What Makes a Good KPI

27.04.2017 |

Episode #4 of the course How to create a data-driven culture by Jon Leighton


So we’ve covered what makes a poor KPI, and now it’s time to find out what makes a good one. These are the KPIs that you’ll share with the team and keep track of regularly, using them to determine how successful you currently are.

Himanshu Sharma of Optimize Smart sums up the elements that make a good KPI best:

1. Available:Make sure that you have some way or method of actually measuring it. It’s no good choosing something you can’t measure; otherwise how are you going to determine how well you’re doing?

If your goal is to increase the number of social mentions, make sure you have a tool (such as Mention) to actually track those mentions.

2. Bottom Line Impacting: I’ve said it before and I’ll say it again—KPIs are metrics that help you measure against your objectives. These objectives will all ultimately be related to your business’s bottom line. A KPI should be bottom line impacting for the ultimate measurement of success.

3. Relevant: I’m repeating myself yet again, but KPIs are about measuring your objectives. If it’s not relevant to your objectives, it’s not relevant to your business. Simple.

4. Actionable: When you measure your KPIs, you need to be able to take something actionable away from it. It’s all good and well measuring it, but can you actually do anything with it?

5. Timely: KPIs shouldn’t take two months calculate; they should be readily available when you need them. While looking back over your data can be worthwhile, being able to see what’s happening now will provide you with a much better understanding of how things are going right now.

Another element I’d add to Sharma’s list is the ability to segment a KPI. By segmenting your KPIs, you can get a more in-depth view of your data.

When it comes to actually choosing your KPIs, you’ll typically find that the KPI is in the goal itself.

Let’s revisit Bob and his geek store, where he’s already laid out his objectives, goals, and KPIs.



For his first objective, one of his KPIs is the number of unique visits. His Goal is to increase the number of people visiting his site, so it’s an obvious choice. Here’s how it fits the criteria:

1. Available & Timely: Bob can find the number of unique visitors in Google Analytics.

2. Bottom Line Impacting: The more visitors Bob has, the more opportunities for conversions and thus profit.

3. Relevant: It’s directly related to the objective “Sell Merchandise” and the goal “Increase Visitors.”

4. Actionable: If the number of unique visitors is low, Bob will know that he needs to implement a marketing strategy that will increase the visibility of the site.

5. Able to Segment: Bob can segment this KPI down to Unique Visits from different traffic channels or geographical locations. This helps him determine which channels are working and where his customers are coming from (in case he needs to adjust his message to capitalize on a specific area).

Make sense?

You should now have a good idea of what makes a good KPI for your business and have maybe already added some to your spreadsheet.

Next: I’ll show you how to get the data that you need.



Recommended book

Data Science for Business: What You Need to Know about Data Mining and Data-Analytic Thinking by Foster Provost, Tom Fawcett


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