BOTHER – Adding Value through Effective Relativization and Rationalization of KPIs

I posted a comment to a blog about KPIs:

  • http://mybibeat.wordpress.com/2009/11/23/how-to-define-and-select-good-kpis-for-your-business/#comment-10
  • and I thought it cited a perfect next step in my series on how to revamp your investment or the BOTHER program:

    I am typically the consultant of KPIs, so I found it humbling to have a need for some relevant information on KPIs. I say this with the greatest of respect for your posting. While I agree on most points, I wanted to challenge one area, and hope you will take this with a pinch of salt…
    You cite an example for a professional services company: "The survival of a professional service provider depends on the number of ongoing and new projects the company handles" and go on to mention revenue. The follow up you provide is great for measuring the $$ impact yes, but you do not mention the satisfaction of the ongoing client. While measuring revenue of the ongoing client is meaningful, it isnt wholly satisfying – Here’s why:

    In order to grow a professional services company, one must be able to project the likelihood of growing within existing company where ongoing revenue is currently being realized. And why a company may continue to use a services company because they either havent the time to find a new one, or the energy to fire them, it doesnt necessarily mean they will give the next big project to said consultancy because they may actually be dissatisfied, though their continue use of the company for ongoing support may give the feeling that ‘we are ok; they havent fired us after all’;
    In reality, they may be unhappy and as I mentioned for the reasons above, just havent changed the ongoing work to someone else, but certainly is not planning on signing over any new work.

    Instead of just measuring revenue, I would counter that for KPIs to be effective, one must rationalize and relativize by looking at qualitative and quantitative measures like satisfaction points lost or gained by project over dollars (revenue), thus, quantifying the average revenue per satisfaction point gained or lost. One must use statistical analysis to get this metric accurately (Partial Least Squares modeling is a wonderful tool for this), but boy it is powerful. A) You know how satisfied a given client actually is and B) you know that if you start to lose or gain satisfaction points though retention programs or client appreciation, or inversely through lack of attention or project dissatisfaction, you start losing points, how much it means to your bottom line, and where to drive some of your business development resources.
    It takes what you stated very well to the next level of efficacy which analytics is where I believe the true value of BI starts to become realized. Thank you though for your point. I will certainly link my blog back to yours!

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    One thought on “BOTHER – Adding Value through Effective Relativization and Rationalization of KPIs

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