Are you using the right metrics to manage your business?
An old saying goes, โ๐๐ ๐ฎ๐ค๐ช ๐๐๐ฃโ๐ฉ ๐ข๐๐๐จ๐ช๐ง๐ ๐๐ฉ, ๐ฎ๐ค๐ช ๐๐๐ฃโ๐ฉ ๐๐ข๐ฅ๐ง๐ค๐ซ๐ ๐๐ฉ,โ so are you confident that the KPIs you are measuring are actually indicative of the health of your business? Do you have a system to manage these numbers to improve business health?
Many CEOs and executives make the mistake of focusing on metrics that don't matter instead of honing in on the key performance indicators that have a real impact. In this blog post, we'll teach you how to measure the right KPIs and make data-driven decisions that will help your business thrive.
Metrics are everything!
Metrics are used to track progress, assess performance, and identify areas of improvement. However, not all metrics are created equal. Business results should always be the primary focus, as they provide the clearest picture of how an organization is doing overall. But it is also important to consider objectives and activities when evaluating metrics. Objectives help to set the direction for an organization and can provide valuable context for interpretation. Activities, on the other hand, are the day-to-day actions that contribute to business results. By taking all of these factors into account, businesses can ensure that they are making decisions based on the most accurate and comprehensive information available.
Business Result Metrics (Lagging & Unmanageable) include Revenue growth, GM%, and ARR.
Objective Metrics (Semi-Leading & Semi-Manageable) are measures such as customer retention, new product sales, market coverage, opportunity win rates, or sales force turnover,
Activity metrics (Leading & Manageable) include the volume of sales calls, frequency of account planning, number of new hires, and number of early-stage opportunities qualified.
๐๐ผ๐ฒ๐ ๐๐๐ฒ๐ฟ๐๐ผ๐ป๐ฒ ๐ป๐ฒ๐ฒ๐ฑ ๐ฎ๐ฐ๐ฐ๐ฒ๐๐ ๐๐ผ ๐ฎ๐น๐น ๐๐ฃ๐๐ ๐ฎ๐ป๐ฑ ๐ฑ๐ฎ๐๐ฎ?!
Just because data exists doesn't mean it's useful. Having a clear understanding of what business results are and how you want to achieve them can help then map those Objectives to specific Activities to ensure your data is actually actionable.
Defining who needs access to what data within your organization is critical to ensuring that everyone is working towards the same Objectives and that Business Results are achieved. Different levels of the organization need different levels of detail and data to make effective decisions. For example, the C-suite needs high-level data that gives them an overview of Business Results, while the execution team needs more detailed data that they can use to manage activities. By defining what data each level of the organization needs, you can ensure that everyone is accountable for the information that they can actually manage and coach folks on their team. This keeps everyone focused and aligned on a common goal to improve business results.
How do you set up the metrics for Business Results, Objectives, and Activities?!
How can you ensure that everyone on your team is aware of and is working towards these goals? How can you track progress and measure success? By having a clear and comprehensive framework in place, you can avoid misunderstandings and keep everyone aligned with the company's objectives.
It is important to make sure Metrics are specific, measurable, attainable, relevant, and time-bound (SMART). This will help ensure that your goals are realistic and achievable. Furthermore, it is important to involve all team members in goal-setting so everyone feels ownership for their actions.
SMART is defined as:
Specific: The goal should target a specific area for improvement. For example, rather than setting a goal to โ improve customer satisfaction,โ set a goal to โ increase customer satisfaction by 4% within the next 6 months.โ
Measurable: The goal should be quantifiable, so you can track progress and determine whether the goal has been met. In our example, you would measure customer satisfaction levels before and after the 6-month period to see if there was a 4% increase.
Achievable: The goal should be realistic and achievable. If a goal is too lofty, it may not be possible to achieve it within the timeframe you set, leading to frustration and discouragement.
Relevant: The goal should be relevant to your businessโs overall mission and goals. In our example, if your businessโs mission is to provide the best possible customer experience, then improving customer satisfaction would be an aligned and relevant goal.
Time-based: The goal should have a timeline associated with it so you can track progress and keep yourself accountable. Without a timeline, it might be difficult to stay on track and motivated to achieve the goal. In our example, we set a timeline of 6 months.
Conclusion
As you can see, there is a lot to consider when choosing the right metrics and managing them effectively. But with careful thought and planning, you can set your business on the path to success using KPIs and alignment across the organization. Plus, it will keep you away from drowning in numbers but rather keep your focus on building a business.
