The right of business metrics has two dimensions …
The right of business metrics refers to both business key performance indicators (KPIs) and operational process input and output measures.
It has been known for many years, if not centuries, that what gets measured gets done. Many leaders know these principles yet continue to use it haphazardly.
The right of business metrics used by companies do seem to follow the latest fad. This year its EVA the next its RVA etc. Naturally this type of switching creates negative disruption by moving the goal posts, often to another playing field, whether appropriate or not.
It does seem evident that businesses with clearly defined long term objectives are more consistent in their use of metrics. It is also these companies that seem to have a higher percentage lead indicator metrics than others. It is interesting to note that most average performing companies’ metrics are retrospective in design.
There also appears to be a tendency amongst business managers to take comfort from the fact that they have metrics, irrespective whether they are appropriate or not (always-been-measured-this-way syndrome).
Business leaders and managers need to take time to re-examine the metrics they are using. They must ask questions about the appropriateness given their current set of circumstances and business objectives.
Smart metrics will measure the right indicators but also be flexible enough to alert leaders that a change is required—even a change of metric. Metrics should be used consistently over a period of time long enough to ensure the intended objective was reached.
Many metrics measure a company’s overall performance and are contained in dashboards. The make-up of these should be business and shareholder value objective driven.
The right of business metrics need to be balanced. Meaning:
Metrics should permeate the organization and not reside only at the highest levels. In some cases higher metrics would be composed of alternate metrics used at the operational levels within an organization. Bottom line is that all metrics from bottom to top must be aligned to achieve the company's objectives.
A key factor often neglected in developing a metric system is the data used as input to generate the metric. Garbage in, garbage out is a favourite It term which applies to metrics.
It is of no value to have the right metrics tracking a company’s performance but the information used is not credible, valid, reliable or repeatable. It is therefore essential that the methods used to calculate the metrics and the data used as input is clearly defined.
Lastly, even though the back-end of the metric may be complex, it should always be simple to interpret and to enter data into.
Through its programs, AchieveProcessExcellence.com assists with designing the right of business metric system for your company, deploy it, and implement processes to ensure valid data is used as input.
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