In TransferWise we measure progress with Key Performance Indicators (KPIs). They are one of the cornerstones of our work in independent teams and an essential part of the company culture.
For some teams, it’s harder to identify a good KPI than for others. It’s not because those teams are less mature than others, rather they are focusing on the parts of the product that are much harder to measure. For example, you naturally measure the success of marketing team in monthly new users or anti-fraud team in fraud costs. However, finding a good metric for customers experience team is much more challenging. How would you measure customer experience?
You can’t manage what you can’t measure. That is why teams that fail to identify a right KPIs for their vision struggle to be successful. Without a clear metric, it’s hard to prioritize projects and communicate your plans externally. In the end, it’s hard to stay inspired while you don’t clearly see that you’re making an impact.
So what is a good metrics for a product team? I’m using relevant, actionable, simple criteria to sort the wheat from the chaff:
- Relevant: connected to the company vision and KPIs. It should be clear, how changes in the team metrics impact the whole business KPIs and how strongly. Otherwise, why would you focus on them at all? Especially useful if this relationship expressed by a mathematical formula. For example, the number of new customers obtained from launching a new country in TransferWise can be directly connected (added) to the number of new users that the whole company onboard per month.
Let’s take a company with growth as a primary objection and monthly turnover as a metric for it. We can write down formulas: turnover = number of transactions * average transaction value; number of transactions = number of active customers * customer transaction frequency; number of active customers ~ number of new customers — number of churned customers. Any of metrics above could be good for some product teams in this company.
- Actionable: actually allows to measure team impact. It seems obvious from the name “metric” that it should help the team measure its impact. However teams can sometimes select a symbolic KPI that logically connected to their projects, but it is impossible to track impact using it. Common pitfalls here are selecting metrics that are impacting by many teams, not sensitive metrics, metrics that changes over time event without team effort.
For example, we had card acceptance rate as a KPI for the cards and payment methods team, but for a while, we have focused on the projects that are not impacting acceptance rate directly. It caused confusion and questions from other people in the company. So we removed acceptance rate from the list of our KPIs and communicated why we are not focusing on it at this moment.
If you don’t see changes in your metrics as result of your work, you either doing the wrong things or you selected wrong metrics.
- Simple: easy to explain and grasp. KPIs are the main tool for a team’s internal and external communications. That’s why it’s crucial for them to be 100% clear to the team itself and the whole company. You don’t want to sound like: “We are going to increase shnaptus on 25% in next quarter”.
If you could not explain your metric and how it linked to the company main objectives in one sentence, most likely you are in trouble.
Best metrics are based on common sense and need no explanation, for example, number of additional new customers per month, costs of acquisition of one new client, number of customer support cases per transaction, etc.
However, you can’t avoid more specific and sensitive metrics. Introducing a new, not obvious metric make sure to communicate it to the company explicitly and many times. You can’t overdo it. If you are using metric with an abbreviation, like LTV, NPS, CSAT, constantly explain what it means and how it’s calculated.
Relevant, actionable, simple criteria helping me to verify good metrics, I hope it will help you to find only the best KPIs as well.