Bandwagon Metrics: The Death of the Standard KPI

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A key performance indicator is a formula that may be applied to companies in order to analyze some dimension towards achieving business objectives. In most cases, business objectives are simply making money. However, many of these key performance indicators (KPIs) are set-up by management simply because of their popularity. Administrative dashboards draw data from many different sources and create strong visuals intended to give insights for making strategic decisions. However, the only problem is that every industry and company is unique and general (KPIs) may be misleading if companies do not fully understand where they belong. In this article, we will provide a few mainstream key performance indicators to describe the flaws of overgeneralization and how they may be achieved to improve your business.

Return on Investment (ROI): There are few things more cliché in business than return on investment. It makes sense, because this is exactly what most people are concerned with and the reason they place resources into something in the first place. Companies measuring an ROI may be misled, however, unless they are performing smaller more customized measurements along the way. A simply ROI means very little in terms of stability unless it is possible to understand where the cash flows are being generated and how the money is being spent. For instance, if your company generates all its profits from selling Widget X and is spending all its operating cost on Widget Y, there could be no variation to send alerts for any variance. Companies that wish to mitigate the bandwagon ROI should create a POI (product return on investment), where you may estimate the returns for placing investments on each cash flow directly on the value they create.

Quality Index (QI): This metric is designed to determine the relationship between quality and customer expectations. If your product falls short on its promises, the market is likely to be dissatisfied and may share their negative experiences with others. However, what if your company is more concerned with the severity of impact in relationship to the quality index? A gas station in a small town just off an interstate serving distance travels may have terrible hot dogs, but a negative review on Yelp is unlikely to have the same variance as even a low end Steakhouse in a suburban area. Rather than tracking the general QI, it may be more advantageous to customize the variable in order to provide a more accurate picture to improve the situation. A suitable replacement may include churn rate for (SaaS) companies or negative review postings for restaurants. If each value is associated with lost revenue, a new metric may be created that is more customized to your company that associates the lost revenue due to mismatching customer expectations.

360 Degree Feedback Score: How does management rank employees and what do your employees think about their managers? The 360 Degree Feedback Score is designed to answer this question and provide insights to improve the relationship. There are many industries where people are not satisfied with their employment, nor will the marginal investment in attempting to make them satisfied change anything at all. A production worker on an assembly line may have the same turnover level regardless of how they feel about their manager. In contrast, a software engineering company that wants to retain top talent will be very interested in this relationship. Rather than simply throwing out the metric or jumping on the bandwagon by adding it, consider creating your own custom metric based on an adaptation. For the manufacturing setting, perhaps the goal is to seek out managers that are verbally abusive or behaving unethically rather than demanding employees work long hours in order to meet production requirements. The software firm may be more interested in an adjustment focused more on the

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