The Hidden Impact of Poor KPI Selection

Author: 
Justin Yopp

On September 8, 2016, Wells Fargo announced it would pay the largest penalty ever - $185 million in fines – since the inception of the CFPB in 2011. As a refresher, from 2011-2016, employees opened over 1.5 million unauthorized deposit accounts and over 500,000 unauthorized credit card applications to the tune of $2.6 million in fees for the company. And over 5,300 employees were terminated during the same period.

Five days later, CEO John Stumpf stated: “We are eliminating product sales goals because we want to make certain our customers have full confidence that our retail bankers are always focused on the best interests of customers.” Clearly, this is a leader reversing course on poor KPI selection.

As marketing leaders, our purpose is to maximize the potential of our teams. The selection of Key Performance Indicators (KPIs) directly impacts our fulfillment of that purpose. Done correctly, the right KPIs foster harmony and collaboration. They empower our teams and focus their effort where they have meaningful impact. Misstep here, though, and the wrong KPIs create dissonance and drain creativity out of our teams.

Here are common KPI missteps and their impact on our teams, with examples to illustrate what you should look out for in your own organization.

Out-of-our-control KPIs
It’s a classic tale. Leaders choose KPIs that are disconnected from things their teams actually influence, control, or impact. Feelings of frustration and possibly outright anger towards leadership rapidly ensue. Consider a scenario where marketing is held accountable for the response time of the sales team on MQLs. Sure, it’s a critical KPI, but sales should have accountability, not marketing. Alternatively, the MA execution team has campaign performance as a KPI, but they don’t do anything other than program the system. Not a fair approach, is it?

Conflicting KPIs
This problem can be difficult to identify, especially when the conflicting teams don’t communicate often. If KPIs within and across teams are in conflict, it will lead to competition, animosity, and protectionist behavior. I experienced this when my SQL objective wasn’t shared by my sales counterparts. I was held accountable for SQL performance, but the sales team could choose to (or in most cases, choose not to) progress these leads through the funnel. And it’s not like I could just qualify those leads myself! (see KPI Misstep #1). As a result, our relationship was passive-aggressively cordial on good days and somewhat bitter the rest of the time.

Side note: This creates the conditions for a bit of “gaming the system.” Had I been more enterprising, and less honest, I could have convinced my counterparts to just convert those SQLs.

Unimportant KPIs
If KPIs focus on things that aren’t important, activities that don’t move the needle, our teams will feel disconnected from the broader cause and will rightly be hesitant to follow us. Sometimes difficult to pinpoint – most organizations don’t have objective measures of causality – and therefore definitions of what moves the needle are highly subjective. A good litmus test: if the KPI bolsters someone’s reputation more than it drives an outcome, it’s probably not important.

Bonus: Unachievable goals
OK, this isn’t KPI selection, but too interrelated to leave out. If goals for our team’s KPIs are unachievable, people will simply give up as their efforts will be futile. Or worse, commit fraud to achieve them. I’m not describing stretch goals, but literally unachievable ones. I worked with a healthcare marketing director whose lead generation requirements were so insanely high that the inside sales team literally didn’t have enough time to make all the calls. With no plans to add capacity, my client was distraught and anxious. She invested immense energy into trying to convince leadership these goals were unachievable. She dreamed about leaving, but unfortunately, was fired for underperformance.

Company-centric KPIs
KPIs that are company-centric instead of customer-centric tell your team that the “customer-first” mantra is little more than empty words. This leads to a disillusioned workforce whose trust in their leaders is eroded. The Wells Fargo scandal is a clear example of this misstep – where the objective was to get customers into new accounts, whether they needed them or not. In this extreme example, these customers weren’t even given the choice. Instead, they unwittingly became victims of poorly chosen company-centric KPIs.

Leadership’s choice
Persistent misuse of KPIs leads to a frustrated, ineffective team that doubts their leaders. The best case is these team members get fed up and leave for greener pastures. The worst case – they stay and become apathetic, subtly hostile or overtly aggressive – reflecting the impact of these decisions on our cultures and performance.

As leaders, we have a responsibility to create environments that allow our teams to flourish. Our selection of KPIs directly impacts this environment, positively or negatively. The best leaders consider what KPIs are fair and will lead to meaningful impact. The worst leaders? Well…what do you think?

Justin Yopp is a marketing strategist at The Pedowitz Group. He has spent the last 10 years crafting business and marketing strategies for local and global businesses, with an emphasis on demand generation. He helps organizations accelerate beyond best practices, increase internal buy-in and adoption, and capture more market mindshare. Connect with Justin on LinkedInor follow him on Twitter.