Hunting for key figures

by | 04.03.2021 | Project management |

They serve to compare the target and the actual, the past, the present and the future. Some think they motivate, but others are demotivated by them. They are estimated, measured and calculated, analysed, interpreted and balanced. They are hailed, demonised and developed along value chains. They are recorded in systems, declared as KPI, postulated as goals and defined as salary components. And they are used in every conceivable business sector and situation in life. They are called: Key figures.

Key figures – definition, purpose and types

“… and on the seventh day God created key figures.” No, the story doesn’t go back quite that far. Let’s take a look at the first hits of the modern deity Google:

The Gaber Wirtschaftslexikon defines key figures as “a summary of quantitative information, i.e. information that can be expressed in numbers, for internal (company-specific key figures) and inter-company (industry key figures) comparison (such as company comparison, benchmarking). They serve to support decision-making as well as the management and control of measures”.1

Wikipedia adds: “Indicators condense facts or causal relationships with the help of absolute numbers, equations, formulas or index values. The observer (public, media, analysts) should be able to form opinions, make judgements, establish rankings or make decisions on the basis of indicators”.2

And the student encyclopaedia – aren’t we all students? – by Lernhelfer describes the purpose as follows:

  • Objectification: Instead of subjective statements and judgements, ratios provide verifiable facts.
  • Prioritisation: The selection of certain key figures makes it possible to concentrate on certain phenomena of the company, the national economy.
  • Performance incentive: With the help of indicators, targets can be set that provide an incentive for continuous improvement.
  • Monitoring/controlling: By regularly determining key figures, the effectiveness of initiated measures can be determined or a decision can be made to initiate measures quickly.
  • Comparison (benchmarking): A comparison over several years is possible with the help of key figures. Even companies of the same type can be compared objectively with key figures.
  • Presentation: Indicators serve to present the performance of a company in a clear and comprehensible way.
  • Forecasting ability: In their entirety, ratios can offer the possibility of working out forecasts of future development.3

Wikipedia again helps with the types of key figures:

  • absolute key figures: e.g. travel time, total costs, size of operation, capacity, personnel capacity,
  • relative key figures (ratio key figures):
    dimensionally relative ratios: e.g. unit costs, expenses per day, turnover per customer,
    dimensionless relative ratios: e.g. percentage share, price index, share index, employment level, return on sales,
  • inventory key figures: e.g. sickness rate, vacancy rate, market price, market interest rate, temperature (valid on a specified date),
  • trend key figures: e.g. for trends and average values (validity for a fixed period of time).

Sounds all comprehensible, doesn’t it? I would like to look in a different direction and illuminate the effect and optimisation of key figures, as well as blind spots.

Effect and optimisation of key figures

There are probably key figures in your company, perhaps even in your specific environment. Perhaps you are allowed to win a defined number of new customers per quarter? Or call a defined number of people per day? Or increase customer satisfaction? Or evaluate employees in an annual feedback meeting?

Regardless of what such or similar specifications do to you, a key figure is a key figure. Not in the sense of constructivism, but rather in the understanding as a neutral. In itself, it is neither positive nor negative. It is. It exists. Why it exists in your specific environment is another question. Why it experiences importance is an additional question. And what effect it has is a third question.

A small example:

Your organisation formulates three goals: to increase the number of page views and the length of stay per website visitor, as well as the number of returning visitors. For the sake of simplicity, I won’t go into the example of setting exact values and applying the smart formula. It is simply about “higher, faster, further”.

Why does the organisation set the goals? Because they are key figures that tools like Google Analytics collect. This is extremely banal, but not uncommon in everyday practice. Who was originally the hen or the egg here, I don’t know. In the present, however, it is the case that these key figures are used by many organisations because it is apparently easy to collect them.

Why is it important to achieve these targets? On the one hand, because they show a development in comparison with current key figures. And on the other hand because it is a widespread belief in marketing departments that they are important values. A high dwell time, many page views per visit and returning visitors are considered desirable. I would like to disagree with at least two of these three statements; but only in a few lines further down.

And what effect do the objectives of the example have? Of course, this does not have to be the case everywhere, but on some websites, for example, you have to press a “Continue” button in the middle of reading a blog post. Why? Because this results in a second page view and because the click signals to Google & Co. that the visitor is active and will not “jump off” again. If she jumps off, the measured dwell time is zero. Two birds with one button.

