Have you ever wondered why the temperature and "feels like" temperature are so different?
Well the same "phenomenon" can impact your business.
Today we'll explore 6 ways your KPIs can lie to you.
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6 'Feels Like' Factors Wrecking Your KPIs
Growing up, we’d always do a family road trip to Georgia.
We have a large extended family that lives there, so it meant seeing great grandparents, close relatives, extended relatives, and the people we had no clue how they were related.
We made the trip back last year and the family picnic had over 50 people… that sorta thing.
This road trip portion was always a lot of fun for us kids, but I’m not sure it was so much fun for the adults (2 days of 12+ hours driving with a bunch of kids doesn’t sound like much fun to me today). We’d sit in the back of the van, play goofy games, eat a lot of food, and watch movies on TV with an embedded VCR.
It was always like a game of Tetris trying to fit everyone and everything in the vehicles.
When we got to Georgia, there was a lot of playing outside and very little sitting around the house watching TV or movies. I look back at those trips and think that exploring really shaped my childhood and adulthood in a way.
It made me curious and generally unafraid to explore.
We’d find condemned barns and climb every wall and find hiding spots. We’d run through fields of crops. We’d fish in small ponds. We’d play laser tag around cars, roads, railroad tracks, and unwilling adults. And then we’d take breaks with popsicles and pound cake.
Because of school schedules, we’d always go during the summer. And most of the time, it’d be August. This meant heat… and because it was Southeast Georgia… humidity and bugs.
We’d count our mosquito bites by the end of the trip and declare the person with the most as the “winner.” There was no prize, so I’m not sure what they won besides itches.
I always thought Oklahoma was hot in the summer, but in Southeast Georgia, you could feel the humidity, and sometimes even see it.
As a kid, this was hard to understand at first. I thought 95 degrees was… 95 degrees. But it turns out there are many other variables at play as well.
I’m no meteorologist, but besides temperature the following impact how it “feels:”
- Humidity
- Sunlight
- Wind speed
- Wind direction
Thinking about this experience, and how the “feels like” temperature differs from the real one, I got to thinking about how this relates to your business.
When we “measure” our business, we tend to look at one thing. We all have a pet metric. Cash, revenue, profit, billable hours, etc… the only reason that metric gets picked is because one time it was really helpful and you decided to rely on it ever since.
But, one KPI does not reveal the full picture of a business.
Your Revenue could be increasing, but margins and profit be going down.
Your employees could be busy and “billable,” but your clients are unhappy with what they’re getting.
You may be getting traffic to your website, but your copy (and thus conversion) stinks.
You may be selling more, but taking on unsustainable debt.
We need to uncover these blind spots and understand the variables that aren’t always seen.
By understanding these unknown variables, we can explain the “feels like” temperature of the business in relation to the story the numbers are telling.
So, how do we take into account not just temperature, but also humidity, sunlight, and wind?
Here are 6 variables that impact your KPIs that you might not see.
Employee morale
Employee morale will directly impact productivity and service, which can directly impact any KPIs they’re touching.
This could be a direct touch (number of units packaged) or indirect (strained relation to supplier, thus slower delivery).
Metrics to watch with this is:
- Employee Turnover Rate: High morale generally leads to lower turnover.
- Customer Satisfaction: Happy employees often lead to happier customers.
- Productivity Metrics: High morale can increase the amount of work produced per employee.
Monitoring individual performers’ performance, personal relationships, and overall satisfaction can have a big impact across the business.
These KPIs can be monitored in tools like NetSuite, who is sponsoring today's issue.
Thanks NetSuite for sponsoring this issue.
NetSuite is the #1 Cloud ERP that gives you complete visibility and control over your business operations, including financials, inventory, HR, CRM and more. Over 37,000 organizations have turned to NetSuite to help grow their top and bottom lines.
Click here to see what the future holds for AI and Machine Learning in finance.
Company culture
While individual employee morale can have a large impact, but a culture of mediocrity can have a much bigger one.
A bad culture will also increase employee turnover, which means that even good training is quickly lost. And as statistics show, training employees is expensive.
In 2017, Uber faced scrutiny about their work culture, and it hurt profits and slowed growth. While they recovered, it wasn’t until board members quit and Travis Kalanick was removed that things reversed.
On the opposite end, Google encouraging employees to use “20% time” on personal projects has lead to the creation of some of Google’s biggest products (like Gmail). It keeps employees engaged and creative and ultimately leads to better results.
One-time events
The immediate example here is COVID-19. It led to huge disruptions in the supply chain and large shifts in how people interacted with companies.
Since these are generally obvious, I won’t directly address this other than to say: we have a tendency to attribute more changes to one-time events than should be.
Margins aren’t temporarily down because of your Christmas party. That’s an every year thing and it should be planned for.
Bookings aren’t down because the weekend was slow. It could be a sign of something bigger and it’s important to keep your eyes peeled.
Economic factors
The economy can and will impact your business, but the question is how.
Sometimes it’s the supply chain impact, others it’s the way consumers behave.
Being able to see these trends early is key to performing well in a hard economic climate.
Small changes in profit margins, sales volumes, or overall traffic could be signs of a much bigger economic shift.
The key is reacting quickly, but not overreacting.
We want to build resilient businesses that can “pounce” when others are struggling.
If getting products from overseas, factors like exchange rates, interest rates, and inflation, can hugely impact your business very quickly.
Consumer behavior shifts
Consumer behavior shifts because of preferences, but also because of political winds of change.
Not eco-friendly? A change in the eco conversation could impact your business.
Not online? A change to online shopping could make your store unprofitable.
A few things to consider are:
- Market Share: A shift in consumer preference can lead some companies to gain or lose market share.
- Customer Lifetime Value (CLV): If consumers become more brand loyal or shift preferences, it can impact their CLV.
- Customer Support Queries: Changes in consumer behavior might lead to an increase or decrease in inquiries or complaints.
With B2B businesses, this can be harder to track, but being on top of industry trade publications can be a great way to follow trends.
Technology changes
Kodak missed digital cameras and cell phone manufacturers didn’t see the iPhone coming.
Big shifts in technologies can not only impact companies but overall industries.
Being on top of technological shifts can keep your business growing and future-proof the business.
Be on the lookout for ways to use tech to:
- increase operational efficiency
- update your product offerings
- leverage is to reach more people
Wrap up
Understanding these “under the radar” impacts helps you translate your numbers into actionable insights.
This is the whole game.
By understanding your numbers and then translating those numbers into stories, you’re able to gain a competitive advantage that will allow you to:
- Grow your business
- Make more money
If you struggle to pick KPIs, I suggest you review my post from last June, where I walk through a 7-step process to picking the right KPIs.
Reach out and let me know: what are common “feels like” factors that have impacted your business in the past?
