SkuVault Blog

Tips and tricks to scale your business from the experts in eCommerce

Why and How To Measure KPI Metrics in Your Business

Posted by Andy Eastes on Jul 1, 2016
Find Andy Eastes on LinkedIn

how to measure KPI metrics

What’s the saying? Ah yes, if you don’t measure it then it won’t improve. I have found this to be absolutely true.

In all of my businesses, the best thing we ever did was to give employees and managers a list of KPI metrics to measure their key responsibilities.

KPI metric sheets must be filled out daily, and employees receive weekly, monthly, quarterly and annual report summaries. It is an absolute must to enforce daily manual entry of these values. Although this may sound inefficient and go against everything I stand for, re: automation, I stand firm and believe that this is the best route.

Yes, you can have automated reports to gather all of this information, and you can even compile it into an interactive dashboard, BUT I cannot stress enough the importance of requiring the person who is ultimately responsible for the results to manually enter their KPI metrics. Yes, metrics collection can also be automated, leaving the last step of individual entry to be done manually.

We use Google docs for this because they are easy to share. The point is that you should be able to ask each employee at any second what his or her current numbers are, and each individual should know off the top of their head. When the report is fully-automated it is too easy to “not have time to check it today” and then, over time, metrics are only checked weekly or worse, monthly.

The main benefit here is gained from requiring employees to keep their KPI metrics fresh in mind, making their main priority crystal clear.

For example, a website marketing manager is responsible for conversions. This might be the main metric for that position. Then there are some supporting KPI metrics, such as: Website traffic, NBCR (non-bounce conversion ratio), NB (non-bounce) users, Total sales, Average order value and Average items per order etc. These metrics are commonly referred to as KPIs. KPI stands for key performance indicator. In this context, a key performance indicator is a metric used to evaluate how successful an employee is at fulfilling the main function of his or her job. KPIs may also encourage that employee to continually improve by creating a goal to strive towards.

 A key performance indicator is a metric used to evaluate how successful

an employee is at fulfilling the main function of his or her job. 

 

What Daily KPI metrics Accomplish:

  • Enforces focus on main job
  • Ability to identify good and bad results faster
  • Ability to conduct small tests (implement changes) and see results faster

Some Basics to Keep KPI Metric Reporting Effective:

  • Each key team member should have ONE metric that he or she identifies as the major metric to evaluate his or her performance
  • Supporting KPI metrics should also be identified and reported
  • Report KPI metrics daily, no excuses
  • Do it every day (I can’t repeat this enough!)
  • Report KPI metrics, manually
  • Use incentives - I like to base a portion of team members’ pay off of their main KPI
  • Set BIG yet reachable goals on each employee’s daily KPI metrics sheet

KPI metrics per position help to clarify with team members that for which they are considered ultimately responsible, and hence, they ALWAYS know how they are performing. This leaves no question. Now, two things need to be made abundantly clear about implementing and using daily metrics to improve performance and profits.

  1. A Goal is a Goal. You can have quotas and you can have goals; it makes sense to have both. A quota is a minimum you have to hit within a certain frame of time, and a much higher lofty goal is the destination you, ultimately, want to reach. If you have only goals or only quotas or even if you have both, it needs to be understood that by no means does hitting the desired number mean you can rest for the duration of the period. Many individuals, left to their own devices, will hit a goal and stop trying. This drives me crazy to no end. Just like the people who come in for an interview and then slowly trudge through the office as if they have no purpose. This, for me, means a very short interview. So on this one, make quota and goal incentives clear to your team, and have your incentive plan reward highly when people not only meet but exceed their goals.
  2. Ask for support. Imagine you are the marketing manager at an eCommerce business and you have an employee tasked with managing the website. Conversions cover the main KPI metric for this position. What if there is only crap product on the website? This is an extreme example but no matter how good the employee is the conversions are never going to be great. In this case, you should train this employee to confirm their ‘crap product’ theory USING RELEVANT DATA and then share the findings with their manager. It needs to be transparent that reported findings will not be deemed as an attack on anyone but rather assistance that can be given to the merchandising manager to help them improve. If your company’s culture does not allow for this type of collaboration this is something on which you will have to focus in order to foster a team attitude. To clarify, make sure the person feels comfortable sharing ideas, supported by data, in order to eliminate the problem (if no data, then this is just pure complaining which is never a good sign). Each employee’s job is to make sure the company succeeds, and if that entails working with other departments, great!

 

 

Topics: eCommerce, eCommerce Businesses, Inventory Tips and Tricks