In today’s digital world, every company generates massive amounts of information. From web traffic to point-of-sale systems, calls to Internet of Things (IoT), your business is flush with data.
When starting your data journey, it can be tempting to ask, “What metrics can we build with the data we already have?” or “What metrics are other people looking at?” However, in the immortal words of Admiral Ackbar:
There are thousands of possible metrics out there, and they aren’t all useful to you. Worse, building reports and metrics just because you have the data for them can often lead to “data overload,” where you are overwhelmed by the data at your fingertips, and it becomes meaningless. I have seen plenty of reports full of “Because we can” metrics abandoned, and, as a result, business leaders lose confidence in the usefulness of their data.
Looking at your competitors also isn’t the best solution. Your business may not be in the same position that they are, and doing what “everyone else is doing” means, at best, doing as well but no better (I assume you want to do better; otherwise, you wouldn’t be reading this blog!).
So, where to start? Quite simply, with your company’s goals. With defined goals, you can look at what needs to happen across a series of domains to achieve them. What does your staff need to do? What do you need from your customers? What do you need to do with your processes? Your financials? Once you know what needs to happen in these domains, you can look at possible metrics to track these activities. At their core, the best metrics are simply gauges showing whether you are moving toward your goal. Having defined your metrics, you can now ask if the data you need already exists or if you need to create a process to collect it (creating processes will be the focus of a future blog post).
Each domain you identify warrants its own recurring report, a small handful of regularly updated metrics. This report should highlight where you are succeeding and where there is room for improvement. Once these reports are built, you can then pull specific metrics and add them to a dashboard, a very high-level overview that can alert you to changes, so you can then go back to the reports and see what’s happening in detail, and follow up with your team to get a better understanding.
A couple of words of caution. First, these are tools to show whether you are progressing toward your goals, and the data will never be “perfect” (after all, humans are involved). It is enough for the data to be mostly correct or, as a colleague once said, “directionally correct.” If you worry about perfecting the data, you will spend most of your time and energy on that at the expense of your goals. If the data is blatantly wrong, then you should worry about it, but a one-off oddity here and there is inevitable. Second, these are not quotas or targets for your staff. These reports can be extremely powerful in identifying company strengths and where there may be room for improvement, but improving the numbers should not be incentivized. Remember, the numbers are a symptom of your company’s state, and your focus is the underlying cause.
Imagine you run a call center full of telemarketers, and you decide that, to meet your company’s goals, you need to increase your sale call volume by 10%. You build a report focusing on the metric of calls made, and you see that Carol consistently has some of the lowest call numbers, and Michael has some of the highest. Because of Michael’s performance, you give him a bonus and have regular meetings with Carol about how important it is to increase her volume.
Soon, Carol is on par with her coworkers for calls made, and the rest of the team has stepped up their call efforts, competing for the next bonus. Success, right?
Unfortunately, no. While Carol had the lowest call volumes, she had the highest sales. She could not make more calls because she was busy building relationships with, and selling to, her customers. Worse still, when you incentivized a higher call volume with a bonus, everyone’s sales dropped because they were more focused on making the calls than selling the product. As a result, your call volume increased by 20% from 375 calls in a week to 450, but your profit from sales dropped by 28%, from $535k to $385k.
The lesson? Your employees will rise to meet your expectations for them, even at the cost of your business. Meanwhile, had you used the report as a prompt to ask questions, you could have discovered that Carol was doing something different that allowed her to have more success with her customers, something that her coworkers could benefit from learning and thereby increase your sales. With the increased revenue from sales, you would have been in a great position to raise your call volume by hiring more sales staff.
Now that you have a basic understanding of how data can empower your business, some possible pitfalls, and defined your business goals, you can start looking at metric selection. Next week, we will discuss financial metrics.