Nowadays, the definition of what is a good business metric is well established, but organizations face new challenges: markets are evolving faster; new regulations and compliance requirements; the exponential growth of data to be ingested by information systems; clients expecting more, better and quicker. Organizations do not need to only measure their performance – they need a rapid return on investment and focus on the more critical areas. Do you know where to act first? Is your company prepared to improve on how you monitor performance? Are you measuring the right information?
We have ten tips to help you trail the way forward!
1 - Understand the needs of your organization
Gathering the business needs across your organization will allow you to grasp an overview of its current state, and is the starting point to understand where taking action is critical, and where you will have to measure the effectiveness of your actions.
Business measures will grant insights on where you are towards your goals. Therefore, it is important to understand which goals you aim to achieve. In each department, you will find examples of problems, opportunities or constraints. Facing these challenges will either increase your profit, decrease expense, or make sure your company complies with regulations.
Evaluate the current or missing capabilities of your organization. This includes looking at the people, processes and technological aspects around you to better understand them and where to improve. In large organizations, this exercise is performed at the division, operating unit and department levels
2 - Gather the subject matter experts
Who among your organization possesses deep functional knowledge on the areas you intend to improve? These are the people that understand the impact of change – and the needs behind it. They will help you identify the business value of change, decide on where to focus your resources first, and how to best measure the effectiveness of the actions taken towards the goals set.
Defining the costs and benefits will not be the only reason to identify and talk to subject matter experts. Find out what is the perception of change from each major stakeholder, and how their values and expectations impact your goals. In each area of your company, find the right people to champion the change you want to create. Make them a part of that change and they will influence others in their organizational structure to embrace new processes and ways of measuring corporate performance.
However, do not run away from detractors. Understanding their concerns on an early stage of a change process will help you mitigate the risk of low adoption in the future.
3 - Know where to focus your resources
In an ideal world, implementing business metrics would be a transversal action across all departments of a company. In reality, resources are finite and disputed by several stakeholders. Prioritizing what to address first is a big challenge to any organization.
On one side, the financial potential can be assessed by gathering the cost to benefit ratio of a proposal, with an estimated return on investment. On the other, the intangible benefits for an organization also need to be assessed for estimated value to the organization.
A well-built business case should provide a clear answer to both aspects, including also the cost of not taking action. This artifact will translate the business needs into clear goals for the organization, setting the course for the changes to come. Implementing new business metrics or changing the way performance of an area – or the whole company – is measured are two things that need to be aligned with these goals.
4 - Realize the current state
In your company’s current state, is it practicable to think in a sales increase of 10%, or 20%? In the next five years? Or two? The needs you identified and set as goals to reach are the starting point for change – understanding where you are now will allow you to define clear and feasible milestones for that change. Business measures will track your performance towards these milestones, so it will be important to know how far you can reach.
5 - Define SMART objectives
Improvements identified will become milestones for your organization. To reach those milestones, you will need clear objectives. This is a vital step towards the success of any project and the desired change. If you clearly state where you want to be, you will be better equipped to know what is left of the road ahead.
The SMART acronym is important to define objectives. Remember: Specific, in a way that it answers the question “How will I know I have accomplished it?”, and describes the expected result; Measurable to answer “When will I meet my expectations?” with a definition quantifiable in quantity, cost or frequency; Achievable to answer “Can I achieve it with the resources and time I have available?”; Relevant to understand if it fits the organization’s goals; and Time-bounded, to understand when it will be concluded.
6 - Consolidate your data
Nowadays, organizations have a disparity of data sources available, in a way that is more or less structured. From reporting-dedicated tools, to the simple but powerful Excel spreadsheet, each person will find their own ways of keeping track of the information most important to them.
This also means having, inside your company and its different departments, different versions on the reality of the organization. Breaking through those information silos is important.
Make available one transversal source of truth to allow the development of consistent metrics across the organization.
7 - Identify the most useful metrics
An effective business metrics is the one that compares the current state towards a business milestone, in the context of the organization – allowing stakeholders to act in the best way on the information made available.
In each department, from marketing to sales to corporate, specific sets of business measures will be needed to properly track performance. Subject matter experts will help you accomplish this as well.
8 - Monitor how your metrics perform with the right dashboard
A good dashboard will keep the many stakeholders informed on the performance of your organization, “telling the story” behind the data with a clean and contextualized visualization. The different sectors of your organization have different needs for information, so make sure you address them the best way.
Corporate, marketers or sales people will be the storytellers in your organization, using information from the business metrics to connect to the audience of decision-makers around them, so choosing the proper visualization type will make the difference between an engaged audience and a dispersed one.
Prototyping a dashboard may be as simple as using pencil and paper. Group relevant information together; choose the best chart types; keep it clean and do not over crowd it with data. Less is more!
9 - Assess whether your company is ready for change
As best as your business metrics solution is, there will come a time where you need to incorporate it into the day-to-day business without disrupting the critical activities of your company. You will have to ponder factors such as risk of business impact, number of affected stakeholders or the dimension of the change you are proposing to decide on an implementation strategy. Do not wait for the solution to be developed to start thinking about this; as soon as you set your milestones, think about the impact of the change that comes with them.
Resistance to change in your organization can be overcome through the planning of training sessions for the company’s employees; communication plans for the departments or areas affected can be set in a way to prepare people for change so that they know what to expect when the time comes.
10 - Act on the results
Your goals are defined, your objectives are set, and the business measures implemented allow you to know if you are on track. What now?
Analyzing your metrics will allow you to measure your company’s pulse. The detail on the data composing those metrics offers the added capability to conclude, accurately, which processes need improvement, which costs can be reduced and which clients to invest on.
Your milestones will evolve over time, drawing you nearer to the goals defined. The business measures you have built will allow you to realign the focus of the several business areas and set the course straight.
Business metrics allow the executive and management layers to measure the pulse of the organization, but not only that. They are the compass that shows the company’s employees the way forward, allowing them to measure the quality of their deliverables towards expectation.
This also means that a misalignment with organizational goals will translate into a reduction in performance and an overall feeling of wasted effort.
As such, metrics need to be developed in line with the company’s goals and the objectives these break down into. Only then, will you have a truly useful tool to measure your success.