Chaitanya Indukuri is a product manager in analytics and insights at Deutsche Bank and is based out of New York City.
Every business leader focuses on improving their organization’s performance. People and processes are key ways to improve performance. However, data is a powerful lever for catalyzing change that business leaders do not tend to utilize effectively.
In this article, I’ll propose a comprehensive data strategy for optimizing the performance of any business.
Common Performance Management Frameworks
Data drives all firms to varying degrees. Performance is typically monitored and tracked using key performance indicators (KPIs). Some organizations focus on North Star metrics, the most crucial metric that best captures the core value a product delivers to its customers and that drives sustainable growth for a business.
Many organizations adopt a goal-setting framework called OKR, objectives and key results. OKRs are used to evaluate the performance of a business unit or product. While objectives tend to be aspirational and, thereby, very qualitative, key results are quantitative. Key results are KPIs that help measure the progress of the corresponding objective. OKRs were popularized by John Doerr, a prominent venture capitalist and author. His book, “Measure What Matters,” outlines how to implement OKRs to drive performance and achieve significant goals. Many companies, such as Google, have successfully adopted OKRs.
Why KPIs Alone Don’t Work
While adopting KPIs and OKRs helps improve an organization’s performance, I propose an even more powerful strategy that is pivotal to improving performance in this era of big data. I refer to this strategy as performance scorecards. This strategy involves doing much more than John Doerr recommends: Don’t just “Measure What Matters,” but rather, measure everything. You can focus on some metrics over others, but measuring all metrics and analyzing them is vital for optimizing performance.
So, before we discuss performance scorecards, let’s understand the challenges with focusing only on a limited set of KPIs. When you focus only on KPIs, the underlying levers that help improve the KPIs are unclear. If you have sales growth as the KPI, the actionable levers to improve sales growth can be unclear. Is the marketing spending, Salesforce headcount or product features the likely sales drivers?
KPIs tend to measure outcomes, but to improve performance, you must also focus on inputs that lead to the outcomes. These inputs, as seen here, may not directly measure the outcome, but they help drive the outcomes as input metrics and output metrics.
What Are Performance Scorecards?
So, is there a better way to analyze performance other than tracking a handful of KPIs? Yes, there is. I refer to them as performance scorecards. I define a scorecard as a place where all the measures relevant to the performance of an entity are organized neatly and viewable in one place.
Here is one example performance scorecard from a sample B2B SaaS company. In a scorecard, all the performance metrics across different business functions, such as sales, finance and operations, are in one place. Scorecards are a generic concept and can be applied to any entity in any industry. It is so generic that it can be used even by individuals. A personal scorecard can have metrics relating to health, fitness, well-being and finances in one place.
Scorecards Are Optimal For Performance Analysis
While combining metrics from various organizational functions in one place is challenging, it is not impossible. By having all kinds of metrics, including input, output and outcome metrics, in one place, you can connect the dots and better understand performance.
In a previous article, I wrote about collecting performance measures for investors. This same approach can be used by business leaders hoping to analyze performance holistically. Advanced scorecard users can layer advanced interactions on top of their metrics, as I’ve outlined in an article I wrote for CDO Magazine here.
Scorecards have more than KPIs. They have APIs, all performance indicators. They’re a data-centric way to look at reality without an objective next to it. You can always have objectives tied with key results, but having a holistic view of performance data is foundational for any organization.
The cherry on top is an easy user experience that lets you analyze the performance by anybody in the organization. With a better data visualization method like this, you can enact transformation across the organization. When performance becomes transparent, performance can automatically be optimized, which is the Holy Grail of any business leader!
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