We live in a time where information is at our fingertips like never before.  The question up for debate is whether access to all of this information is a blessing or a curse. Currently, many business owners spend more time trying to determine what data to measure rather than actually analyzing and acting upon it.

Many business owners and executives are in data overwhelm, but rest assured that data tracking in the form of metrics or KPIs is an extremely effective tool and should play a major role in your business and decision making.

The first, and what I believe to be be the most important, advantage of using metrics through key performance indicators (KPIs)  is that they give you focus on the segments of the business that need it and are essential to driving bottom line results.  Tracking specific events allows you to ignore the bottom line result and spend your time and energy on the events that affect that number at the bottom of your financials.

Another important aspect of metrics is that they allow you to evaluate performance.  When chosen correctly, performance data can be tracked against goals and forecasts to evaluate the performance of the whole business, a specific business unit, and even an individual employee.  This use of metrics allows a business owner or manager to remove the subjective portion of a performance evaluation and give a critique that is purely based on results.

One last advantage to touch on is that metrics can allow a manager to look into the future.  When implemented correctly a business owner can track leading indicators.  These are the activities that ultimately end up driving the results desired by any business owner or manager.  If the metrics are telling an undesirable story then a business owner or manager will have a chance to communicate with their employees in time to correct the problem.  In essence, metrics shorten the feedback loop.

While it is clear that metrics can have a positive effect on your business, when used incorrectly they can become a nightmare.  The most disadvantageous element in tracking too many or the wrong metrics is a waste of time.  And any business owner knows that time is worth money and is something that can’t be wasted in today’s environment. 

To ensure you are getting the most out of your metrics follow these simple steps:

  • Use benchmarks to give your goals and metrics some perspective.
  • Track both financial and non-financial activity.  Non-financial KPI’s actually drive financial results.
  • View your metrics on a consistent basis.  Analysis of some metrics should be performed weekly for best results.
  • If the information received from the data is not actionable then consider reevaluating the activities or results you are tracking so the information can lead to informed decisions.




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