Knowing Your KPI is Key

 I've written in the past about KPIs, and today I find myself sitting at my computer about to re-tell a story about KPIs - with another twist.

Two years ago, almost to the day, I introduced you all to Albert, Britney and Charles, my three fictitious car salespeople.  Back in 2019, they were selling hybrid cars, and we had enough KPIs to make sure that each of them was a winner in some way (except Albert.  He was our 'control', and he was only there to make the others look good.  Sorry, Albert).

Well, two years on, and selling cars has gone online.  Covid-19 and all that means that sales of cars are now handled remotely - with video views, emails, and Zoom calls - and targets have been realigned as a result.  The management team have realised that KPIs need to change in line with the new targets (which makes sense), and there are now a number of performance indicators being tracked.

Here are the results from January 2021 for our three long-standing (or long-suffering) salespeople.

Metric	Albert	Britney	Charles
Zoom sessions	411	225	510
Calls answered	320	243	366
Leads generated	127	77	198
Cars sold	40	59	60
Revenue (£)	201,000	285,000	203,500
Average car value (£)	5025	4830	3391
Conversion (contact to lead)	17.4%	16.5%	22.6%
Conversion (lead to sale)	31.5%	76.6%	30.3%

And again we ask ourselves:  who was the best salesperson?  And, more important, which of the KPIs is actually the KEY performance indicator?

Albert:  had the highest average car value

Britney:  had the highest revenue (40% more than Albert or Charles) and by far the highest conversion from lead to sale.

Charles:  had the most Zoom sessions; calls answered; leads generated; cars sold and conversion from contact  to lead.

Surely Charles won?  Except that wages, overheads and shareholder dividends aren't paid with Zoom sessions; bonuses aren't paid in phone calls and pensions aren't paid with actual cars.

The KPI of most businesses (and certainly this one) is revenue - or, more specifically, profit margin.  It's very nice to be able to talk about other metrics and to use these to improve the business, but if you're a business and your KPI isn't something related to money, then you're probably not aiming for the right target.  

Yes, you can certainly use other metrics to improve the business:  for example, Charles desperately needs to learn how to sell higher-value cars.  He's extremely productive - even prolific - with the customer contacts, but he's £1400 down per car compared to Britney,  and £1600 down per car compared to Albert.  Additionally, if Britney learned to improve her sales conversations and Zoom technique so that it was faster and more efficient, her sales volumes would increase.

So:  metrics and KPIs aren't the same thing.  Select the KPI that actually matches the business aim (typically margin and revenue) and don't get distracted by lesser KPIs that are actually just calculated ratios.  Use all the metrics to improve business performance, but pick your winner based on what really matters to your company.