Which Business Metrics Should You be Capturing?Terry Giles
All organisations rely on the collection and reporting of metrics to show how well they are doing and to work out a strategy for how to be more effective and efficient. The most common of these being the financial metrics, that get reported to the board.
However, most successful organisations also look at a range of other metrics to ensure that the business performs at the highest level.
Generally these metrics cascade down through the organisation and are connected to the vision and objectives for the organisation. The figure below shows a typical idealised form of the cascade for a large organisation.
Given that there is a linkage between the objectives of the organisation and the processes it uses at all levels to achieve those objectives, one way to measure how well the organisation is performing and identify areas for improvement is measuring the output of those processes.
To do this the organisation must know what their business processes are and how they interact. There also needs to be a minimum criteria for the acceptance of a process output in place to provide a reference for the measurement.
Typically any metric should have the following characteristics to make it useful:
- Objective – it should not involve judgement calls
- Simple – the metric should only measure one parameter
- Timely – such that it can detect significant variations in the process
- Accurate – the errors in the measuring process should be small enough not to give false readings
- Cost effective – it should not cost more to collect the metric than the penalty of something going wrong if the metric was not collected
In conclusion, a structured approach to collecting metrics can reduce waste and unproductive effort, but as mentioned above there are other metrics that an organisation may decide to collect.
A key factor with all metrics collection is that there needs to be a good reason for collecting the metric - one that senior management can buy in to.
Aligning your metrics with the organisation's vision and mission will get that buy in.
Written by Terry Giles
Terry Giles is a consultant for TerryAG Consultancy. He has a great deal of experience in developing Business Management Systems based around a variety of models including ISO 9001, TL 9000, ISO 14001, EFQM, Baldrige, CMMi, ITIL, RiskIT and CobiT 4.1 & 5.