Goals Can Mark Success but Metrics Measure the Pathway |
Posted: October 4, 2017 |
Many companies approach the setting of their organization’s goals with surpassing overconfidence. In many situations, executives also are guided by heuristically biased intuition or rather rely too heavily on past or recent experiences. They overestimate the information they have available to evaluate the production and performance of their business properly. Essentially, a majority of companies tend to measure and assess the wrong things. Business goals are inseparable from management, administration, operation, and production of a business entity. However, metrics measure quantitatively how a company is doing in attaining those goals. Accounting Is Not the Only Place for Numbers in Business Metrics can measure services, customer delight, products, and employees. At the core of any vital process related to the company, you can establish a metric and set goals based on the outputs of the process and the type or amount of work required. Have you ever noticed how much the world depends on numbers? Numbers are everywhere -- from the tip percentage you leave your waiter or waitress to the tallying of your daily servings of sugar, calories, and protein, to the chance of precipitation on the day of a sports game. In business, the same dependence on numerical data is just as predominant. A company may hire a simple virtual bookkeeper to find evenness between workloads and the arrangement of staff as a way to lower expense numbers, but performance metrics are just as important as calculating return on investment. Having metrics aligned with business goals puts you in a powerful place for profitability and value creation. Metrics cannot exist without goals. For a company to be able to look at metrics as they relate to goals, it becomes clear that the measurement is a critical element to gauging success. Once you have laid out simple goals, metrics can be regulated organically. Transparency is abundant with the use of concise measurements and statistics. It can help businesses see where and how current efforts are adding to sustainability or if more resources need allocation. Succinct data metrics can also serve as motivation to stakeholders and donors when the information gets shared with them. How Do You Know Which Metrics Are Beneficial and Suitable? In his Harvard Business Review article, “The True Measures of Success,” Michael J. Mauboussin acknowledges the invaluable choices companies have been making for decades about choosing the appropriate statistics to measure. Choosing proper measures can help propel a company trying to reach goals. Having "useful" metrics available can be a compass when making critical decisions for operations or management while trying to meet these aims. He says that to determine the usefulness of statistics, you must first ask: what is the goal or objective? For example, the goal for many businesses is to elevate shareholder value. The follow-up question, Mauboussin says, is to ask: “which activities lead to that outcome?” Or what means will assist you in reaching that goal. According to Mauboussin, the metrics that a company should choose for measurement and assessment are the ones that communicate cause and effect and are also, characteristically, persistent and predictive. . The educators of data management and analytics at TWDI Research for business intelligence also feel that performance metrics should start with a governing goal or objective. From there, the strategic picking of metrics should be worked backward and have the following characteristics:
Financial vs. Nonfinancial Measurements As could easily be understood, value-generating processes and activities will not always get seen in the numbers of finances. Nonfinancial performance metrics are important and to be useful, they must also reveal cause and effect in persistence and predictability. These measures can include employee and customer satisfaction, product quality, consumer loyalty, and workplace safety, to name a few. Your company stands a far better chance of ushering in improving results by determining if there are nonfinancial metrics that can link congruently with financial measures to promote value creation for your business.
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