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Measuring the Right Things – the Right Way

[This post is excerpted from our new ebook, ROADMAPP]

Peter Drucker, the grand old man of management theory, famously wrote, “What gets measured gets managed.” In other words, Metrics determine what you focus on. After all, who wants a bad report card? If you are tracking your Key Performance Indicators (KPI’s) regularly, you’re likely to find ways to improve them.

Which can be good or bad.

Because if Drucker is right (and he is, he is, trust me on this if nothing else), consider the implication: if you choose the wrong KPI’s, you or your organization will end up getting better at the wrong things. Select with care. There is little benefit in high-fiving over a 10% improvement in gas mileage if you achieved it by driving so slowly that competition is racing past.

Nor is selecting KPI’s a onetime thing. What’s important in a business can change with time. If you get married to a specific set of KPI’s, you might end up missing something that didn’t matter yesterday but is critical today. For example, many startups track sales or clicks or customer ratings obsessively. At some point, however, margin or competitors’ performance might acquire major impact on your ability to survive.

You need to be nimble with your numbers.

And you need to know this: “what gets measured” is not enough. A measure without a benchmark or goal means nothing. Say you sold 1000 widgets last month. Is that good? Was your target 500 or 2000?

So not only do you need to select the right metrics, you also need select the right way to evaluate them.

And that too is not enough.

Once you’ve measured and evaluated, you need to consider the implications. Yesterday is gone. Today’s reality is there in your metrics. Are you still on course? Have you uncovered new opportunities or obstacles? What action should you initiate right now?

For example, suppose you have included Budget Tracking and Revenues among your KPI’s. While reviewing your metrics, you find that spending is on track but sales are coming in ahead of plan. What are you going to do about it? You get to change your action plan. You could take the extra revenues to the bottom line, set up a reserve, or invest in a new initiative. This is not a time for autopilot: make a conscious decision!

It all comes back to Action. All the time. Don’t get fooled into thinking of tracking metrics as an academic exercise you can delegate to puny geeks. Metrics should be a muscular activity, a powertrain driving Action.

What is your favorite method for ensuring metrics drive action? How do you ensure you’re measuring the right things?

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