Do you really need to spend so many resources on your KPI’s?

Before the internet, if anyone needed to search for a piece of information they would go to either the library or the bookstore. Nowadays, information is instantly available at our fingertips, however, a new challenge has emerged. It is difficult to determine if the information is accurate or which information is even relevant. Today, one of the biggest obstacles that companies face is how to decipher what data is accurate or relevant and what is not.

Management guru Peter Drucker famously said: “If you can't measure it, you can't manage it.” Simple but true. If the problem 10-15 years ago was lack of measurements and information, these days, the major problem is that companies overmeasure and exhaust themselves by spending too many resources on tedious tools that rarely bring ROI. Most companies have specialists to collect and analyze data but it adds little to no value to the management team and wastes precious time.

Ran Zussman SeaLights

Before you exclaim about how you, specifically, use your company’s data flawlessly– take a moment and reflect: Have you ever thought about the hidden costs?

Prior to investing in tools and collecting data, companies should define the minimum effective dose. What is the minimal set of tools that one would actually need to improve the company’s performance?

A great example would be to look at a company’s sales department. Why would sales managers spend time managing the CRM? Is there anyone who actually verifies that the data has been used correctly or at all? Did anyone measure which pieces of information have had the most significant impact on any ROI? Has anyone measured the average time a sales manager spends on activities that are outside the scope of sales, specifically employing various web tools?

Another oftentimes forgotten world that people tend to neglect is the QA world. It has a direct impact on the bottom line. Do you really need to measure coverage every time that you run tests for a new build? Do you know which of your automatic tests improves results? Wouldn't it make more sense to focus and maximize coverage only around code changes?

With multiple tools and too many integrations, companies forget the goal they are after. Unfortunately, the main interest is to use the tools that everyone uses with the thought that if it’s right for them, then it must be right for us. If we collect this specific data, we can get better performance.

The same thing happens when companies hire an employee. Instead of hiring brilliant minds and teaching them relevant tools, most companies hire technocrats who specialize specifically in SQL, Salesforce, etc. with no regard as to how they utilize their capabilities. What is the most efficient way of working? What should they measure and how can they do that with the minimum amount of time and effort to get the biggest bang for their buck.

It’s as if we fell in love with analysis and forgot about Pareto and the 80/20 rule. No one is measuring the hidden costs such as: how much time the sales team invests in documenting instead of actual sales, how much money and time does it cost one to maintain CRM/ERP systems, and how many critical decisions that brought money to the organization have come from these resources.

The question that is often forgotten is what are the main KPI’s of the company. Once you figure it out, you need to decide what to measure, emphasizing the ROI of the measurement itself. For example, one should decide which are the KPI’s that directly affect the ARR and NRR of the organization. Once you measure those metrics, you are probably going to have most if not all of the relevant metrics. All other measurements are probably “nice to have” and might be helpful but, and it’s a big but, you should always examine the costs of these measurements in terms of time spent (for example: time spent inserting data to the CRM), organizational resources spent (administrators operating the day to day operations in CRM) and most importantly, making sure that the organization made decisions that improve (in this example) the ARR and NRR, otherwise the ROI is negative and one just wasted a lot of time, money and effort.

To summarize, I’m not arguing that a company should not use a CRM or should not collect data, but one should review and examine the ROI. Question if the collected data and analytics bring benefits in terms of ROI. It’s certainly not about the fancy tools and large departments of analysts. As Pearl Zhu perfectly claimed: “Selecting the right measure and measuring things right are both art and science, KPI’s influence management behavior as well as business culture.”

The article was written by Ran Zussman, Business Operations, SeaLights