If your organization has a hierarchy then so should your metrics.

KPI Trees are a great way to connect the entire organization to the ultimate success metric while giving people at all levels a clear view of how their work connects to the ultimate success metric and to the work of other teams.

So what the heck is a KPI Tree?

A KPI Tree is a multi-level, mathematically connected view of the building blocks of the business.

I find KPI Trees are a critical way for everyone in the organization to understand how the business actually works. They provide clarity for each person to understand how the work they do drives a higher-level metric. And, conversely, they can see how something they are pushing might detract from a different metric. For example, one team might develop a service program in a retail store that requires a service counter that is fully staffed all day long. However, that dedicated use of labor might cause a Sales Per Labor Hour metrics to go sideways and ultimately negatively impact the profitable growth.

How do you build a KPI Tree?

In today’s business world, we’re drowning in data. We track nearly everything, constantly analyzing the numbers. Yet, the sheer volume of data can be so overwhelming that it often leads to a shortage of actionable insights.

All that data is worthless—or worse—if we don’t produce thoughtful analysis and carefully craft communication of our findings in ways that enable decision-makers to react to the data rather than try to analyze it themselves.

To navigate the data deluge and extract meaningful insights, I’ve found a framework that consistently produces effective analysis. It’s all about achieving F.A.M.E., baby!

We need to focus on four key attributes: Focused, Actionable, Manageable, and Enlightening.

Here, in my experience, are the keys to achieving FAME in analysis:

We have immediate access to loads of data in today’s world, but just because we can access lots of data in real time doesn’t mean we should access our data in real time. In fact, accessing and reporting on the numbers too quickly can often lead to distractions, false conclusions, premature reactions and bad decisions.

I remember a time I switched on CNN and saw — played out in all their glory on national TV — the types of issues that can occur with reporting too early on available data.

CNN reporters “monitoring video” from a local TV station saw Coast Guard vessels in the Potomac River apparently trying to keep another vessel from passing. They then monitored the Coast Guard radio and heard someone say, “You’re approaching a Coast Guard security zone. If you don’t stop your vessel, you will be fired upon. Stop your vessel immediately.” And, for my favorite part of the story, they made the decision to go on air when they heard someone say “bang, bang, bang, bang” and “we have expended 10 rounds.” They didn’t hear actual gun shots, mind you, they heard someone say “bang.” Could this be a case of someone wanting the data to say something it isn’t really saying?

Q. How are sales forecasts like baby due dates.

A. They both provide an improper illusion of precision and cause considerable consternation when they’re missed.

Our daughter was born perfectly healthy almost two weeks past her due date, but every day past that less than precisely accurate due date was considerably more frustrating for my amazing and beautiful wife. While her misery was greater than many of us endure in retail sales results meetings, we nonetheless experience more misery than necessary due to improperly specific forecast numbers creating unrealistic expectations.

I believe there’s a way to continue to provide the planning value of a sales forecast (and baby due dates) while reducing the consternation involved in the almost inevitable miss of the predictions generated today.

Most digital commerce channels are still achieving single digit conversion rates even though customer intent-to-purchase rates are 20% or higher in most cases. Customers are continuing to run into obstacles to the purchase process that need to be eliminated. The good news is that during this time of limited capital investments, retailers can use low cost means to find and eliminate as many obstacles to purchase as possible.

The first step is to get into the right mindset and remove what I feel is the biggest disconnect with the customers that many retailers have:

We’re way more comfortable and experienced with our own sites than our customers are.

We use our sites every day, and we know exactly how they’re supposed to work. However, our customers are generally nowhere near as familiar with our sites as we are.

Breaking down our metrics into these three levels takes some serious discipline. When we decide we’re only going to focus on a relatively small number of metrics, we’re doing ourselves and our businesses a big favor. But it’s really important we’re narrowing that focus on the metrics and objectives that are most driving the business forward.