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Avoid misusing agency KPIs

It’s great to have goals and objectives — both for your agency and for your team members. But many agency leaders don’t set and implement them correctly.

Chip and Gini explain how bad KPIs can be worse than no KPIs, as well as what you can do to make sure that your goals are actually reasonable.

You will find no shortage of advice on KPIs, OKRs, SMART goals, and all sorts of other trendy topics, but this episode should help you cut through some of the fluff and get to the point of what really matters.

Key takeaways

  • Chip Griffin: “It’s good to do a little bit of a reality check and to encourage folks to think about what they’re doing when they set KPIs. Understand that there is a lot of misuse, abuse, overuse, and unintended consequences from them.”
  • Gini Dietrich: “They all want the benchmarks, and that I think is a big trap. It doesn’t matter what the rest of the industry is doing.”
  • Chip Griffin: “I like numbers, but they should help to inform your decision making. They shouldn’t drive it.”
  • Gini Dietrich: “If you want to lose 50 pounds in a year, that’s five pounds a month. Break that down. What does that look like? What do you have to do to do that? And it’s the same thing with your business. Figure out what it is you want to achieve and break it down.”

The following is a computer-generated transcript. Please listen to the audio to confirm accuracy.

Chip Griffin: Hello, and welcome to another episode of the Agency Leadership Podcast. I’m Chip Griffin.

Gini Dietrich: I’m Gini Dietrich.

Chip Griffin: Gini, I wanna talk about our goals, objectives, KPIs for 2023.

Gini Dietrich: Alrighty.

Chip Griffin: Right after this.

All right, So I’m, I’m gonna get out my pen and paper here and, uh, let’s see. I, I think we need to come up with some numbers. What, I mean, how many number of listeners is a good number for a podcast? What, How many should we be looking for?

Gini Dietrich: I think like 5,000 a month downloads.

Chip Griffin: 5,000 a month? Okay. Yeah. Okay.

Gini Dietrich: That’s good. I feel like that’s good.

Chip Griffin: Do we know what it is now?

Gini Dietrich: I have no idea.

Chip Griffin: No? Oh, that’s okay. I mean, someone told me that 5,000 is good. Yeah. And so 5,000 is gonna be, that’s our, that’s our new goal. That’s what we’re gonna go for.

Gini Dietrich: Cause, but we don’t have the, we don’t have a baseline? We don’t know?

Chip Griffin: Uh, I mean baseline, who needs a baseline?

Gini Dietrich: But what if it’s 7,500 right now and we’re going for 5,000? I mean, come on.

Chip Griffin: Well, now that would be interesting now, wouldn’t it? But, but, so I was talking to someone the other day and they said that their podcast has 5,000 listeners and it’s a, it’s a bigger podcast than ours, so we should definitely…

Gini Dietrich: All right, well, fair. All right, well, let’s get to 5,000 downloads a month.

I like it. Done.

Chip Griffin: Unfortunately, while we’re being a little facetious here, that is how a lot of agencies end up setting their goals and objectives. They, they sit there and they say, what? You know, and, and we’ve talked about some of these things before, but, but you know, what’s the right revenue per employee? And so you, they sit there and they say, Well, I’ve got five employees and if it should be 200,000 per employee, then I should be a million dollar agency next year.

They don’t bother to pause and say, Well, we’re only a $250,000 agency now. Right, right. . But we’ll definitely be a million. Yes. The goal should definitely be a million, be a million dollar agency next year. So, I mean, that’s a goal. It, it, it, it is a goal. And I, I just, I think that it’s, it’s that time of year when a lot of agencies are out there working to set their own goals and objectives for 2023.

They’re working to set the KPIs. Or OKRs for their own employees. And, and I think it’s good to do a little bit of a reality check and, and to encourage folks to think about what they’re doing when they set these and understand that there is a lot of misuse, abuse, overuse, and unintended consequences from all of these things.

Gini Dietrich: There are also, and I will say this without hopefully not hurting, feelings on this, but there’s a lot, a lot, a lot, a lot of conversation about benchmarks. Can you tell me benchmarks for an agency that has 10 employees and where we should be from a revenue standpoint and a profitability standpoint, and, you know, revenue per employee and revenue per client and in profit per client.

