The CFOs At A 160yearold Retailer And An Emerging Technology Company Talk About Their Approaches To Modern KPIs
good morning,
KPIs, or key performance indicators, measure how well a company is achieving its key business objectives. Today, all companies – whether they are almost 100 years old or just developing – are guided by KPIs that reflect modern technology.
According to Michael Schrage, a researcher at MIT's Sloan School Digital Economy Initiative, organizations looking to harness new data, new technologies and new algorithms need to rethink old KPIs. On Wednesday, during the Fortune Emerging CFO event at Workday, Schrage shared some feedback with Harmeet Singh, executive vice president and chief financial officer of Levi Strauss & Co. and Alka Tandan, Gainsight, Inc. Its CFO shares his thoughts as a CFO.
"One of the classic KPI papers is Norton and Kaplan's break-even point," says Schrage. They published it in 1992. Basically, I think what they did 30 years ago was wonderful and right. The reality is that digital transformation is changing tools, measurement and the economics of measurement. Some legacy KPIs, sales and profit concepts, yes, we keep. But the way people in the finance community, the marketing community, the HR community communicate and collaborate with these KPIs needs to change dramatically. Some of the new KPIs identified by Schrage include employee experience, customer experience and customer lifetime value. They found that KPI innovation led to all kinds of conversations and arguments between CFOs and their peers.
"This is an important and critical position for Levi Strauss & Company," Singh said. “Almost 160 years have passed. We have an old system. We have a traditional approach. But the company, which is primarily a wholesaler, is now focusing on expanding its consumer-facing business, Singh said. “We have 3,000 stores and we add about a hundred every year. And how do we go direct to consumers? In terms of KPIs, we also use technology. Singh continues: “Our KPIs evolve when we think about understanding our stakeholders. , our employees, our shareholders and our customers. Usually revenue, profit and cash flow. That was it, and now we move on to the other key metrics - what matters is customer lifetime and CSAT [customer satisfaction] scores.
"We started in 2013," Gainsight Inc. Says, a technology company that provides software platforms for customer success “We can be considered as a growing company. So we definitely support a growing group of KPIs. We have ideas of success for everyone. We see the success of our employees. We look at client success, then we look at investor success. We work for the success of our clients. So there are many of us.” Over time, we will also develop these key performance indicators for the industry.
Schrag asked Bund to share his company's data-driven findings about what it means for customer-centric success, which traditional marketing or sales professionals still don't understand.
“Traditionally, GRR—Ground Retention Rate—has been used as a key measure of customer success,” says Tandan. "But that's changing, especially in this economic climate. Now our guiding star is pure retention rate. It's really looking at customers, not just who stays, but who grows." Look at your existing customer base and grow it accordingly. I think CFOs and any investors will appreciate that."
Some companies are starting to create a community environment to discuss KPIs. "I've seen a number of organizations create channels and communities on Slack so people can discuss results," says Schrage. "That would be an advantage. For example, the number is lower because of X, or there's a real possibility that we're behind here."
He continued, “One of the issues is how many KPIs are there and how generic are they, or are they company-wide KPIs? It's not about leadership, it's about people. How do you want people to line up? They need to know what their goals are and listen to the conversations around them. This is why I think KPIs are organizational principles that really appeal to people, not just leaders.
See you again.
Cheryl Estrada
sheryl.estrada@fortune.com
This story originally appeared on Fortune.com
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