Goal setting is a popular exercise in many endeavors. College sports teams set goals of becoming national champions. Would-be stock mavens set goals of earning millions of dollars and retiring early to Fiji. And marketers set goals of driving revenue growth to meet or exceed the expectations of private investors, the board or Wall Street.
The problem with all of the above is often those goals are based not on anything tangible but rather on a wish or a number that’s picked out of the air. The people in charge figure it sure would be nice to attain that goal, but they have little idea of how they’re going to get there.
Take our college sports team for example. They say they want to be national champions. But have they recruited the talent it will take to compete for a national championship? Do they know what success looks and feels like? Can they even qualify by winning their conference? If they do get to the big tournament, do they have the depth to survive? Until they’ve thought through the answers to those questions, they don’t really have a goal. They merely have an aspiration.
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The same applies to business organizations. You have to have a deep understanding of the causes and effects in your business before you can set the overarching goals realistically – whether those goals are increasing revenue, improving organizational performance, driving quality, shortening the sales cycle, or some other measurement of success. Being able to answer questions such as whom in your universe is important to achieving your goals, when those goals need to be achieved, and how you plan to do it is the foundation for success.
It’s really the Six Sigma approach of using data to drive decisions: you can manage what you measure; you can measure what you define; and you can define what you understand. Aspirations become goals when the who, what, when, how, how much, etc. are entered into the equation. In other words, do you have enough quantifiable parameters in your goal to know when you have truly succeeded; and how well you have succeeded or not? Conversely, the more poorly defined the goals are, the less likely they are to be achieved, whether on the field of play or in the Boardroom.
For some businesses, Web sites can offer prime examples of aspirations masquerading as goals. If Web sites have goals at all, they are often based on vague intentions or lofty corporate desires. No one has really defined them or correlated them to the business goals. There is often no organized plan to achieve these goals, and often no key performance indicators that show whether intermediate steps are leading to the goals. In fact, in some cases no one is quite sure what the important intermediate steps are.
Web analytics, when applied correctly, can help fill those gaps. A Web analytics package alone is not enough. There has been a traditional tendency to focus on statistics in isolation rather than linking performance to business goals, and that simply won’t work. After all, what good is knowing how many unique visitors you get each month or the even cost per unique visitor if you don’t understand what impact these unique visitors have on the sales pipeline?
Instead, you need to look at your goals, define which data out of the mountains you’re generating each day directly impacts those goals, and then measure it within a timeframe that tells you how you’re progressing. That’s what good KPIs do for you.
Keep in mind that most KPIs are not single numbers, but rather ratios of one statistic to another. They are the first step toward meaningful measurement, and yet they are often bypassed as being too time-consuming to create or too difficult to determine. That is a critical misstep that will almost certainly lead to failure. Here’s how they work.
One reasonable KPI for valuing performance of a Web site for a considered purchase product-set with a long sales cycle is the number of qualified contact forms (or other activity correlated to a lead) generated per total unique visitors. If you can determine the number of contact forms currently being filled out per thousand unique visitors, you have a benchmark from which to improve. This assumes a completed contact form is a qualified lead; however, for most companies, the definition of “qualified” often needs to be better quantified for this to be truly meaningful.
If the goal is to increase sales by X percent within a given timeframe, you can look at the qualified leads/thousand unique visitors KPI and determine how many more qualified unique visitors you need to drive to your Web site in that timeframe. If that number is unrealistic, you will know that alternatively you need to increase the percentage of unique visitors who become qualified leads. Either way, you have a clearly defined path to achieve your goal, and a clearly defined way to measure the success of your efforts.
Of course, all KPIs are only as good as the raw source data used to generate it – which means you have to be careful how you put it together in the first place. Take unique visitor data. It is very easy to mistake visits for unique visitors. Yet they are very different. The former is the number of times visitors enter the site on various occasions in a given timeframe, while the latter is the number of unique individuals who come to the site regardless of how many times they come in a given timeframe.
Mistaking the former for the latter could result in some very skewed numbers, rendering the entire KPI ineffective. It’s also important to realize that users that don’t accept cookies or delete them further skew results, but even so this data is still better than many alternatives. Still, if you are unable to get unique visitor statistics from your analytics, visits may suffice as long as you know you have inflated the numbers and use a projected visits-to-visitors ratio to put these numbers into context.
While there are all kinds of KPIs that can be generated using the raw data, having too many can quickly turn into information overload. It’s much like a sports team that creates a game plan that is so complicated that none of their players are quite sure what they’re doing at any particular time. The result almost inevitably is a breakdown in fundamentals, followed by a big loss. At the top end of organizations, closely monitoring/measuring three to five KPIs is most effective to determine whether you’re going in the right direction as long as the right people downstream in the organization have the additional KPIs and metrics to answer questions and find answers if alarm bells go off.
Setting goals without understanding the factors driving the business, defining the steps to improvement, and creating a means to measure the effectiveness of changes is a recipe for failure. Just as smart coaches evaluate their teams’ talent and commitment level before plotting out a series of goals to achieve a larger, reality-based endgame, so, too, do business managers need to set their overarching goals by first looking at what the organization is actually capable of doing, and what steps and measurements they will use to get there. Only then will they move from vague aspirations to performance indicators that will help the organization grow.