They all want the benchmarks, and that I think is also a big trap. It doesn’t matter what the rest of the industry is doing. And like we’ve talked about over and over and over again here, it depends on the type of business that you are building. So using somebody else’s benchmarks already puts you in a, in a disfavorable position.

Chip Griffin: Well, that, and you know, to me there’s the, the question of of, so what? I mean, let’s say that you find out that the industry benchmark is $200,000 per employee. Let’s say that you’re at $110,000 in revenue per employee. So what? What are you gonna do? You’re just gonna close up shop because you’re not at 200, right?

I mean, and, and it’s not like it’s something that you can change overnight. And if you’re at 190, you’re close enough anyway that you know, you’re within the margin of error. So that, so you’re either gonna be too far away to do anything about it, or you’re already in the ballpark anyway. In which case did it really even matter.

So just stop worrying about the Joneses. Worry about yourself. And worry about improving from your baseline. And, and that’s why we use the example we did at the start of this, right?

Gini Dietrich: What is your baseline?

Chip Griffin: In order to know where you want to go, you need to know where you are today. And so you need to nail that down and you really need to make sure that you understand that data correctly.

Because a lot of times we look at, at these numbers on our P&L or we look at other things and, and we’re not calculating it the same way that, that some article told us. You know, if it says it’s 200,000 in revenue per. Cool. That sounds great. Well, what if I use mostly contractors? Right? Okay. Right now.

Now if I just divide it by employee, now my number may be 400,000 per employee , but it’s not accurate, right? And so, so now a lot of times you’ll see these articles will say, instead of per employee, they’ll say per full-time equivalent. Well, how the heck do you calculate that properly? Because if you’re using your contractors legally, you probably aren’t calculating them in percentage of employee terms.

So there’s gonna be some guesstimating. And guess what? For small agencies, if your, if your divisor is four and a half instead of four, it could make a big difference into what the average per FTE is. So, so be careful when you’re using this data. And I, I, I love data, right? Everybody knows this. I like numbers, I like looking at stuff, but it should help to inform your decision making.

It shouldn’t drive it.

Gini Dietrich: Yeah, and I think one of the other things, and I personally get, have gotten stuck in this before is we get stuck in the, Well, I have to have 50% growth next year, or I have to double my revenue next year. Or we get stuck in those kinds of things and that’s what’s driving our decisions as well. Versus, Gosh, I mean, I’d like to double my revenue next year , but I also know that we’re probably coming up on a recession and there are other global indicators that are, that are going to shape whether or not I’m able to reach those goals.

So for me to say that I’m going to double our income next year is probably not, not probably, It’s not realistic . So you have to look at those kinds of things as well.

Chip Griffin: Yeah. And it’s, you know, and part of it is looking at where you are today. And, one of the mistakes folks do make in that regard when you’re talking about revenue growth in particular, is, well, you know, the, the last two years I’ve grown by at least 50%, so, Right.

You know, I should be growing by at least that. Well, well, maybe not, because at some point, you’re going to hit some kind of a plateau. And there are various plateaus in any business as they grow. And there’s a whole bunch of different reasons for it that we’re not gonna get into here.

But it has to do with things like, you know, how you’re structured staffing-wise and the kinds of clients you have and all those kinds of things. And it’s much easier to have 50% revenue growth when you go from one client to two. Than it is to go, you know, 50% revenue growth when you’ve already been around for a decade and you know, you’ve got established customer bases and that kind of stuff. And, I think the other mistake though is just thinking, setting your goals purely in percentage terms, which is the natural instinct. If I’m gonna set a revenue goal, I want to do it in terms of 40% growth, 50% growth.

Even when you’re talking more modest numbers, like 10% growth, they’re numbers that, that are sort of pulled out of the air and aren’t really based on looking at what’s going on in your business. And whether you apply those, those percentages to your own revenue numbers, to your individual employee performance goals, there’s huge risk in that if you’re not looking at the underlying data points to, to say, is this realistic? Is this even possible?

Gini Dietrich: Yeah, that’s a really good point. One of the things that I always encourage our clients to look at are things like, okay, if you want to have 50% growth next year, great. What does that mean?

So let’s look at, are you over servicing clients right now? And if you are, how are we gonna scale that back so that clients aren’t upset when you sort of take away the work that you’ve been doing because you’ve been over servicing and you allow your employees to start to work on other things, is that possible?

