Creating effective KPI’s for 2023

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We’re coming to the end of 2022 and ’tis the season to evaluate 2022’s performance and plan for 2023 targets. Despite ongoing challenges in the economic and business environment, I’ve heard from many people that they had aggressive metrics for themselves and their teams this year and expect the same in the new year. Meanwhile, morale is down, burnout and the “big quit” continue on.

Hitting targets has become more difficult and yet leaders tend to simply push harder. But here’s a better way: track Progress Impact Metrics, which track the progress toward the desired outcome.

As the collective “we” purposefully engineer an economic slow down for 2023 there’s no relief in sight for the “work harder, not smarter” mindset. Once again we’re planning for next year’s metrics with a lot of uncertainty in the economy. Further indication, perhaps, that uncertainty is just the new normal.

We just don’t know what disruption might ripple across your specific industry or region. For this reason, we must build resiliency into the core way we manage work, based on an increasing awareness of the internal and external factors that impact our environment. We must be able to dynamically change our work based on new information.

This dovetails right into metrics, since if you measure the right things then humans will naturally adapt to optimizing them. History shows us, for example, if you measure innovation by the number of ideas or the number of patents, that’s what you get–ideas and patents. If you wanted something else, you should have measured something else.

Every few years a new framework for KPI’s gets legs, like innovation accounting, OKRs, and so on, but they all seem to devolve into measuring tasks toward outcomes. This is because outcomes are easy to understand, we can see them; they’re easy to measure. But the connection between tasks and desired outcome is often tenuous; it’s a leap of faith.

Say you want to reduce customer churn or increase customer engagement. You can hypothesize any number of ways to do that. Perhaps teams posit that adding more features will accomplish the objective. They interview customers, but rather unimaginatively ask customers what they want. They perhaps split-test various implementations, using data as evidence. They think they’re practicing good lean innovation and they deserve some kudos for their efforts.

But what are they likely measuring? # of customer interviews, # of experiments, experiment results, # of new features, Net Promoter Score, etc. That they did the work by the agreed to date.

There’s no direct connection between the measurement and the desired outcome. In other words, while “increased customer engagement” is the desired outcome or objective, # of customer interviews doesn’t say anything about whether or not you’re figuring out what will result in more customer engagement.

Think about sales people. Salespeople typically have sales quotas, which means money. So, you can look at the lowest level of salespeople in an organization and draw a straight line to their output and the company’s revenue targets. Salespeople naturally optimize their work to get their greatest personal return. (Sometimes you see overly complex commission plans that create all the wrong incentives!)

For the rest of us, however, it’s typically a dicey correlation between the work we do and the company’s priorities. We build an organizational structure optimized to manage people’s tasks. (Hint: This is why managers want workers in cubes, not on Zoom.)

The question is how can the rest of the organization accomplish the sales equivalent of measuring progress toward outcomes?

With any project, product, opportunity, or quest for increased efficiency, there’s a stakeholder or multiple stakeholders who benefit from the work that’s being done. Let’s call them beneficiaries. Beneficiaries are external or internal customers and users, buyers, bosses — anyone who gets value out of the work. Ultimately, if the endeavor is to be successful, the beneficiary must change their behavior to get the value. They’re doing something now; they must do something differently. This is so, even if the actual activity they do is similar, e.g. they must read a different report, or must engage in a new Slack Channel. Beneficiaries must behave differently to achieve the value you’re creating for them.

To measure progress toward a desired outcome you measure the change in behavior, or early on, some indication of willingness to change. We call this the Progress Impact Metric (PIM). If enough beneficiaries change their behavior the team accomplishes their mission. Sounds easy, but it turns out it’s extremely difficult.

It’s always difficult to change people’s behavior and the difficulty goes way beyond simple explanations of rational vs irrational behavior. Changing behavior requires the understanding of the value, knowledge of its existence, and a bunch of other variables that is perhaps a subject of behavioral science.

Amazingly, often the missing component is awareness of existence. You must have a call to action (CTA). A call to action is exactly as it sounds: it tells the beneficiary that to get value x, do y. If you want the skirt, push the buy button. If you want the white paper, click download. If you want new growth opportunities, fund rapid experimentation.

Try to get out of the business of managing individual performance related to specific challenges. Agile team members should largely be responsible for that. Leaders should hold teams accountable.

I’ve heard that some leaders don’t want this level of accountability. The nebulous connection between the work they manage and outcomes allows them to fudge results and avoid scrutiny. But we can’t continue to merely push people harder. Execution through uncertainty is certain to fail. If you want to truly digitally transform your company, you need to start with the basics: focusing on the data that indicates PIM, or the metric indicating progress toward outcomes.

To learn more head to Moves the Needle or connect with me on LinkedIn.

I am the New York Times bestselling author of The Lean Entrepreneur and CEO and founder of Moves the Needle. I work as a trusted adviser to startups and large enterprises around the world. With more than 25 years of expertise in changing industrial age mindset into digital age opportunity, I blend agile, human-centered design, and lean methodologies to ignite entrepreneurial action from the front lines to the C-suite. As a sought-after keynote speaker, startup mentor, and executive advisor, I have travelled the globe sharing my vision for reimagining 21st century organizations. Through agility, digital transformation, and a focus of creating value for customers, I help leaders navigate the uncertainty brought on by increased complexity and endless disruption.



NYT Bestselling Author. October 2021: Disruption Proof: Empower People — Create Value — Drive Change

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Brant Cooper

NYT Bestselling Author. October 2021: Disruption Proof: Empower People — Create Value — Drive Change