Most everyone agrees that Key Performance Indicators (KPIs) are essential, but what if they blind us to important information as often as they help us make the right decisions? KPIs should help you find the bottlenecks, make the most of opportunities, and create consistent long-term growth.
However, typical KPIs are often misleading. When your focus is on these metrics, you are almost certainly not seeing other important signals.
For example, everyone knows that tracking the results of advertising is important. You probably get a monthly report detailing KPIs such as impressions, clicks, cost per click, and conversions.
Those all sound important, but are they the right metrics for you to consider? Do they tell you if you’re making the most out of your advertising budget or how well the person in charge is doing their job?
Impressions mean next to nothing; many people can see an ad, no matter how bad it is. Clicks mean a bit more, but if all you get are clicks, you’re losing money. The cost per click of individual ads is important for the person who actually works on the ads; it helps them see which ads to discontinue, modify, or give more budget for. But the average cost per click (the usual KPI) doesn’t mean much.
Conversions sound important. They are the goal of advertising: generate leads and sales. But the issue is that outcomes don’t tell what got you there. They don’t tell if the performance is as good as you could hope given the conditions or if you’re far from your potential. They don’t tell whether your team is great or if they merely got lucky. They don’t pinpoint opportunities nor highlight future risks.
Suppose your advertising KPIs look bad. Should you stop advertising? Change what you advertise? Fire the person in charge? Or fix a problem elsewhere causing your advertising to fail? Typical KPIs may very well lead you to the wrong conclusions.
It may seem counterintuitive, but it helps to stop fixating on performance. Instead, focus on the process and how specific actions correspond to results.
Key Optimization Indicators (KOIs) provide clearer, more actionable insights.
KOIs are a combination of typical KPIs (e.g., number of leads), effectiveness (e.g., lead-to-sale conversion rate), and key actions taken (e.g., “we tested a new lead magnet because…”).
Measuring effectiveness, as in conversion rates, and keeping track of what people actually do to improve results (and their reasoning behind those decisions) tells you much more about what your next actions should be.
You’ll see where you have the most untapped potential, who contributes the most to the company’s long-term growth, and what minor issues may become serious headaches in the future if ignored.
KPIs are important, but they don’t enable you to make the best decisions.
