Every organisation should consider measuring their actions and impacts. It’s easy to come up with ideas about what could be measured, but defining truly effective and informative metrics can be challenging. Here are the most important aspects to consider.
Good metrics can be tested in four categories. Every metric should fulfil these four prerequisites in order to produce reliable data to act on.
1. Comparative
A good metric has to be comparable to time, other equivalent groups and competitors.
2. Understood
Create metrics that are understandable. If people can't remember the details or discuss them, it means the metrics are confusing.
3. Ratio-based
Every metric should be based on a clear ratio. Think of driving a car. Distance travelled is informational but not actionable. But distance per hour is something you can act on.
4. Behavior changing
A good question to ask about every metric is "What will I do differently based on this information?". A good metric produces data that informs a company about necessary adjustments.
It’s easy to come up with metrics that first might seem adequate and well-grounded. However, most of the time the problem lies in the fact of not really knowing what is going on.
An organisation can measure the number of marketing emails sent to customers every month, but if they don’t know how many of those emails were actually read, the metric is not good. They only end up with information about the number of emails sent, but with no information about how many readers they got.
Another popular metric is to measure how many followers or friends or likes an organisation receives through social media. However, this is only a popularity contest unless you can get those followers actually do something for you. As Melonie Dodaro puts it in The American Business Journal: "It’s too common to see businesses buying their way to more Facebook and Twitter followers but what’s the use of having them if they don’t want what you have to offer?" Like in many cases, quality goes before quantity.
Every organisation has an infinite amount of different numbers to be measured and collected. However, a smart organisation concentrates on the metrics that truly bring valuable and actionable information for them. As we all know, these actionable insights are at the core of gaining a competitive advantage in today's business world. If you want to broaden your understanding of this topic, take a look at our blog series about the VUCA framework.
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