KPIs for CFO SuccessMaximizing Your Competitive Edge With KPIs,” where our panel of key financial executives discussed their use of KPIs to drive behavior, solve business problems and improve organizational performance.

Our speakers included:

  • Julie Andriolo, Vice President of Finance, uTest, who described her approach to KPIs from a high-growth start-up perspective;
  • Diane Basille, Vice President, Healthcare Finance, Nuance, who reviewed the implementation of KPIs from a large public company perspective;
  • Seana Droggitis, Finance Director, Philips, who commented on how she manages multiple, and sometimes competing KPIs within a complex, multi-national business; and
  • Paul Flanagan, Managing Director, Sigma Prime Ventures, who spoke on how the right KPIs can accelerate growth and development of startup organizations.

Our panel was moderated by Jay Thibodeau, Professor, Bentley University.

What We Learned

There Is No Such Thing As Standard KPIs

Controller RoundTable Boston Dec. 2013 70+ Controllers and other finance executives attended
our KPI program in December 2013.  

The first rule of KPIs is that there are no standard KPIs that apply to all businesses, anywhere. Rather, the ‘industry standard’ KPIs that you will use are entirely determined by your organizational size and industry, the type of product you sell, your ownership type, and so on.

For example, a highly regulated and multi-national organization like Philips is focused not only on operational KPIs (purchasing costs, sales effectiveness, etc.), but also on compliance-related KPIs. On the other end of the spectrum, a high-growth startup organization like uTest will be focused on growth and top line numbers (monthly recurring revenue, churn rates, customer acquisition rates, etc.)

The granularity that you dive into when working with KPIs is also directly correlated to your business initiatives, size, and type. For example, if you are a start-up Saas company, you will be heavily focused on monthly recurring revenue (MRR), and may dive into all of the components of that number (how much MRR stems from upsells to existing customers, new business, by business type or by vertical, etc.), as well as churn rates.

Meanwhile, if you’re a larger organization like Nuance or Philips, you may find yourself with a leveled series of cascading KPIs (known as the ‘tops down’ approach) that dive into detailed reporting the further down in business function.

Further, your organizational characteristics also entirely determine how often you set and reevaluate the effectiveness of your KPIs. For example, larger companies have annual KPI processes, while smaller companies would benefit from quarterly reviews.  

To Grow, Your KPIs Must Evolve

As your business grows and evolves, so too do your KPIs. For example, if you are a startup company whose sales are becoming more mature, you may be focused on selling into vertical industries, and therefore will want to evolve your KPI metric to reflect that sales shift and appropriate sales compensation goals.

The most important thing about the evolution of KPIs is that you always ensure that you are accurately tracking the metrics that matter the most to the growth of your business. For example, when coming on board to VistaPrint, Paul Flanagan took a critical look at the KPIs being tracked, and found that while there was an overwhelming number of metrics, few focused on the evolving business model, including site traffic, conversion rates, average order value, the cost of customer acquisition and so on.  Once the KPIs were reworked to match the business model, the company then had an accurate and detailed look into their operations and growth opportunities.

Paul continued “Having many KPIs is not the point – they’ll never work for rather. Rather, KPIs are the levers you pull to grow your business, and it’s important that they evolve to measure the things that matter.”

Listen To What Your KPIs Tell You

Controllers RoundTable Boston 12.13 (2) Our panel discusses the importance of telling the 
story behind the numbers 

All too often, financial executives act as ‘scorekeepers’ of their KPIs – who hit the goal, who missed, and what are the repercussions of missing the number.

However, strategic finance executives don’t just report the data. Rather, strategic CFOs and Controllers take a critical eye to the data that’s presented, and translate a story from those numbers.

For example, one panelist noticed while comparing top line revenue and churn that while the sales team was meeting their top line value KPI, the churn rate was climbing at the same time. Critical evaluation of the two KPIs uncovered that while the sales team was meeting its number, they were not booking accounts of value, and therefore the churn rate went up.  After testing the churn rate with a trial version of the product in the sales cycle, it was found that the churn rate for acquired customers went down significantly, and their average lifetime value increased.

Another panelist shared an example of using KPIs in the boardroom. While investors pushed heavily for the company to ‘step on the gas’ and drive growth, the KPIs said differently. Rather, the company is now focused on locking up its sales processes to ensure fast and scalable growth that will support aggressive goals for the company shortly.  

Paul brought the message home: “Take every KPI and measure the sensitivity to it. Finance executives can control the direction of the company, but you can’t just report on the data and be a scorekeeper. Drill down on your KPIs to show their sensitivity to each other. The person who can actually take the data and interpret it – that’s a CFO.”

Operationalizing KPIs: It’s All About The Relationships

Controllers RoundTable Boston 12.13 (3) The panelists discuss the importance of
communication and negotiation when
operationalizing new KPIs 

In regards to advice on how to operationalize new or revised KPIs, every panelist had a different perspective to bring.

  • Diane’s advice on how to successfully track KPIs: the finance and operations team (including systems and people) must work together. After all, where the data resides in larger companies varies greatly, and the finance team will find themselves spending quite a bit of time taking their data and comparing it to operations data.  It’s in everyone’s best interest to build a communicative and collaborative partnership with your business teams to drive growth through KPIs.
     
  • Seana’s advice on how to build those relationships:  First, she encourages her finance team to get up and out of their offices and meet face to face with other business units to entice and encourage those units to work collaboratively with finance. Secondly, operationalizing KPIs is all about negotiation, which first takes a clear understanding of what motivates and challenges other business units. Being able to dig into a KPI and find a common path to operationalize it is a learned skill that takes diplomacy and excellent communications skills, all of which will serve finance executives throughout their career paths.
     
  • Julie’s advice on how to communicate and report on KPIs: It’s in the finance team’s best interest to help keep the business ahead of its own curve. For example, Julie’s team publishes a weekly report that provides her sales and operations teams with a head’s up on whose contract is up for renewal that week, what’s the impact on MRR if that client is lost, and what the current churn rate is. After all, a KPI should ultimately drive a call to action, and can be done through constant communication and reporting.

And finally, the entire panel encouraged our attendees to always check with their peers, whether through networking with groups like The CFO RoundTable or others, to check in on the latest trends and uses of KPIs to help their own business grow. 

Talk Back

Have another question about KPIs that our panelists didn’t answer? Want to share your story of KPI success or struggle? Share with us in the comments today!

Photos and More Information

For more information on this or any of the upcoming events The CFO RoundTable has planned, please click here.

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