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What gets measured, gets done…

Mischa Tissen, 16 maart 2022

Many of you have been working with KPI’s, targets and most steer businesses by following and monitoring certain KPI’s.

These KPI’s are chosen in order to support the business and can be monitored by different kind of tooling. And as the saying goes: ‘what gets measured, gets done’, it is important to make sure you are monitoring the correct things in order to move forward.

Let’s have a look what kind of KPI’s can be used related to Sales and Service processes that can also be supported by CRM tooling.

Before we can setup KPI’s it is important to know exactly what the purpose is you want to monitor. In this blog, I would like to mention the different kinds of key performance indicators used and how to determine them.

For KPI’s we can distinguish between leading indicators and lagging indicators. These 2 different indicators are often mixed. Quite some definitions can be found online, but to explain the difference, I use the following descriptions:

Example

When a company has a strategic goal to improve the profitability, they will want to monitor the KPI’s revenue and costs as both indicators together make up the profit. The revenue and the costs are the lagging indicators.

Well that seems obvious, but how is this taken into account within the different levels of an organization?

I mean, not all employees can influence these KPI’s directly. So they need to be translated, or in other words, broken down into smaller chunks, that can be influenced to drive the related KPI. And of course it should be possible to be measured and monitored easily. These smaller chunks are the leading indicators. Basic rule of course is that these leading indicators should contribute to the lagging indicator. And the other characteristic of a leading indicator is that they can be influenced upfront, whereas the resulting lagging indicator is just showing the result afterwards. And then you are quite late to intervene…

It is of crucial importance to break down your lagging indicators into different leading indicators (likely for different groups of people in your company). You could draw up these relationships in any form of diagram (like the ‘hierarchy diagram’ or the ‘funnel’), as long as it is understandable and clear for the ones that should contribute to this. Some examples could be:

hierarchy display
Picture 1: Hierarchy display of indicator relationship
funnel display
Picture 2: Funnel display of indicator relationships

 

 

 

 

 

 

 

 

Hierarchical

Indicators are hierarchical. That means that a lagging indicator (which is generic for an organization) can be broken down into different KPI’s or leading indicators for different departments.
Customer satisfaction for example, can be further broken down into ‘number of complaints solved in time’ for a service department, whilst for a sales department the feedback to surveys about visits could be one of the translations of customer satisfaction.
As displayed above in the pictures, a web of leading indicators will exist that are the drivers for the related lagging indicator.
You could even extend this to a full overview of the important related enablers/drivers and specific targets in order to get the complete picture:

hierarchical mapping of kpi's
Picture 3: Hierarchical mapping of KPI’s

Complexity

One of the pitfalls often made is that many lagging indicators are defined in organizations. But even more leading indicators exist out there! Especially because there are so many options to measure data from all kinds of systems, there is a risk of measuring too much… There is nothing more demotivating then a bunch of numbers that you have to monitor as responsible person.
So ‘keep it simple’ applies here. Or better: stay focused by using a limited number of indicators that really matter to your strategic and tactical directions. And that part can be very challenging, but of crucial importance to think about before you are starting any actions towards setting up KPI’s.

In addition, these indicators should all point to the same direction. And the more indicators you define, the harder it is to make them non-conflicting.
Of course some leading indicators tend to be conflicting with others. When you need to make decisions on what to give priority, there should be a ranking on what has the priority. Some organizations use the balanced score card as defined by Kaplan and Norton early 90-ties, to get an proper overview.

And what about CRM?

Of course CRM can support in many ways to drive your business forward. It could basically also give you that overview that a balanced score card does.
In sales perspective, the SAP Cloud for Customer tooling can be used to create a nice dashboard showing an overview of the KPI’s defined. But that should only be started, once the discussion about lagging and leading indicators is settled. And with the overviews of lagging indicators and the related leading indicators that are generated, the correct data can be gathered from different sources, joined in SAP Cloud for Customer and made visible. The way to do that was already explained in an earlier blog by my colleague Guus Dorenbos.

If you need more information about how the process from indicator to dashboarding works, please do not hesitate to contact me!

Mischa Tissen

mischa.tissen@acorel.nl

Mischa Tissen

Read all my blogs

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