Our panelists included (from left to right): Kim Armor,
Managing performance in any business requires alignment between strategy and operational execution. Corporate Performance Management (CPM) is a process that helps organizations link their goals and objectives to planning, monitoring, analyzing and reporting the results internally and externally.
Key Performance Indicators, or KPIs, are an important component of CPM and can help executives and management understand how the business is performing against its goals to help drive decision making.
On April 8, 2015, The NYC CFO Leadership Council gathered a panel of experienced CFOs and industry experts, who explored the role KPIs play in various stages of a company’s growth.
Keep Them Simple: When it comes to metrics, there is such a thing as too much information. The panel recommended that high-growth, early stage companies track 3-5 KPIs at a time. Anything more will dilute the value of the information you’re presenting to your board and executive team.
When presenting to your executive team or board, one of our panelists suggested that CFOs go as far as to color code the KPIs in order to visually convey your information. For example, the KPIs of the companies she tracks are on one page, and each is given a green/yellow/red block. For those that are in the yellow and red, the executive team knows that they need to pay closer attention to those companies.
Further, make sure that your KPIs are inclusive – make sure that your leadership team and board have bought into the KPIs you’re tracking, along with the rest of your company. Take steps to communicate the value of the KPIs to your employees, and how their work affects the numbers.
Let Them Evolve: As your company evolves, so too should your KPIs. In the early stages, your board and executive team should focus on your growth drivers (Recurring Revenue will usually trump everything). Over time, you’ll open the lense to understand new KPIs (such as CAC, churn, etc.)
Stay wary of ‘hot’ KPIs – for example, LTV (Lifetime Value) for an early-stage company needs to be taken with a grain of salt as the model may not have proven itself out yet. Your board may drill down into CAC (Customer Acquisition Cost), as this number is usually presented as an average, and they’ll want to understand particular campaigns and tactics.
There are also some industries, such as the adtech industry, that evolves so quickly that KPIs that were tracked 6 months ago may no longer be relevant. Our panel encouraged attendees to stay on top of industry movements and what their peers are tracking. Further, while you may only be tracking a particular set of KPIs now, be prepared to answer to newer, more complex KPIs when asked.
And how can you possibly be prepared to do that?
Get Out Of Your Spreadsheets: The panel agreed that you cannot scale your business in Excel. While it certainly works for very early-stage companies, the amount of data that you will need to process in order to arrive at your KPIs will quickly outpace the capabilities of a spreadsheet. Luckily, according to the panel, there are SaaS vendors out there that are enabling CFOs to do their jobs better.
Further, while you’re looking at new accounting systems to grow, be open to new data that may also shed light on the health of your company. For example, our panelists cited CB Insights, VentureWire, and Mattermark as a few of the data sources that they turn to. However, they did caution that these are more ‘social’ signals of the market, so don’t rely solely on them to measure how you’re doing, and be sure to ingest your information properly.
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