What you measure improves
Agencies that don’t start tracking their numbers and using them to make better-informed decisions will find survival a challenge.
How many of you have key performance indicators (KPIs)? OK, that’s a bit of a trick question; we all do. KPIs are simply numbers that tell the story of what has or hasn’t happened in your business.
Can you say off the top of your head with any certainty how much new business you’ve written year-to-date? How about the amount of business you’ve lost? The potential revenue in your pipeline?
Related: 5 marketing tips to keep the client pipeline full
It’s shocking how few in our industry can answer those questions. Agencies have been able to survive and maintain healthy margins despite not knowing their numbers. But for so many reasons, that is starting to change. Agencies that don’t start tracking their numbers and using them to make better-informed decisions will find survival a challenge.
Measure what matters
There are so many things that could be measured; you could spend time doing nothing else. We’re not proponents of that, but some numbers have to be measured.
You have to know the numbers that reflect your story and tell where it’s going on the agency, department, and even individual level. Here are just a few KPI examples we all need to track:
- Financial – Revenue/employee. Spread/employee. Net growth. Net profit.
- Sales – Conversion ratio. Close ratio. Average revenue/client. New business written. Active prospect revenue.
- Service – Client retention by revenue. Client retention by case count.
- Marketing – Website visitors. Conversions. Leads generated. Lead scores.
We all know the old axiom, “You can’t manage what you don’t measure.” Once you start measuring something, the likelihood you manage it more effectively is almost a certainty.
Make them personal
An agency’s struggle with KPIs is often similar to their struggle with creating processes. They make it way more mysterious and complicated than it should be. For KPIs, there are blueprints and ideas out there, many of which are pretty straightforward calculations.
However, to fully leverage KPIs’ impact, you need to identify and track the most relevant ones for every team member. That may sound daunting, but here’s a simple exercise to do just that.
- For each role, identify the two or three most critical results to be produced.
- For each of those results, identify the two most critical behaviors in producing those results.
- For each behavior, identify a quantifiable and objective way of measuring whether the behavior is happening.
- That measurement is your KPI.
Keeping track
Most organizational KPIs only need to be updated quarterly (some annually). However, individual KPIs should likely be tracked monthly.
KPIs aren’t magic on their own. They need to be plugged into an organizational culture that is transparent and where everyone is mutually accountable. There must be a culture in place that takes action when the KPIs indicate it is necessary.
KPIs are just numbers. Numbers don’t lie.
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