A common subject that comes up when facilitating strategic planning is the metrics that a business should measure regularly. What’s the right number of metrics to have? How often should you measure them? Am I measuring a certain metric correctly? How can I best set my business up for success?
When arriving at the right answer for you, here’s a few things to consider:
1. The value of metrics.
A great metric is one that sets a point where either corrective action is taken, or no action is taken. Therefore, that attention is directed somewhere else. Focusing your resources in the right areas is essential to running a business effectively.
2. The correct number of metrics is the number you can act on.
There is no answer as to how many metrics a business should have. Every business is in a different level of development, has different needs and has different priorities.
In my experience, some companies err on the side of measuring too much. Inevitably they spend too much time measuring and reviewing their metrics. As a result, they are left with little time to take the necessary actions to correct the trajectory of what’s being reviewed. Or they have too many targets and they are spread too thin to take action on any of them.
The main point is to make sure that every single metric elicits corrective actions when they aren’t on target. If a metric isn’t being acted upon or takes too much time to measure, reconsider its purpose.
3. Once in a while, trust your gut.
There’s a common belief that every metric must be an objective measure. This is true in most cases, but not in every case.
Here’s an example:
A while back, I was working with a very small company that wanted to measure customer satisfaction. Their inclination was to use a net promoter score type system. However, there was a lot of work required to generate that process, and there were low response rates and long response times to customer issues. The metric turned out to not be worth the effort in their stage of development.
Instead, on a weekly basis we elected to review key accounts and assign each account a green or red score. The red accounts were acted upon that day. These “subjective” measurements are incredibly simple to measure and to act upon. That’s the perfect metric for creating great change in a business. They also force staff to take an intuitive look at the business versus merely a mechanical one. In addition, subjective targets can cause disagreements on whether or not to take action. What a great way to engender groupthink and consensus!
4. You can add or remove metrics throughout the year.
The great thing about being in an innovation-focused business is that new ideas come up, and past ideas are no longer pursued. That’s perfectly OK. I always encourage my clients to only focus on the metrics that will get them to the next level of their business growth.
5. Every metric should relate back to the customer.
Create and review metrics that directly or indirectly drive the growth of your customers. If your targets don’t relate to the customer, then your efforts with measuring the targets won’t help them and, ultimately, won’t help your business.
6. Assessing the value of your metrics.
After you measure your targets, scrutinize them for the value they bring. Make sure to take into consideration the cost of your metrics including the time spent measuring, equipment needed, plus the time spent explaining to staff what they mean or what they say. Is this time worth not spending it with the customer? Finding the balance between too many and too few metrics is a journey that leads to success.
I challenge you to reassess your metrics going into the year. Is there anything you can add, edit or remove? How can you use your metrics to make this upcoming year the most transformative for your business? What actions could you take off each target that would lead you to the next stage of growth?