Design your own KPIs, like this bar manager did with limes

Key performance indicators can be studied at the most prestigious business school. Or you could craft one yourself studying the trash.

Credit: Image credit: flickr/Sharon Mollerus

In a previous life, Dane Atkinson, now the CEO of SumAll.com, ran a bar in New York City. While there he developed what he came to call the "lime equation" -- an alternative indicator of sorts that could pinpoint the bar's sales or revenues for the night and as it happened, also flag employee theft.

Atkinson quickly realized there was indirect but tight correlation between revenue and the limes used, and by the end of the night he could estimate revenues to within 5% based on the lime usage (one of his jobs as manager was also to collect the trash). When employee theft was suspected as a problem at the bar, Atkinson turned to his secret indicator -- the lime equation -- and began rotating the staff to see which individual was the common factor.

"I would then swoop in and publicly catch the thief confounding the rest of the staff to the method!" Atkinson tells CITEworld. From this experience he took away two lessons as he set about establishing sales performance metrics for his staff: One, as CEO you care about the belief, output, love of the team. So find what metric correlates to that attitude and that is the number you watch. Two, don't share that metric with anyone.

Insights, anyone?

Some vendors of CRM applications might be dismayed to hear such advice, entertaining as the story is. For an emerging trend among some of these companies is to coax users of their product into sharing metrics -- from sales to compensation -- with the other users of the product to establish very specific benchmarks for these indicators.

One example is Xactly's recently rollout of Xactly Insights. Xactly offers an application that supports sales compensation and Insights is an add-on that compiles the compensation data of the customers that the flagship applications is managing -- and then releases it in anonymized form to the users. Users have to opt in and most have, according to Xactly. Of those that didn't, some are changing their minds as they see how useful the application is.

Another example is a new analytic and data visualization tool that Zendesk recently introduced that sits on top of Zendesk's flagship customer service platform -- coincidentally, it's called Zendesk Insights. It too combines data from the system's users and then aggregates and serves that data back to customers as metrics or benchmarks for customer satisfaction rates. One such metric might be the level of staffing determined as necessary for a particular retail market; another might be how quickly an e-mail reply must be answered for customer satisfaction in, say, the real estate industry.

Whether these metrics give users an edge is unclear absent third-party peer-reviewed studies, which are impractical. They do make an intuitive business case though: In an ever-competitive economy, companies need an edge and striving for a unique, carefully chosen, and most importantly data-driven goal could very well be that edge.

KPIs by dashboards

These examples, though, are among the minority. For the most part companies still use tried-and-true metrics and KPIs to measure success -- be it in sales or elsewhere -- which is all well and good with vendors as it makes the system design and user interface design easier to create and manage.

Vendors, however, take care to incorporate as much flexibility as possible into their KPIs, giving users a wide range from which to choose. DataMentors' recently released Marketing Dashboard product, to cite just one example, lets users monitor a range of KPIs from sales trending, product cross-sell, marketing ROI by channel, customer acquisition, or sales by product category.

Indeed there is something to be said for MBA-worthy measurements, especially when making a case to the Board of Directors or shareholders or -- worst of all -- inquiring regulators. In those harrowing circumstances, agreements sold by salesperson or top 10 sales by product would probably fly much better than the number of limes a manager found in the trash that night.

This story, "Design your own KPIs, like this bar manager did with limes" was originally published by CITEworld.

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