One of the main reasons why organizations fail to realize the full potential of their investment in IT teams is misalignment between technical and business objectives. Engineering needs to know explicitly how their work fits in with the business’ broader goals and how they can judge whether what their work has an impact or not. To that end, organizations should identify and track the right key performance indicators (KPIs) that can be leveraged across the entire company. It goes without saying that these KPIs should align with business goals, not just that of a particular team.
What’s a KPI and why is it important?
A KPI demonstrates and helps you evaluate how well your organization is meeting stated business objectives. They should be:
- Crucial to achieving your goal
- Relevant to your business
KPIs help focus efforts on the goals relevant to your business and help you determine in a quantifiable way whether you are meeting those goals.
How to Design KPIs to Align Business and Engineering
The sky’s the limit s to developing KPIs, but selecting the wrong ones could result in measuring things that don’t align with your business’ overall goals. How, then, do you choose KPIs that are appropriate for your organization and help you align engineering and business teams?
There are a myriad of ways to answer this question, but the best way to identify what you need to track is to research your organization and learn how existing KPIs can be modified to shine a light on what your teams are doing. You probably already know a fair amount about your industry, so the next steps are to identify relevant KPIs that already exist and rethink them so that they are useful for engineering but geared toward meeting business goals. For example, if you’re tracking revenue, perhaps you might track digital revenue after you’ve made a site change (you can think of this as a modified version of A/B testing).
Old vs. New KPIs
The following covers a few common KPIs and how you can apply them so that engineering can balance the need to measure the impact of their contributions in both the technical and business areas. What this means is that the teams should be able to identify the specific technical impact (e.g. “we increased click-throughs by 10%), as well as the business impact (e.g. “We increased click-throughs by 10%, which then increased sales by $25,000”). Generally speaking, you’ll want to take a step past a given engineering metric and identify what you want that function to do and how it should help your business. This helps in the identification of the KPIs on which you’d focus.
To demonstrate this, we will show you three common KPIs and how they can be modified to be more holistic and facilitate alignment between business and engineering.
Time to First Byte (TTFB) instead of Uptime
Uptime measures the amount of time a given server is operational, whereas TTFB measures how long it takes a user to receive the first byte of data from the time they navigate to a site. While both are measures of how well your site performs, TTFB directly measures the user’s experience.
Given how crucial performance is to customer satisfaction and sales, this metric gives engineering both information on current performance, as well as a goal toward which they can strive. It also has the illuminating how engineering impacts the customers and therefore the organization’s bottom line. Per Kissmetrics, loading time (of which TTFB is one possible measure) is a major factor in whether a viewer abandons a page of not, so poor TTFB values directly lowers revenue–you can’t make money from visitors who are no longer on your site!
Application Performance/Availability instead of Server Performance
Server performance is a component of application performance and availability, but measuring the latter includes all factors that might influence a customer’s experience directly, his or her action indirectly and, ultimately, the company’s bottom line. You might not eschew specifics such as server performance or response time entirely, but by taking a step back and shining a light on an overall process, your engineering teams can get a picture of how all parts of your site and infrastructure work together. Your customers don’t typically perform actions in a void, so it’s helpful for you to measure performance regarding whole processes.
Conversion Rates instead of Total Page Views
Rather than tracking the number of visits to your page, you might follow the number of people that convert (buy an item, provide their email address, etc.). Measuring page views is a good start, and obviously, a low number in this area is problematic, but high traffic but low conversions are problematic. Conversion rates, combined with bounce rates, let you know where there are problematic areas on your site. Perhaps your search is too slow, or there’s a shopping cart-related error. Maybe a key call-to-action features (such as a banner) isn’t leading customers to where you want. Use this opportunity to identify ways that IT can improve the customer’s overall experience so that these visits turn into purchases, sign-ups, and so on.
To maximize the full potential of your IT team, you should ensure that your IT team’s goals are in alignment with those of your overall business. The two need to work together to facilitate overall organization growth, and one way to make sure this happens is to implement KPIs allowing you to track the progress achieved toward your company’s mission.
Rather than utilizing technology-specific or business-specific metrics, we recommend that you combine the two when creating and implementing the KPIs that drive your day-to-day tasks. Instead of focusing on microtasks, your KPIs should take a holistic approach and focus on the larger systems that your clients face.
Once you’ve identified your KPIs, it’s important that you gather the data so that you can see if you’ve made progress.