What It Actually Means
Most businesses have the second and call it the first. Twenty numbers updated monthly, reviewed briefly, acted on never.
The Rule Worth Knowing
Any measure that becomes a target stops being a good measure.
This is not cynicism, it is reliable. People optimise what they are judged on, including honestly and without noticing. Judge a support team on tickets closed and tickets get closed faster, some prematurely. Judge an agency on rankings and they will find terms that rank. Judge a developer on tickets completed and tickets get smaller.
Nobody is cheating. The number simply stops describing the thing it was chosen to describe.
The practical defence is to pair any KPI with a counterweight that would move in the wrong direction if it were being gamed. Tickets closed alongside reopened tickets. Speed alongside defect rate. Traffic alongside enquiries.
What Makes A Good One
It changes a decision. Ask what you would do differently if it moved twenty percent. No answer means it is information, not a KPI.
It is close to money or to the constraint. Enquiries, cost per enquiry, close rate, retention. Numbers connected to whether the business works.
Somebody can influence it. Holding a person to a number they cannot affect produces resentment and creative reporting.
It cannot be improved by doing the wrong thing. Or it is paired with something that catches that.
It is counted the same way every time. Half of all metric disagreements are definitional. Write the definition down once.
The Vanity Ones
Numbers that rise reliably, feel like progress, and change nothing.
Total visitors. Social followers. Impressions. Emails sent. Page views. These are worth watching as context and they make poor KPIs, because they can all grow while the business shrinks, and they are the easiest to move deliberately.
The test is direct: if this number doubled and revenue did not move, would we care? If not, it is not a KPI.
What To Ask
- What decision does this number inform? Apply to each one currently reported.
- How could this be improved without helping the business? If it is easy, add a counterweight.
- Who is judged on it? Expect it to be optimised, and design accordingly.
- What is the definition, and has it changed? Silent definition changes make trend lines meaningless.
A Workable Set For A Small Business
Most owner-managed businesses need very few, and the useful ones are usually four or five: enquiries, cost per enquiry, close rate, revenue, and one leading indicator of activity that produces enquiries.
That last one matters more than it looks, because it is the only one you control directly and immediately. Revenue is an outcome arriving late and reflecting work done weeks ago. Conversations opened, or proposals sent, is something you can act on today, and it moves everything else in time.
Choosing a leading indicator you control, and reviewing it weekly, is worth more than an elaborate dashboard of outcomes you can only observe.
More terms are in the glossary.
