Of all the harmful business decisions you can make analytically speaking, the worst is picking a single KPI for success.

~ Everyone in the company is obsessively solving for Conversion Rate (CR).

~ Your boss has decided the only thing that matters is Cost Per Acquisition (CPA).

~ Your team's bonus is only based on Revenue.

~ Profit is the mandate from your board of directors, so everyone needs to marshal around profit.

~ The new VP has dictated that Net Promoter Score is the true north. NPS or death!

So, what's the problem?

On the surface all of these seem entirely reasonable. Why wouldn't you care about Conversion Rate or CPA or Revenue or Profit or NPS? Each is a pretty good metric. (Except NPS. Its lack of value has been so thoroughly debunked I've come to believe no one should measure it as it takes good people down bad paths).

The problem is the mindset. Life/business is complicated. One ring can't rule them all.

Choosing one metric also drives bad behavior (not because people are ill-intentioned, more likely because people respond to incentives).

If Conversion Rate is the KPI and the goal is 5%, I can get 5% CR by ensuring I cherry pick channels, offers and targeting. I can give everyone $50 off, I can decide not to go after competitive customers, I can ignore incrementality, and on and on. The business gets 5% yet loses long-term.

I can easily solve for CPA, but deliver a tiny sales volume.

I can drive a whole lot of Revenue, unprofitably.

I can drive for short-term Profit by ignoring current customers, or pulling a bait and switch or any number of strategies.

And, you've surely completed NPS surveys and rated a 9 because the auto dealer was standing in front of you or there was an incentive for a free swag for a specific score.

Single KPI organizations create incomplete incentives and a myopic view of success. Over a medium/long period of time, these companies go bye-bye.

So, what's the solution?

Every KPI you choose should have a BFF that incentivizes good behavior by your employees.

When you choose a BFF for your KPI, the result is balance for the overall business (not a narrow single team or channel), balance for short AND long-term, and balance for yourself (business) and your customers.

Here are potential BFF pairs for the KPIs above:

~ Conversion Rate < > Revenue.

~ Cost Per Acquisition < > # of Orders.

~ Revenue < > Task Completion Rate.

~ Profit < > Market Share.

~ (Please don't use it!) NPS < > Referrals Revenue.

Your peers, your agencies, everyone in the company now has better incentives.

Drive up Conversion Rate, but if you miss Revenue targets that is not cool.

Focus on CPA, with the flexibility to ensure you are driving a giant number of profitable Orders.

Go grab as much Revenue as you can on your website, but also help people who are not there to buy to complete their tasks (window shopping, tech support, compare you with competition, download white papers, etc.).

Solve for Profit, but not in a way that ensures you stay super profitable at 3% Market Share.

You catch my drift.

Success in business requires a portfolio of actions, hence your measurement strategy should reflect that level of sophistication.

Bonus.

You are not a single KPI person/team/division... Hurray!

I'm thrilled you have three. (No more than five KPIs. Ever.)

Do the three have a BFF relationship with each other so that each helps bring out the best in the other?

If they don't, I'm afraid you are still doing it wrong.

Bottom-line: There is an enormous amount we can get wrong when it comes to Analytics. Please get this basic bit about KPIs right. Not doing so has a profoundly corrosive impact, one that permeates across the organization in harmful ways.

Don't let your KPIs be lonely.

-Avinash.

PS: If you got the sense that this has been a long-term sore topic for me... You are right. :) Here's my post on Occam's Razor from 2014 (not the first time I covered the topic!):

Excellent Analytics Tip #26: Every Critical Metric Should Have A BFF!

It has an additional 11 pairs of KPI BFFs for you to use.

PPS: Definitions, if helpful.

Metric: A metric is a number.
KPI: A key performance indicator (KPI) is a metric most closely tied to overall business success.