And, and can we use the next year to do that? Are you profitable or are you losing money? And if we have 50% growth and you’re not making any money, we should focus on actually making money versus the top line numbers. So we may start at, okay, I want to have 50% growth. And then we start to dig into, okay, what does that really mean?

And then because of that and because we’re digging deeper and into on all the underlying, data that you, you suggest, then that’s when you start to understand that 50% growth may not be possible, but us going from 5% profit to 20% profit is.

Chip Griffin: Right. And, and I, I think in all of these things, it’s important to, to break big goals down into small items so that you understand what it takes to get there. So in, in your particular case, it, you’re talking about growing by 50%. Really map that out month by month. Yes. The next year. Yes. What does, and, and it’s, you know, whether you say 50% or you want to get to a 2 million revenue number, these are very popular things for agency owners to set as objectives.

Okay. Break it down. How many new accounts do I need to close and when do they close? Because one of the mistakes I often see is, you know, well we’re, you know, we’re only 200,000 away from hitting this new revenue target that we wanna get to. Let’s say it’s 2 million. I’m at 1.8, I wanna get to, to 2 million is that’s just, it’s just 200,000 that, you know, we, we can do that.

That’s just two accounts at a hundred thousand valuation, right. Excellent. As long as you close them all on January 1st.

Gini Dietrich: In January, right. Yes.

Chip Griffin: Otherwise, that’s not what it looks like because you don’t get all of the revenue at once. If that, if that hundred thousand dollar client is in a $7,500 a month account, well guess what?

If you don’t sign them up until June, you’re only getting about 50K out of them. Yeah. So, I like people to, to take a spreadsheet and work those things out .And Oh, by the way, in that particular example, I just need to get 200,000. So a hundred thousand from two clients, you’ve now assumed a hundred percent retention of all your existing clients.

Most agencies do not have 100% client retention. So you need to factor in who am I going to lose? And you don’t necessarily need to know specifically which one because it’s very difficult to predict exactly which clients are gonna go away when, but you need to factor in some degree of attrition, whether that’s by applying a percentage or just picking a representative client and say, Okay, I assume we’re gonna lose them in March and we’ll lose another one in September.

Or what, I mean, something that’s based on your track record so that you can look at these numbers and say, Oh, that number, that number is not achievable, not reasonably. Right, right, right. Like magic would have to happen for me to get from here to there. On the other hand, sometimes you do it and you, and you’ve tested your assumption and it turns out your goal’s not ambitious enough.

Because it’s, It’s a layup to get there once you break it down into the component parts.

Gini Dietrich: Yeah, absolutely. I think that’s the case for anything. I mean, honestly and truly, I think just as human beings, we all go into the last quarter of the year and we do this personally and professionally, and we say, Okay, great.

January 1st is a new year and we’re going to kick butt and here are our goals. I’m gonna lose 50 pounds and I’m gonna exercise every day. I’m, I’m going to eat fruits and veggies every day, and I’m gonna have 50% growth in my business. And none of those things happen because they’re not broken down into smaller, achievable goals.

Instead, we have this – and, and we all do it. All of us, we have this great vision of grandeur, of like, Okay, January 1st, all right, that’s my date. We’re gonna do it. And it, I always joke, I’m always like, Please let me get to February 15th so the gym clears out. Please let me get to February 15th so the gym clears out. Because everybody is there until February 15th, and then the gym clears out. So you, you just have to be realistic and understand that human nature is to say, Oh my gosh, we’re gonna do this and this and this and this, and I’m so excited and I just had a couple weeks off at the holidays and I’m rested and I’m ready to go.

And because we haven’t broken those goals down into smaller bite size chunks, we don’t achieve them.

Chip Griffin: And, and also by the way, there’s no particular magic to January 1st, for professional goals. Personal goals. Business goals. Right. Right. I mean, if you’ve got a good idea in September, you don’t have to necessarily say, I’m gonna wait until January 1st.

This is gonna be part of my 2023 plan. If it’s a really good idea, why are you waiting three months? Right. Take action now. At the same time, you know, if it’s something like the gym, that may be a good one just to hold back until March anyway. So you don’t have to deal with…

Gini Dietrich: Right. Everybody at the gym,

Chip Griffin: All of the nitwits pretending they actually want to do this.

