We live in an era where data is becoming more and more accessible. Elaborate business intelligence systems with numerous canned or customizable reports that can tell us almost everything - it seems. Are they telling us the right things? How is your business really doing? Do you know? Does everyone in your business know?
How many metrics should you have that circulate through company meetings, emails, bulletin boards, newsletters, etc? Having 30, 40, 50 or more metrics is as bad as having zero. No data and too much data cause the same response - confusion – one of not knowing what is happening, the other of not knowing what is important. A "balanced scorecard" with 60 metrics and all different shades of red, yellow, and green doesn't help people drive improvement.
People cannot act on things they are confused about
When accountants talk about metrics they typically talk in a language only finance professionals understand (I see all of you non-accountants smiling). It's not just accountants. Quality professionals do the same thing. So does sales and marketing. And engineering. You get the idea. Businesses need a limited set of metrics in a language that everyone understands to tell them if their actions are adding up to success (or -gulp- not adding up to success). It does not matter how sophisticated your data systems are at providing reports, you should always (read: always, always, always!) have a limited number of high level metrics that gives everyone a sense of how the organization is doing. How limited? About five or six.
Only five or six metrics??
Ok, so what about the rest of the metrics? Aren't those important too? They are. But not right now. Think about this - you walk into a doctor's office for an annual physical. The clinical staff could run hundreds of different tests to see how healthy you are. But they don't. They always start by checking your vitals. These limited number of metrics provide the caregivers broad perspective of your overall health. Only after understanding your vitals will they perform more tests to diagnose potential health problems.
Your business is no different.
In order to assess the ongoing health of your business, there needs to be a clear separation of "vitals" metrics - measures people use all the time to get that broad perspective - and diagnostic type measures used to zero in on specific problems. Here is a quick process to identify your business "vitals" (use this free tool to make this process really easy):
Step 1 - List all the metrics you currently use within your organization - all of them. Think about performance goals, committee meetings, department meetings, etc. For some organizations, this list can get quite large.
Step 2 - Place them into the appropriate categories. It is important to have a balanced set of metrics (i.e. - not all financial measures, not all sales measures, etc. Use these categories to group the metrics: quality, safety, cost, growth, customer experience, delivery, employee development).
Step 3 - Identify the broadest measure within each category. Ask this question - is there something broader? Is there some measure that would more widely describe business performance for each category?
Step 4 - Obtain and organize the data to create a standardized report for each of the "vital" metrics.
Remember: The purpose of these high level measures are to answer one question - is the business getting better or getting worse? If the old adage of "what gets measured, gets improved" is true, then let's make sure we are measuring the right things!
Christopher M. Spranger, MBA, ASQ MBB
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