This article was written by Alka Tandan, CFO, Gainsight, and originally published in CFO.
In the digital economy, businesses are finding new paths to success. That means the metrics used to measure and steer performance need to change, too—but many companies are still wedded to old-school key performance indicators (KPIs) that don’t fully reflect the needs of today’s organizations.
Metrics such as projected earnings and customer churn remain important for any business. But in our transforming world, driving success doesn’t just depend on tracking financial performance. It requires a more holistic approach, with data used to strategically empower employees, drive enduring customer success, and optimize lifetime revenues from each customer relationship.
That means looking beyond financial metrics and tracking performance strategically across the organization as a whole to surface actionable insights. How are the customer lifetime value (CLV), employee experience, and EBITDA connected for your business, for instance, and how might changes in one area help unlock new opportunities in another?
Emerging KPIs have the power to drive success for employees, customers, and investors, but only if we creatively operationalize them across our organizations. As financial leaders, we need to look beyond simply tracking metrics and amassing data—we need to lean in, and turn our KPIs into true strategic assets. Here are four ways to get started.
1. Find Your North Star
In the digital era, there’s no shortage of data. The trick is figuring out which metrics truly matter to your business, then using those “North Star” metrics effectively to drive your company forward.
Many software companies, for instance, are moving away from tracking churn using their Gross Renewal Rate (GRR) and focusing instead on their Net Retention Rate (NRR). The difference is simple but profound: Where GRR measures attrition, NRR considers the potential for cross-selling to existing customers. As a much-cited Bain & Company report found, that’s a great way to maximize value over time—not least because it’s so much more efficient to cultivate existing customers than to acquire new ones.
Wherever your North Star lies, it’s important to ensure you’re tracking forward-looking indicators. Lagging metrics are seductive because they’re easy to interpret, but they’ll only ever provide 20-20 hindsight. To drive growth, you need predictive, future-oriented metrics that enable your team to spot problems, identify opportunities, and chart a path forward.
2. Keep Digging Deeper
After identifying your North Star metrics, it’s time to look under the hood. At Gainsight, we pay close attention to NRR, but we also hold weekly meetings in which we dig into customer health scores, including adoption rates, engagement scores, net promoter scores, and related metrics. That reveals not just churn, but also downscaling risks (such as reduced usage in specific areas) that might not be apparent in topline NRR data.
We also make a point of reviewing our metrics on a rolling basis to ensure we’re still using the right KPIs for our evolving business. Often, North Star metrics remain unchanged, but underlying metrics are reconsidered or targets are revised to reflect new strategic goals.
Your employees should understand how their compensation relates to their team’s KPIs, with clear incentives for employees to drive improvements and uncover growth opportunities.
It’s also vital to look outward and set targets with reference to both competitors and best-in-class companies in order to define clear goals for growth. It helps to track efforts to standardize metrics in your industry, too, so you can fine-tune metrics and create more meaningful comparisons.
3. Create a Culture of Ownership
Turning data into action depends on building a culture of ownership. That starts at the top, with the processes your leadership team builds around your KPIs. Consider using weekly business reviews in which executives and others from across the organization gather to share progress around their assigned KPIs. I’ve found this process helps ensure both accountability and collective buy-in: Everyone commits to their piece of the puzzle, and we collaboratively problem-solve if one team’s KPIs start to drift.
The next step is to ensure that planning around KPIs cascades down to the operational level. It’s important to communicate North Star metrics across the company. For example, every employee could get a customized one-page strategic plan. That way, every team member understands how KPIs impact their work and how their work drives KPIs.
Building and sustaining a KPI-driven business culture requires carrots as well as sticks. Your employees should understand how their compensation relates to their team’s KPIs, with clear incentives for employees to drive improvements and uncover growth opportunities.
4. Keep Everyone Connected
Performance data shouldn’t be sequestered in financial spreadsheets. Data is only useful when it translates into intelligent action, so as CFOs, our role is to create conduits that allow data to flow from frontline teams to analysts to executives and decision-makers, and back again in order to provide visibility, accountability, and guidance every step of the way.
It’s my job to help everyone in the organization to align around those strategic goals and use their own KPIs to work smarter and get the job done.
All financial leaders create reports that get passed upward, helping executives, directors, and investors to gauge performance. But it’s important to close the loop and push KPI-driven insights back out to middle managers and frontline workers too. When I present data to the Gainsight board, I’m getting a ringside seat as strategies are decided and fine-tuned. It’s my job to help everyone in the organization to align around those strategic goals and use their own KPIs to work smarter and get the job done.
To streamline that process, we use data dashboards to keep directors and other key stakeholders in the loop and to give decision-makers across the company real-time access to the metrics they need. We also listen to our investors: The insights they get from their portfolio companies—which have KPIs of their own, of course—can help us to spot trends early, overcome blind spots, and stay ahead in today’s volatile environment.
Get Strategic About KPIs
As financial leaders, we have a mandate to manage the KPIs to help our companies succeed. But we also have a mandate to ensure those metrics are used strategically at every level of our organization, from the boardroom to the frontline.
As we align our businesses around emerging KPIs, it’s important to ensure we’re tracking the right metrics. But it’s also crucial that we bring our entire team, from board members and executives to sales agents and customer success managers, along for the ride and leverage each stakeholder’s insights to elevate our use of these new KPIs.
Emerging KPIs are powerful tools for modern businesses. But success will only come if we demystify those metrics, and use them to spark organization-wide conversations that unlock new insights and opportunities for growth. If they’re left on a spreadsheet, numbers are just numbers—it’s by operationalizing them across our organizations that we can turn new KPIs into true strategic assets.
Learn More
To learn more CFO secrets, check out The Essential Guide to Budgeting for Customer Success and Durable Growth.