That leaves the returning visitors. However, these can only be measured if visitors agree to the cookie consent AND do not delete the cookies after leaving the website. In other words: this is a key figure that is very difficult to collect in online marketing. Of course, there is the option with appropriate tools to set cookies before consent is given and to ignore “Do Not Track” settings of the visitor. Ouch!

And why do I want to disagree with at least two of the three statements:

  • Website visits are all about visitor intent. For safety’s sake, I’ll write it more clearly again: VISITORS’ INTENTION. If the content is appealing to them, informative, entertaining etc. they will spend more time with the content and on your website. Without any tricks.
  • If you have good content on your website – please don’t tell anyone, but it might be worth defining a target audience here – and link to useful and appropriate information on your website, they will almost automatically view more pages per visit. Even without any tricks.

And last but not least: returning visitors. Yes, they can be “good” for a company. And what if a visitor sat in a café 3 times a week for 4 hours, consuming only a cappuccino and tap water? Would a turnover of about 3 euros be “good”? Probably not 100%, right? The conclusion is therefore: It depends on the CONTEXT and the INTERPRETATION of the key figures.

Blind spots with key figures

There are at least three blind spots when using key figures:

  • unmeasured values,
  • self-deception and
  • the confusion of target and key figure.

A small example of this as well:

Your organisation defines two goals: The amount of video minutes played and the number of newsletter recipients are to be increased. So again “higher, faster, further”.

What can be observed on many websites? Embedded videos start automatically when the website is opened. And pop-ups jump out at visitors: “Sign up for our newsletter now like 30,000 others! Become an insider!” A logical consequence: the number of video minutes played increases. And presumably the number of newsletter sign-ups also increases. Congratulations, both goals achieved!

Unfortunately, there is a downside: dissatisfied visitors. They are forced to stop the video, even though they did not start it. An action – like the “Continue” button – without advantage. If this happens a second or third time, many visitors will avoid the website in the future. Goal achieved, visitor lost. Unfortunately, such metrics are rarely measured. How should that work?

Stop. Of course you can measure satisfaction. For example, through one-click ratings. Actual usage can easily be observed at airports, among other places. At the security checkpoint, in toilets or at duty-free shops, you will often find rating scales with three smiley faces: one smiling, one neutral and one sad. Good, OK, bad. I have had the pleasure of observing employees – not customers, guests or visitors – pressing the buttons on several occasions. So the use of key figures can also lead to misuse of systems. And that is hardly surprising when branches of a chain compete with each other or even when salary components are linked to evaluations.

Last but not least, there remains the third blind spot: the confusion of target and key figure. You will find this in the conclusion.

Conclusion

Key figures are part of your life and mine. In organisations, they often represent goals, which unfortunately puts them in the spotlight. If you define that 80% of customers should be satisfied, you accept that 20% are not. Is this what customer satisfaction looks like? If you define the click rate of newsletters as an indicator of quality, you will try to increase the click rate. In practice, by the way, this is very easy, and “of course” has very little to do with the actual quality of a newsletter, which should ideally be causal for clicks.4

I would like to end my contribution with an appeal:

  • Do not confuse key figure and target. Try to achieve the target, not the key figure.
  • Do not blindly hunt after key figures. Instead, question the values. And get away from benchmarks.
  • Don’t optimise everything just because you can measure it.
  • Be creative and define your own indicators if necessary. You are then also welcome to chase them!

 

Notes:

[1] https://wirtschaftslexikon.gabler.de/definition/kennzahlen-41897
[2] https://de.wikipedia.org/wiki/Kennzahl
[3] https://www.lernhelfer.de/schuelerlexikon/politikwirtschaft/artikel/definition-und-zweck-von-kennzahlen
[4) It is very easy to increase the percentage of clicking newsletter recipients. In the following week, send your newsletter only to the people who clicked on a link in the previous week. Repeat this process for a few weeks. At some point you will only send your newsletter to “fans” who more or less click on all of your information. This increases the percentage of clicks. However, this is also pointless at most, because at the same time the absolute value of clickers falls.

Michael Schenkel has published more articles in the t2informatik Blog, including

t2informatik Blog: Speed as unfair advantage

Speed as unfair advantage

t2informatik Blog: Don't Uber yourself

Don’t Uber yourself

t2informatik Blog: Learning to code in schools

Learning to code in schools

Michael Schenkel
Michael Schenkel

Head of Marketing, t2informatik GmbH

Michael Schenkel holds a degree in business administration (BA) and is passionate about marketing. He likes to blog about project management, requirements engineering and marketing. And he is happy to meet you for a cup of coffee and a piece of cake.