Gini Dietrich: Correct. Yep.

Chip Griffin: I mean, it’s an idea. I think that the other reason though why personal goals, employee goals and others fail is because we, we only think in terms of what are the new things we’re going to do. You can’t commit to a new thing without agreeing on what it is you’re going to stop doing.

Gini Dietrich: That’s a really great point.

Chip Griffin: Because none of us have the ability to put more time in the day, more days in the week. Yep. It just doesn’t happen. Yep. And so if I’m sitting with an employee and I’m saying to them, you know, I want you to get more involved in business development. That’s a very common thing that agency owners will say to employees, particularly as they’re moving up in the ranks.

Yep. That’s fantastic. What would you like them to do less of? Right? They can’t become more involved in business development unless they’re doing less of something else. And so if you’re, if you’re sitting down with them at their annual review and saying that, you know, one of your KPIs for next year or one of your goals for next year is going to be, to get more involved in business development, you have to be honest and say, and as a result, I expect that you’ll spend less time on this. That less time maybe because change someone’s responsibility.

It could be potentially because they’ve become more efficient at doing something. But be careful at overestimating that because we often overestimate how efficient someone can become. Oh, well you’ve been doing this for a year, you should be able to do it a lot faster.

Gini Dietrich: Or we base it on what we can do, Which is also unfair.

Chip Griffin: Yeah, exactly.

And so, So whether it’s, you know, your personal, I mean, if you say it, I’m gonna go to the gym for an hour a day. Excellent. What are you going to do less of? It’s a trade off. Yep. And so you need to be thinking about those things when you’re dealing with people and how they’re spending their time and the objectives that you’re giving them, because otherwise you set yourself, you set them up for failure because you can’t just magically create more time in the day.

Gini Dietrich: Yeah, absolutely. As much as I would very much like to create more time in the day, just can’t do it.

Chip Griffin: Right. I think the other thing when it comes to employee KPIs is there’s become this fascination with, with making everything quantitative and, and I get. Right. We, you know, and we’ve got the whole smart trend, you know, where, where you’re supposed to make sure that your objectives are measurable and, and yes, I, I understand that because otherwise you end up with just completely soft things.

Like I, you know, I, I want you to write better. Okay? What the heck is that?

Gini Dietrich: Right. Oh, okay. Me too. How?

Chip Griffin: How? So I understand the objection to very fuzzy objectives. At the same time, if you start getting hyper specific with them, you do a couple of things. First of all, a lot of times you’re just making numbers up out of the blue because you may have no idea what a reasonable number for a target is, and so you just sit there and say, I mean, and this is true not just for employee targets.

This is true if you’re working with clients and they want, you know, how many, how many more likes do we want to get next year? Well, we haven’t been running a campaign, so we have no idea. We, we really just don’t know what kind of engagement rate you’re going to be getting. And so it’s just, it’s a wag and, and we can do a wag based on maybe what we’ve done with other clients, but no two clients are exactly the same.

So be careful when you’re setting these numbers up, because A, they’re made up oftentimes, but B, you then often create a scenario where the team, the individual, is focused on just hitting those numbers. And that can have all sorts of horrible, unintended consequences because if you say to somebody, you know, I need you to be making sure that you are getting, I dunno, three client mentions in the media each week.

They’re probably gonna make sure they get three client mentions in the media each week. They may be low quality, they may cut corners. They, I mean, all sorts of things can happen just so they hit that number. And the more, the more that you center your management style around these numbers, the more likely you are to have these unintended consequences.

So I personally don’t like putting a lot of quantitative things into your goals and objectives, even though I like numbers. I think that unless you have something that’s clear cut and you’ve got a long track record and you can say, Yes, absolutely, You know, we’ve got three years of data here. We know this is what you typically do, and so we know that this is an achievable thing based on these other things that you’ll be doing.

I would rather you didn’t put it in there at all. And even in those cases where you can prove it, remember that’s the activity that you’re likely to actually get. And it doesn’t matter if something comes up along the way where perhaps instead of media hits, they should be focused on something else. They may not, because if they think that you’re gonna be tying the bonus to them hitting these KPIs…

Gini Dietrich: Right, right, right.

