Let's take an in-depth look at three common ways of applying time frames and comparative values when building your key performance indicators (KPIs). Once your organization has adopted a KPI dashboard, knowing what to do next may not be obvious. A great starting point is to consider what sort of time frame paradigm you want to use when tracking your KPIs. This article will examine three important models: historic, X-to-Date, and moving/rolling metrics.
Historic business metrics or KPIs have a fixed start date and end date that uses a full data set (last year, last quarter, or last month). This metric is locked-in and must be compared to other historic metrics.
Although this type of measure might compare values from yesterday to the previous day, historic metrics typically examine monthly, quarterly, and yearly time frames. The operative word to use when describing historic business metrics is "strategic." This type of metric lends itself to longer time frames, so use this metric to spot trends and patterns that you can use to bolster your long-term business strategies. Historic metrics tend to answer fairly broad or strategic questions, such as the following: what is the state of my business based on this metric compared to last year/quarter/month?
Here’s an example of a classic historic metric for a KPI that shows the previous year’s total revenue. Note that we are dealing with definitive start/end dates that uses a complete data set.
X-to-Date measures have a fixed start date with a moving end date that uses a partial data set (this year to date, this quarter to date, or this month to date). As such, your data will be continually updated providing you with a narrative of your performance on a given metric up to the current date. This type of measure is very common, and is the traditional way of reporting sales and financial metrics.
X-to-Date metrics tend to be more tactical than historic reports. Again, this has to do with the fact that they tend to be more operational in nature because you are dealing with a current set of values. A unique aspect of X-to-Date metrics is that at the beginning of the period (for example, 2 days into a Quarter), the numbers can be very volatile, or even misleading. There is just not enough data there to be statistically relevant.
As is the case when comparing any metric, use Past X-to-Date, or Last Year X-to-Date, so that you're comparing apples to apples.
Here’s an example of a common X-to-Date metric for a KPI that tracks total revenue to date. Note that this metric provides data that tells us about our performance up to and including the current date.
Moving or rolling metrics
Moving or rolling business metrics have a fluid start and end date (the past 24hrs, or the past 7/30/60 days). The data set used for this metric is complete and grants tactical insights into the operational performance of your business. This type of business metric can be utilized by front-line workers as well as managers and executives.
Consider the scenario of a business using a rolling metric to monitor website traffic. As the state of this KPI changes, your front-line workers and managers can respond to the information tactically. When your KPI tells you that you aren’t meeting your target for number of new visitors, you can organize a response to tackle the issue. Making small adjustments on the go is the strength of this metric.
Here’s an example of a rolling metric for a KPI monitoring website traffic. Note that this metric provides data that is complete for the given time period, but will continually update each day as new data comes in.
Summary chart – reporting time frames
This summary chart will provide you a breakdown of the distinctions between the three time frames we've just discussed.
Notes on acronyms:
- Prev, Prior, Past: All seem to be the same and can be shortened to PY or PriorMTD for example
- Last: Used the same as prev, prior, and past. Can be shortened to LY or LQ for example
Developing a comprehensive and useful KPI monitoring strategy requires considering what types of business metrics you need to monitor as well what time frame paradigm you should apply. Knowing who in your organization needs what information harkens back to the old writing rule, "know your audience!" Once you know this, rolling out metrics tailor made to suit their needs – such as a historic metric showing percentage YoY of sales growth for an executive – becomes much easier and much more effective.