Metrics are an essential aspect of good reporting – they provide visibility into the success of your organization and directions for improvement. Moreover, they align your team towards a common goal and help you to communicate with customers, shareholders and employees.
It’s little wonder that collecting metrics and using them to their full potential correlates with better long-term business outcomes: according to one report, organizations that place a strong emphasis on data and its business value increase annual revenue by more than 5% on average.
But while organizations have more access to data than ever before, they often struggle with choosing the right metrics for reporting – as we’ll see, those two facts are not unrelated. In this article, we address common challenges for metric collection, and share five questions that can help you overcome them.
Ultimately, the best metrics are practical to implement, aligned with business outcomes, and useful for inciting change. So, let’s say you’ve just finished a crosstab report, and you see room for additional metrics – what questions can you ask to ensure you pick the right ones? Here are five.
Metrics should always be oriented towards your organization's overarching mission, long-term, intermediary, and short-term goals, in that order. Choosing metrics is not just a matter of knowing what your goals are, but which ones matter most in the present, and how a metric can help you achieve them.
When it comes to driving your mission, metrics primarily help by identifying areas that are meeting expectations, and areas that need improvement. For instance, measuring quota attainment can tell you how well your sales team is doing at a high level, whether they need more resources and training, or whether quotas can be realistically pushed higher.
The predictive value of a metric is key to its overall usefulness - the more straightforwardly it correlates with a specific goal, the more helpful it is for achieving that goal. For instance, cost per lead (CPL) is directly related to the return on investment (ROI) you can expect from your marketing efforts - lower CPL means higher ROI, and vice versa.
Other metrics are simply too ambiguous, conditional, or irrelevant to have strong predictive value. For instance, the amount of time visitors spend on your site could correlate with higher sales or conversions - but that's not necessarily true. Without measuring those things directly, time on site is not necessarily good or bad, and it does not give you a clear direction for changing your web strategy.
When curating a report, it’s easy to lose sight of the effort it takes to generate and collect data. Often, a metric is worth less than the time it takes to measure and track. Consequently, it’s important to choose metrics that require minimal overhead and additional workload – working with the tools and data-collection systems you already have is always ideal.
In a monthly sales report – for example – it takes very little effort to include an additional metric for top-selling products of the month. In most cases, this won’t require further action from your salespeople to provide the information. But more complicated metrics – like average revenue per user – may require enough work to warrant leaving the metric out altogether.
There’s a big difference between information that’s simply “nice to know” and information that has the potential to change practices throughout your organization. A good metric will provide you with insight that informs business practices; it will reveal trends in the data which guide strategic decisions.
In your monthly sales report, total sales can be broken down by salesperson, helping you to determine which – if any – need additional training. This will not only guide future decisions for your sales team but also spending for your company as a whole. If a metric isn’t helping you make these kinds of decisions, it indicates that you are probably tracking the wrong kind of information.
At the end of the day, concrete action is the whole reason for reporting: it empowers decision makers to evaluate, change, update or eliminate business practices as necessary. Asking whether a metric is "actionable" is different from asking whether it is "predictive," although the two qualities are related: all actionable metrics are predictive, but not all predictive metrics are actionable.
For a metric to be actionable, it must apply to a business area with a clearly defined scope of responsibility. Metrics pertaining to your sales team are actionable for sales managers and associates - metrics pertaining to your finance department are actionable for bookkeepers, analysts, and financial officers. For every metric you choose to report, there should be someone who can apply it.
Today, businesses have an endless number of metrics they can potentially choose when generating a report – but in a world of big data, the purpose of reporting is to condense meaning from high volumes of information and provide clarity for your direction. Without that clarity, a third of business leaders don’t even use their data to drive decisions.
Ultimately, a handful of carefully selected metrics optimized for your business goals is more valuable than many poorly considered metrics that don’t aid in long-term or short-term decision making. Choose a partner that can help you to extract the most value from your data and business tools.
MainSpring is your go-to source for IT strategy and support. Our award-winning managed services are handled by a diverse team of experts on the cutting edge of business technology, with decades of combined experience serving small-to-medium sized businesses. We adopt a proactive mindset to every customer, taking ownership of your results and working diligently to exceed your business needs. To learn more, contact us today.