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.

Relat­ed Posts:

A Pic­ture is Worth 10,000 Num­bers!

A VERY Use­ful Tool: Trail­ing 12 Months Track­ing