Chip Griffin: They’re likely to defer to that.

Gini Dietrich: Yeah. We have a client who’s very specific on, on employee KPIs and every, every quarter they have to write new ones for themselves. And every quarter I’m like, You guys like… this is insane. But it is like we’re going to generate X amount in in revenue ourselves, by me as an individual and I’m going to hit this many media hits and this many website visitors. And I mean, it’s that specific. And every quarter I just shake my head because it’s that kind of level of insanity. Insane.

Chip Griffin: Well, and the other thing is, you know, small agencies in particular, and that’s who we’re talking with, are… they tend to have to adapt a lot.

Yep. And frequently. And it’s frankly, one of the selling points that small agencies have to clients is that you can be nimble and adaptable. And so that means that that setting a goal 14 months out, right? Because if you’re gonna set a reasonable goal for 2023, October/November’s the time to do it. So, so you have to to peer into the crystal ball and know what things should be like at the end of 2023.

How many variables are there to that? And so you have to be very, I mean, even setting things like a budget, I’ve been in larger organizations – you know, not, not Fortune 500 type ones, but large enough that you can actually set reasonable budgets and try to stick to them. There’s still typically at least one or two reforecasts throughout the year.

Yes. Because stuff changes. Do you do that with your employee goals? Not usually. Most times when you set goals for your employees, they don’t get revisited until the next performance review. Now, that’s not, that’s not how I would encourage you to do it. No, but that’s typically how it’s done.

You sit down. You do the process near the end of the year, you button it all up, and guess what? Almost nobody’s looking at that document, except perhaps the employee if they think their bonus is gonna be tied to it. Otherwise, nobody’s really paying attention to that document until next November, December, when you’re doing a bonus calculation.

That’s not how to manage. And it doesn’t matter how fancy an acronym someone comes up with or how many books or articles they write, you know, KPIs, smart objectives, OKRs, all, I mean, it just, there are so many of these things out there and you just need to be really careful about how you’re thinking about them and using them to make sure that you’re A, using them for the right reasons, and B, that you are using them in the right way.

Right, because otherwise you’re actually better off without objectives and there are plenty of great businesses out there that don’t spend a whole lot of time on building out, you know, highly measurable, very specific objectives. Doesn’t mean you shouldn’t do them, it just means that that’s not really the decisive factor for most organizations on their success or failure.

Gini Dietrich: Yeah, absolutely. And it’s just like with your personal stuff too. If you wanna lose 50 pounds next year, awesome. How do you break that down? And you don’t have to write it out in some big spreadsheet, or maybe you, you could put it on, write it on a post-it note on, put it on your bathroom mirror or something like that.

But it doesn’t have to be fancy. If you wanna lose 50 pounds in a year, that’s five pounds a month. Let’s take that, let’s break that down. What does that look like? What do you have to do to do that? And it’s the same thing with your business. Like figure out what it is you want to achieve and break it down.

It does not have to be fancy. I laughed when you said the employee goals never get looked at again. It’s the same thing with your own, your own plan and your, and clients’ plans too. You create these beautiful plans and then they go in a drawer and nobody looks at them again. So be really specific.

I’ve actually become, in the last couple of years a really big fan of quarterly forecasting. And saying, Okay, here’s what we did in this quarter. Here’s based on that, here’s what we think we can do and let’s, let’s write, jot down three things we think we can achieve. We know we have to, we know we’re gonna have a product launch we, or an online course launch.

We know we have to do this and we know we have to do this, so let’s write, develop some goals around that and go for it. And then we revisit it in every single staff meeting. We revisit it every month and then we reforecast every quarter. Big fan of doing that right now.

Chip Griffin: Yeah, I think you, I mean, at a minimum, you need to be reviewing these things on a quarterly basis, whether you, you know, actually forecast or not.

I’m sort of ambivalent, but do review it. Do discuss it. Do figure out what your next steps are. And, also, by the way, if there’s some big event that takes place, you lose your biggest client, you gain a giant client, you have an important staff departure. These are also all indicators that you need to revisit some of these key plans.

