Everyone loves numbers. You don’t exactly have to go far to find some business sage or other intoning “what gets measured gets managed” as if he’s discovered the third secret of Fatima. But that doesn’t change the fact that in the majority of businesses metrics are used incorrectly. And when that happens, rather than numbers being in service to the business, things are the other way around: you are running and organising your business in order to ‘make the numbers come out’. And that’s a problem.
So how do we avoid that situation? By asking the following three questions of every metric you use in your business:
Question 1: Does It Matter?
Sometimes it’s the simple questions, the ones that go unasked, that make the most difference. If you’re going to measure something, and by implication if you’re going to attempt to improve that number, then you’ll need to answer a firm ‘yes’ to this question.
You might be thinking at this point that it stretches belief to imagine any business would set about measuring and optimising numbers that simply don’t matter, or don’t matter much, to their success. In response I would politely point out that it happens all the time. It is incredibly easy to measure standard metrics like ‘new customers’ without asking whether that metric actually means much to the business. In many cases - it doesn’t.
Ultimately any metric has to have a clear, causal influence on a Key Performance Indicator (KPI). If it doesn’t, find something else to measure instead. Start from your top level goals and work down - each step of the way being sure that the metrics you are choosing ‘roll up in a meaningful way to those goals. Never, ever, find yourself obsessing about a number that just doesn’t matter.
Question 2: Does The Number Equal ‘Success’?
Any number should accurately measure how effectively a given function of the business is performing. Again, this might sound desperately obvious, but is in fact anything but. The issue here is around metrics that are ‘close’ to the actual function we wish to measure but not all the way there. And the consequence, in most cases, is that they can be ‘gamed’ in order to hit targets but have only a related impact on what we actually care about.
Take ‘click-through’ of emails or (more recently) push notifications. That feels like a decent enough way to check a communications team is creating engaging content. But of course as a metric it’s almost entirely meaningless. In fact, it’s dangerous. It won’t take a smart employee acting in good faith too long to realise that click-thru can be increased by creating ever more lurid and misleading subject lines.
The question is what do customers, consumers and prospects make of being duped by clickbait? Probably not much in the medium or even short term. Instead, ask yourself what a successful email program actually looks like. The answer, surely is that those people who have read and responded to email demonstrate certain behaviors that you are looking for. So measure on those actual behaviors rather than some approximation of them
Question 3: Can I Put Someone In Charge Of It?
Some people believe metrics stifle creativity. Nothing could be further from the truth. The wonderful thing about the right metric in the right place is that it enables real autonomy and responsibility at every level of the organisation - something that in turn makes for happy people and great performance.
Why is that? Well, if a number is agreed to accurately measure the performance of a function, and at the same time we’ve agreed that function matters, it then follows that I can then give an individual a target for that number, an agreed amount of resources, and then allow them to meet that target in any way they choose.
This approach is immensely liberating for everyone concerned, but that is probably a topic to be expanded on another day. For now, remember this: a good metric supports the idea of giving an individual responsibility for it. As a rule, one person (as head of a team or otherwise) can reasonably be expected to have control over all or most of the factors that influence success or failure. This aligns metrics with structure and makes numbers active measures of individual performance rather than passive measures of “how are we all doing?”
A Great Metric
By way of summary, let me give you one small example of a metric that matters - in this context for a Saas B2B company selling to SMEs.
The metric is “Sales Approved Inbound Leads”. In answer to each question:
It matters. For organisations like this - particularly those focused on a broader market - inbound leads are a key contributor to sales and thus revenue.
It is meaningful. Note we are not measuring “Inbound Leads”. These could be bought by the thousand very easily, making a mockery of any target. By insisting that the number reported is only for those leads the sales team accepts as being of sufficient quality, there can be no doubt we are measuring the right thing in the right way.
I can give an individual responsibility for it. With a specific target and budget, this individual evaluates the many options for generation of inbound leads: SEO, SEM, display, re-targeting, social, media sponsorships etc etc. With a clear measure of success that individual is able to make decisions around tactics and have a way to evaluate tests and trials,
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