Are Business Metrics Obsolete? by Spencer Silk – Franklin CIO Services, LLC

By Spencer Silk
Franklin CIO Services, LLC

Metrics are used to drive improvements and help businesses focus their resources on what is important. Metrics vary be company and can vary from those that are mandatory  for legal, safety or contractual purposes  to those that track increases in efficiency, reductions in complaints, greater profits and better savings. Generally, metrics should reflect and support the various strategies for the organization, including finance, marketing, competition, standards, or customer requirements and expectations. Metrics indicate the priorities of the company and provide a visual representation of performance and goals.

Ultimately, metrics will help tell the organization:

•    Where it has been
•    Where it is heading
•    Whether something is going wrong
•    When the organization reaches its goals

Benefits
To derive the most benefit from metrics, it is important to keep them simple. If you have to spend too much time creating them it will not generate the hoped for goals. If a metric is not proving to be useful the metric should be changed. A poorly defined metric may drive exactly the opposite actions that were desired and should be modified. Employees need to understand the metric, how they can influence it and what is expected of them. For example, it is clearer to state that a metrics target is to reduce complaints down to two per month than have a 50 percent reduction per month. Good metrics will:

•    Drive the direction of the organization
•    Provide focus for an organization, department or employee
•    Help guide decisions
•    Drive desired performance
•    Change and evolve with the organization
•    Produce good internal and external public relations
    
Installing Metrics
The first step in installing metrics is to decide which measurements are really needed. To be effective metrics need to be:

•    Measurements that reflect meaningful benefits to customers, stakeholders and employees
•    Responsiveness to customer needs
•    Results driven
•    Measurements with clear linkage between:
         A.  Short-term performance and strategic objectives
         B.  Drivers and results
         C.  Functions / customers / suppliers / processes
         D.  Specific actions required and desired results

•    Measurements that are:
         A.  Limited in number
         B.  Hierarchical
         C.  Timely
         D.  Difficult to manipulate
         E.  Reflect the time state of the processes
         F.  Understood by everyone
         G.  Used to drive change

All business processes have “Drivers” that link to “Results” and driver measurements are leading indicators of Results. By improving a Driver accelerates improvement of Results. There are generally three Driver measurements. Most drive metrics deal with on time delivery (not being late), doing tasks right the first time (no rework) and cutting the time it takes to perform a task or a cycle.

Displaying the Metrics
Once a company has decided what to measure and how it will be measured there is a need to define a display or a Dashboard. Each measurement needs to have a definition of the basis for measurement and corrective action. The definition needs to include what is being measured, what calculations are made, what is the source of the data, etc. The measurements should be measured over time. Information included on a display will generally display several or all of the following types of measures:

•    Goal or desired level
•    Baseline or where the metric was at the beginning
•    Actual current level

Conclusion
Using appropriate metrics, businesses can link each measure back to a well-articulated goal that everyone understands. Continual challenging of each metric’s relevance should be encouraged as time passes to improve the value received. Businesses using metrics often better understand the value in watching trends. By monitoring in smaller periods you can better understand individual, management and organizational influences. A better use also means frequent inspecting and adapting these influences to ensure trends accelerate, decelerate and reverse in the context of an end goal that is constantly evaluated for fitness. The most appropriate use of metrics also means understanding when measures are no longer relevant, replacing them, or dropping them as progress is made towards the goal and the environment changes. Changing the value of entitlement as you get closer to the goal is a natural result of utilizing metrics, and the need to do so should not come as a surprise or considered as a negative.

So, are they obsolete—–Not if you wish to succeed.

Spencer Silk is president of Franklin CIO Services LLC -? a professional services firm that assists small and medium sized businesses with planning and updating business plans, developing and improving processes to improve performance using metrics. Silk can be reached at ssilk@franklincio.com or 248-642-3287.