Human Resources
What Metrics Are You Using?
Every business needs metrics, not only to measure, but to set the precedent and direction of the business and its employees. Metrics are not always as easy to establish as one might think, but with out the right metrics in place, you may not be steering your ship in the right direction.
Before you try to implement metrics for your business, you should ask yourself one underlying question: What is the one thing I want our firm to be really good at?
As we all know, you can't be everything to everyone and sometimes the hardest thing for an entrepreneur to do is to decide what they will be and what they will not be. Understanding the one thing that you will be by knowing what you want to be the best at will help you consider what metrics are most critical to the success of your business.
Metrics come in all shapes and sizes depending on the company, industry, employees, and divisions within your company. Too often, as firms grow and add additional divisions and headcount, they begin to assign metrics that do not align with the company's core value proposition or worse yet; they do not align across business units within your firm. If your manufacturing department is measured on the lowest error rate, but your marketing department is measured on how quickly they deliver product to your customers, you'll have misalignment. Speed and quality do not work in synchronization so with out any doubt, the manufacturing department will slow down the marketing department which will in turn create internal confusion and frustration.
Metrics should be derived from your business's written strategy and mission statement. They help your employees understand what they need to do on a day to day business to accomplish the goals of the corporation. When the wrong metrics are put into place, it is easy to have employees moving in different directions with out it being apparent to CEO and the executive team. It is only after a problem arises that you may realize your employees are moving in different directions because the wrong metrics have been put in place.
Managers use metrics in their performance reports of employees. They often get graded on how well they performed against those metrics, so it should be no surprise that employees will focus on doing whatever they need to do to ensure they meet the metrics that they have been given. After all, their performance rating depends on it. This is why ensuring you have the right metrics in place across the entire company is so critical because it is what drives each and every one of your employees.
How do you set the right kind of metrics across the board? It starts at the top. If the CEO does not know how each division is measured it is easy for each department to set their own internal metrics that may not necessarily align with each other. Rather than having each department manager set and review each division's metrics, the CEO should review every metric for each division to ensure synchronization among divisions. Further, metrics should follow the "SMART" process so as to set metrics that mean something to the employees and to the business.
S - Specific
M - Measurable
A - Attainable
R - Realistic
T - Timely
Setting metrics that work together across your company and support your core business strategy and meet the SMART test will help ensure that your employees are moving your business in the same direction at all times and that they are all motivated to accomplish goals within their respected departments. Easier said than done, but metric driven businesses can reap great benefits from the tight fit and organization within the company.
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