How Key Performance Indicators Can Actually Kill Key Performance Focusing solely on business-oriented KPIs can short-change your bottom line.
By Camille Nicita Edited by Bill Schulz
Opinions expressed by Entrepreneur contributors are their own.
Executives and employees alike now work toward exceeding various Key Performance Indicators and receive quantitative feedback that evaluates their success.
While KPIs might work well internally for gauging those deserving of a promotion, they don't embody what customers truly need to function, thrive and succeed in their own lives which, in turn, limits opportunities for companies to create a new type of "value exchange" with their clientele.
Focusing on the business rather than the customer
Business-centric KPIs like revenue growth and profit margins fail to take customers' human-centered goals into account. This is mainly a structural problem, where firms place a laser focus on shareholder value instead of offering more intrinsic value to customers.
In addition, when success measurements are focused on customer-driven outcomes, they become easier for employees at all levels to understand, adopt and act on. Through positive reinforcement, leaders can use exemplary instances of service excellence with respect to customer goals to create transformative change at the frontline.
Such is the case when a Zappos employee advocated for a dedicated customer loyalty team trained to assist customers with special needs. This agility enabled the launch of Zappos Adaptive, an extension of their online experience that serves the unmet needs of clients with disabilities.
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Aiming to evaluate and repair
Even client-oriented KPIs like Customer Satisfaction and Net Promoter Scores are not ideal for creating best-in-class customer experiences because they prompt a mindset of "evaluate and repair" vs. "discover and build."
Instead of asking questions to truly understand customer needs and motivations, CSAT and NPS ask questions relative to "how likely would you be to refer us" and other questions relative to a company's current strategies. They're also inherently ambiguous.
A study from "The Harvard Business Review" claims, "NPS presumes that someone can't be both a promoter and a detractor. But humans are complex and often contradictory. Our minds operate on multiple planes—placing facts, feelings, and experiences within contextual and subjective frameworks. An oversimplified model can ignore this natural human state."
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Prioritizing incremental gains, not disruptive change
KPIs often place a narrow focus on fixing existing processes, which leaves the gate open for disruptive brands to enter the arena and identify better ways to entice customers. KPIs also tend to assume the future is a linear progression of the past, enabling worthy contenders to claim their seat at the throne of the industry.
Take car dealerships' demise for Carvana's gain, for example: By adopting a different framework that involves asking customers the right discovery questions to understand their pain points, then acting on those insights, businesses can reframe products to meet their dynamic environments.
By complementing traditional KPIs with Customer Performance Indicators, businesses can create a new kind of value exchange, one that uncovers how a brand and customers work toward mutual benefit. Unlike the former, CPIs are all about the client. They are quantifiable measures of how well any business, regardless of industry, performs against the goals most important to its customers.
CPIs can evaluate how the brand is helping customers succeed as individuals. This value exchange model concretely links their goals with revenue growth, enabling brands to be more deliberate about their customer-centered initiatives and investments.
By complementing KPIs with CPIs via a new value exchange model, businesses can place more intentionality around customer-centered investments, which creates more committed customers, more motivated employees and the ability to stay ahead of the curve to solidify their dynasty.
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