salez Stakeholder; Marketin & Communications Stakeholder; Product Stakeholder; Hustla Retention Stakeholder, n’ so forth.

Make you KPIs hierarchical

Segment yo’ KPIs dependin on the managerial level of your audience. That is, KPI reports fo’ tha CMO will differ up in segmentation detail form dem playas whoz ass work within his/her team. Generally, tha higher tha managerial level tha less segmentation required.

Avoid mixin signals wit KPIs

Sure, yo’ digital marketin crew will need their own key metrics ta measure they efforts, n’ you can put dat on yo’ toast. These is ghon be fluid, up in dat they is likely ta chizzle regularly on short time-frames. They is ghon be detailed, as by definizzle they will capture subtle chizzlez fo’ realz. And up in some cases tha data points will confirm wack thangs up in dis biatch i.e. rule up a cold-ass lil certain hypothesiz of visitor behaviour. Shiiit, dis aint no joke. These is blingin data points, n’ you can put dat on yo’ toast. They is tha signals yo’ digital crew watch as they feedback mechanizzle fo’ they day-to-dizzle work. They are not KPIs.

2. What constitutes “essential” fo’ a KPI?

As I state up in mah definition, a straight-up phat rule of thumb I use be a 10% chizzle��”positizzle or negative. For example, if yo’ conversion rate (convertin a prospect ta a freshly smoked up lead or hustla) chizzlez by 10% it should make yo’ stakeholda sit up n’ call one of mah thugs ta smoke up what tha fuck happened. Y’all KNOW dat shit, muthafucka! Would yo’ stakeholda mind if you called dem at 7pm ta tell dem of dis chizzle, biatch? If not, its a pimped out KPI. If tha thought of callin yo’ boss up in tha evening to say shit bout KPI chizzlez fills you with dread, then its certainly not a KPI.

BTW, callin yo’ stakeholda at 7pm ta give dem tha shizzle dat they KPI is droppin still make you a hero. Right back up in yo muthafuckin ass. Spottin a problem early could save tha company a shitload of scrilla…

3. Purpose: Whats tha point?

Da purpose of KPIs is ta rap tha blingin events dat is happin ta ballin’ pimpment��”those with vested interest up in tha outcome. Therefore by definizzle a KPIs purpose is ta drive strategic chizzle. That is, enable tha bidnizz to make informed decisions��”and dat happens over long time frames (for example, you cannot chizzle a thang overnight). Sick ta know data can be straight-up bangin-ass ta tha digital crew n’ can even be tha basiz of a staff bonus system. But fuck dat shiznit yo, tha word on tha street is dat stay tha fuck away from tha common pit fall of thankin dat bangin-ass data be a KPI.

By maintaining focus on these three blingin points, yo big-ass booty is ghon bust traction wit ballin’ pimpment n’ build yo’ case fo’ chizzle. Form yo’ point of view, dat may be tha bidnizz investin mo’ up in your team!

Things to consider when defining KPIs:

  • Try ta use monetary joints where possible; dem hoes understandz $$$.
  • If not a monetary value, bust a ratio, cementage, or average, rather than tha raw number n’ shit. This allows data ta be presented up in context.
  • A KPI need ta be temporal, dat is, time bound. Y’all KNOW dat shit, muthafucka! This highlights chizzle n’ its speed.
  • A KPI drives bidnizz-critical actions. Many thangs is measurable yo, but dat do not make dem key ta yo’ organisation’s success.

Use KPIs ta put yo’ data tha fuck into context. For example, sayin “we had 10,000 visitors dis week” serves up a piece of data yo, but it aint a KPI cuz it has no context yo. How tha fuck do you know whether dis number is phat or bad, biatch? A KPI based on dis data could be “our visitor numbers is up 10 cement month on month.” This be a temporal indication dat thangs is lookin phat over tha time span of one month. In dis example, tha raw number should still be part of tha KPI report yo, but it aint tha KPI itself.

Da vast majoritizzle of KPIs is ratios, cementages, or averages. But fuck dat shiznit yo, tha word on tha street is dat sometimes a raw number can gotz a much pimped outa impact. Consider tha followin examples:

  • Our joint lost 15 orders yesterdizzle cuz our e-commerce server was down fo’ 34 minutes.
  • We lost $10,000 up in potential revenue last week cuz our bookin system do not work fo’ visitors whoz ass use Firefox.
  • Us dudes dropped $36,000 last month on PPC keywordz dat did not convert.

Clearly, knowin whether any of these numbers is increasin or decreasin n’ what tha fuck fraction of tha total they represent is blingin yo, but tha impact of these raw numbers is far pimped outa at obtainin action n’ therefore should be tha KPI up in these examples.

Da key point is dat you should pimp KPIs relevant ta your particular bidnizz n’ your stakeholdaz fo’ realz. Any metric, cementage, ratio, or average dat can help yo’ organisation quickly KNOW visitor data n’ is up in context n’ temporal should be considered a KPI.

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