How to Select Business Metrics for Valuable Performance Measurement
In your quest for improved analytics and greater visibility, the first step is to ensure your data is accurate and accessible. Now, you’ve got mountains of data available to you...so what do you do with it? It’s time to decide what you want to track and how you’re going to do it.
Measure what matters to your company
Let’s face it, you can track almost anything. There’s so much data coming out of your system that it can be overwhelming. But metrics aren’t one size fits all. The trick is to define what matters most for your business.
For instance, most companies track payables and receivables overdue. That makes sense – you want to understand at a glance how much money you owe your vendors and how much your customers owe you.
But let’s look beyond that. For companies that handle inventory, you probably want to know your inventory value or maybe the number of backorders you have in the system. If you handle service jobs, you might want to know your budgeted versus actual revenue on a per job basis. Or perhaps the breakdown of your job labour types, so you can better allocate your resources.
Ultimately, what you measure should be tied back to your business objectives. Is your focus on increasing revenue? Reducing costs? Or maybe reducing the number of support tickets you log on a given product?
Ask yourself the question – what is the end goal we're trying to achieve? Keep in mind that this might change from one year to the next, as your business grows and your priorities change. Measuring the same indicators over a period of time is important to evaluating your success, but you may need to review from time to time as you achieve certain objectives and set new ones.
Move beyond results
But don’t stop at just measuring results. Research indicates that 80% of companies measure results, but don’t understand why they achieved that result or how to change it. Be part of the 20% that really understand their data! Start by creating dashboards that give you insight into your most important KPIs. Then take a deep dive to identify trends and gain insight into why you’re seeing changes in performance. If you can identify the “why”, you’re well on your way to becoming a data-driven business.