— By Vasiliy Ivanov, CEO of KeepSolid.
After 4 years of the company’s operations, our revenues began to plummet. At the same time, according to all the KPIs, no catastrophe was to be foreseen, only small seasonal fluctuations falling on the summer.
Once again, I did not invent anything new, but I was lucky enough to apply the administrative techniques correctly. It is all about the key performance indicators of the company and the interpretation of these indicators with different meanings.
Have you asked yourself these questions:
- What are KPIs really about?
- Why do I need KPIs?
- What KPIs do I need?
Populism
The fact is that key indicators have become a popular term nowadays. But this term is taught by trendy business coaches, whose results in business we have never seen. You know, there are common key indicators, for example, income per month, the number of new customers per day, or the average lifetime of the client. But such indicators would occur even to a student who has set up his own startup! So why then, like thousands of other businesses, we got caught up in an unpleasant and unexpected situation?
I can draw an analogy of this situation from the experience of my mountain ascents – when you stand on top above the clouds, you see only beautiful horizons and other peaks towering above the clouds. What happens at this moment below, under the clouds? Is it rainy or sunny there? You do not know the answer to this question until you come down.
In a company, such a descent from the top can come in the form of the leader’s temporary abandonment of strategic tasks, him visiting all departments and daily communicating with employees. But what to do when you do not have enough time to talk with even the key employees during the week?
Recently, I’ve written about the red flags which allowed W. Churchill to correctly assess the situation during the World War II. He realized that his subordinate generals would not always report the real state of affairs at the front, so he created an intelligence department that subordinated only to him.
So, what should actually be considered as KPIs?
From my operational level I watched the growth in sales, the increase in new customers, and other complex indicators. Every morning I would look at them, feel glad that everything is fine with the current product, and head for new promising developments. But one day, four years into the company’s life and a month or two after dismissing some of the key executives, the statics went down dramatically. I even thought that I made a colossal mistake and did not see their true potential. We began to puzzle out the figures from which the complex indicators are composed. We studied the history of changes in those indicators and found out very unpleasant details. In a manner of speaking, I felt raped by people I trusted. More narrowly focused indicators told us that we had been diving down for a year and it was not visible from above because of the speed that the product gained.
It turned out that we were in a situation where nobody in the company managed and controlled the engineers, although I believed that we had a worthy leader. Additionally, the salespeople confirmed the global statistics of being the least engaged unit. The departments that worked closely with these two subdivisions, often could not get clear information about the timing, quality, and other figures. In the Mac App Store, the application dropped to the 2.5 rating altogether, sales took a nose-dive. As a result, having constructed a chronology of increase and decrease in customers, we got the following chart:
Was that a result of my mistakes? Certainly! I unconsciously replaced the key performance indicators with the trust to the top managers. And under the trust I hid the reluctance to understand the inner workings of particular departments and the work of their leaders.
How we dealt with that
Having analyzed the aforementioned figures and user complaints, we conducted additional customer surveys. Next, I “announced the state of danger” for those activities that did not fulfill the required functions, and took the power over certain departments in my own hands for a while. I established the weekly schedule for product updates and set strict requirements for the content of these updates. After the release of each update, I measured changes in the user rating of the product.
In addition, I personally tested a number of our technical specialists and had to admit the sad fact – after several years, technical experts had not grown in their knowledge. They’d received a lot of information, but not knowledge. Many of them did not even have a full understanding of the architecture of the product they were working on. Consequently, we immediately began to develop the training of the specialists. As a technical leader, I gathered literature that allowed to raise the level of specialists in a few months and prepare them for the next cycle of training. For example, programmers were missing knowledge in software design, UML, design patterns, and C++ (because all our products are cross-platform and we need a single product core for these platforms).
It took us only four weeks (iterations) to return the product to the 4 rating and restore the previous sales level.
Next, we have to go through the correct steps to consolidate the lessons learned from this sad experience. We plan to keep the current pace of development in the area where the order is restored and improve the directions that are still not working optimally.
That is why I consider it important for each leader to independently think of the key performance indicators specific to his company.