Bad Business Metrics
Not all business metrics are created equal. Some business metrics provide an accurate gauge of your company's condition while others are just plain bad. Here's why . . .
Everything in your business is measurable.
But the fact that it can be measured doesn't mean that it should be measured. Metrics are useful tools for planning, evaluation and decision-making. But sometimes, the use of metrics can spin wildly out of control as business owners find themselves relying on measurements that are useless or even detrimental to their companies.
A good business metric gives owners and decision-makers an accurate picture of the company's health while a bad business metric confuses decision-making and frustrates your efforts to gain actionable intelligence about the business. The line between good and bad metrics can be blurry, but here are some of the types of metrics that clearly aren't worth tracking.
- Muddled metrics. Clarity is key when it comes to business metrics. Confusing and muddled metrics aren't useful because they lack actionable value. For example, a monthly metric that tracks the number of customers in the store may not be actionable unless it is applied at the same time and day of the week each month.
- Complex metrics. Some metrics aren't helpful because they are simply too difficult to calculate. A good example might be the amount of time customers stay in the store. To obtain data, you would need to have clerks follow random shoppers around the store. It's not impossible, but it's probably not worth the effort.
- Demotivating metrics. Whenever possible, make sure your metrics measure something positive about the business. A metric that measures the number of project failures is demoralizing, while a metric that tracks the number of successes can inspire your team.
- Manipulated metrics. Business leaders must be diligent to avoid metrics that can be easily manipulated by employees and others who have a vested interest in the outcome. For example, a metric that evaluates HR employees based on the number of candidates interviewed can be easily manipulated by expanding the interview process to include large numbers of non-qualified candidates.
- Non-actionable metrics. Metrics should be focused on providing actionable intelligence. If a metric provides information that can't be acted on, it doesn't have value to your business.
- Too many metrics. A high volume of metrics can have a paralyzing effect on a business. If your team feels overwhelmed by measurements their focus will be on hitting metrics. Creativity and innovation will be stifled, and the company's productivity will suffer. As the owner or leader, you need to prioritize the company's metrics, striking a balance between measurement and creativity.
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