Business Metrics that Work

By Thomas D. McBride
Partners for Creative Solutions, Inc.

How well do you understand what is limiting your organization? Most business leaders are aware of problems at a high-level, for example, defects are too high or on-time delivery needs improvement. But they often lack sufficient detail to understand the underlying causes or how to achieve a sustained improvement without impacting other areas. Metrics are the first and last word for running a top-notch organization. First you must measure your current performance to see where improvement is needed. Next you deploy improvement projects along with metrics to track progress. Last, but not least, use metrics to measure on-going performance to provide early warning of abnormalities.

But, how do you design the best metrics for your organization? Begin by using the organization's strategic goals as the foundation. Review these goals carefully and choose metrics that will show whether you are meeting your goals and where any issues lie.

Metrics can be applied at many levels, from measuring performance of a production area or department, to monitoring how the overall business is doing. All levels should be aligned to support the strategic goals of the business.

It is important that all metrics be useful rather than a burden to those needing the information. The following characteristics of good metrics should help you design an effective set for your organization.

• Support the achievement of the organization's strategic goals - Don't waste time on metrics that are not aligned with these goals.
• Few in number - Too many metrics can dilute the impact of the important ones in addition to being a burden to produce.
• Easy to use - No one wants to spend a lot of time trying to understand the information that has been gathered. Use visuals such as charts and graphs that quickly show successes and issues.
• Provide quick feedback to those that need it - Delayed feedback often looses meaning because it severs the connection between cause and effect. Information should be distributed promptly to all who impact the results, including appropriate management personnel.

It is helpful to compare business metrics to the dashboard of an automobile. The dashboard directs a few critical pieces of information to the driver's attention in an instantaneous, easy to use fashion. Metrics applied in dashboard fashion throughout an organization should help immensely in improving performance.

Winter 2004 -Volume 14, Number 1

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