Your assumptions from before probably don’t fit right. If you lose your biggest client, you should now no longer have the team focused on getting you to the, the next revenue goal. But instead, you know, how do we fix this hole? Right? Right. And I, and I don’t like managing around holes in revenue, but the reality is, if you’ve got a giant hole in your revenue that you didn’t expect, you gotta deal with it somehow.

And you can’t turn back the clock to fix it. So what are you gonna do in the moment? And that probably means a lot of people are gonna have to shift their roles in order to, to get done what needs to be done in order to, to get back to where you were.

Gini Dietrich: For sure. For sure. Yeah. I don’t… I agree with you that there are lots success, successful businesses who don’t plan and don’t have goals.

I do think you should have some sort of guiding light or North Star. And even if it’s like for me next year, I probably shouldn’t say this out loud, but now that I say it out loud, I will actually do it. I want to do a second edition of Spin Sucks. You know, is it gonna take me all year? Probably. But now I know I have to do a chapter every month and it has like boom, boom, boom, boom, boom, boom, right?

And so have some sort of guiding light that will get you where you wanna go, even if it’s not super sophisticated and well written out. And, you know, on a, a whiteboard behind you as you work every day.

Chip Griffin: Right. And, and I would also say that fewer is better, right?

Gini Dietrich: Yes. 100%. Yes.

Chip Griffin: You know? Yes. And, so, you’ll think about what is the main thing that you want to work on as a business?

What’s the main thing you want to work on as an owner? What’s the main thing you want each team member to work on? You’re much more likely to achieve those than if you give them a laundry list of things, or even if you give them three or four things. Right. If I give you three or four things and, and people are like, well, you know, we, we try to limit ourselves to, to three smart objectives.

Well, that sounds great. Right? But that’s three things, right? And it kind of depends on what those three things are, how achievable they really are. Right, Right. I mean, you know, if I were to say, okay, you know, the goal for the year is to, to double revenue, triple profit margin and I don’t know, something else.

And, and, you know, hold head count the same, I don’t know – ridiculous objectives. Right. It becomes a whole lot harder because they all work with each other. Yes. And, and so that can be a problem. I mean if I say, Okay, you know, I want to get more rest, but I also want to lose 50 pounds . That’s going to be hard to do both of them.

Gini Dietrich: That will be hard to do, yes.

Chip Griffin: Right? Yes. And, some of those things go back to, to thinking about where you are today, right? Some things are harder and easier based on where you are today. If you are 500 pounds, losing 50 pounds next year is gonna be a lot easier than if you’re 200 pounds.

Gini Dietrich: That’s correct.

Chip Griffin: Right? And, so you have to weigh those things. No pun intended. It came to mind, and then I just… probably telling us that we should, you know, wrap this up.

Gini Dietrich: Yeah. It’s probably time.

Chip Griffin: But think about all of those things as you’re, as you’re doing your year ahead planning. By all means, do it. By all means, focus on some goals and objectives, but don’t get too wound up in the latest trends. Don’t get too wound up in, You’ve gotta, you know, make everything quantitative. Don’t just grab things out of the air without testing them and figuring out what it actually takes to get there. And, and all of those things hopefully will set you up for more success in 2023. And we wish you luck.

Gini Dietrich: Yes. And let us know if we can help. And say, no, break this down further or that’s not a great goal, or whatever happens to be. We are here for you to help.

Chip Griffin: And of course there’s always the Spin Sucks community. You can join in there and share some of your objectives and get feedback from the whole community.

Gini Dietrich: Yes, you can.

Chip Griffin: On that note, we will draw this episode of the Agency Leadership podcast to a close. I’m Chip Griffin.

Gini Dietrich: I’m Gini Dietrich,

Chip Griffin: and it depends.

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The Hosts

Chip Griffin is the founder of the Small Agency Growth Alliance (SAGA) where he helps PR & marketing agency owners build the businesses that they want to own. He brings more than two decades of experience as an agency executive and entrepreneur to share the wisdom of his success and lessons of his failures. Follow him on Twitter at @ChipGriffin.


Gini Dietrich is the founder and CEO of Arment Dietrich, an integrated marketing communications firm. She is the author of Spin Sucks, the lead blogger at Spin Sucks, and the host of Spin Sucks the podcast. She also is co-author of Marketing in the Round and co-host of Inside PR. Follow her on Twitter at @GiniDietrich.

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