Growing just bigger makes you fat. Becoming better makes you unkillable. With performance metrics (or KPIs) you will monitor progress and performance of your organisation. You will identify bottlenecks in efficiency and celebrate success with high performing teams.
Are you getting just bigger or better? Or both?
A note on OKRs: While quarterly OKR help you execute the strategy, the KPIs measure overall (long term) success and efficiency. KPIs are usually independent of OKRs, unless your objective is to increase efficiency.
There hundreds of metrics. You can categorize them in 3 fundamental categories:
I. Growth
A volume based metric (e.g. revenues, leads, customers..).
“Are you growing?”
II. Performance
An output/input efficiency metric (eg. revenue per FTE, % conversion,..)
“Are you becoming better at what you do?”
III. Cost efficiency
Cost per results (e.g. EBITDA, CAC, …)
“Are you burning resources efficiently?”
You should focus only on a few metrics that are most meaningful to your value creation. I call them Tier 1 metrics. Deprioritize all other metrics in Tier 2 and follow them only to understand drivers behind Tier 1 results.
Examples
SALES
Growth: Sales revenue (e.g. invoiced, closed deals, pipeline deals)
Performance: win rate (won / SQL)
Cost efficiency: customer acquisition cost (CAC)
MARKETING
Growth: Marketing Qualified Leads (MQL) per month
Performance: conversion all channels visitors to MQL
Cost efficiency: acquisition cost of MQL
PRODUCT
Growth: Monthly Active Users
Performance: net revenue retention in (%NRR)
Cost efficiency: increase in %NRR per $1 product team expense
SOFWTARE ENGINEERING (DEVELOPMENT)
Growth: product map completion in %
Performance: bug rate in %
Cost efficiency: $ cost per service run / usage / infrastructure utilized capacity
FINANCE
Growth: forecast accuracy, budget variance,..
Performance: time to report, manual touch points per financial close / report
Cost efficiency: income* / all-in cost finance team & services
*includes: tax savings, treasury profit, cost of capital improvements
HR
Growth: Non-solicited incoming applications
Performance: headcount per 1 HR FTE
Cost efficiency: cost per hiree