Tuesday, July 21, 2015

Do You Manage the Metrics or Does the Metrics Manage You?

Metrics are an important method of understanding what is happening in your business at any particular time. It provides a feedback loop that helps executives make decisions about business strategy. Even though metrics are important, it is equally important to understand that metrics don’t tell the whole story as one can become derailed by over-reliance on metrics.

You need to know how many products are being made, rejection rate, overtime, staffing numbers, sales volume, stock value, time spent on activities, and customer perception. These metrics, in addition to the thousands of others, help describe how a business is functioning. It is possible to run some metrics by the day, month, quarter, year, or decade to get a better grasp of what is going on.

Metrics can also influence employee performance in positive ways by letting employees know that their contributions count. It provides a level of feedback and expectation building that is used for evaluating employee performance. The numbers help motivate and define the nature of work.

The downside is that numbers take on more importance than the actual work and organizational output. This occurs when metrics take on a life of their own and become the focus of employees who want to seek praise and rewards without actually servicing the needs of the company. The focus switches from the customer to the numbers.

The consequences of switching from real life customers or outputs to numbers are that the numbers become the main focus of operations. It is possible to meet all of the numbers but still be turning away customers or turning out an inferior product.  If your business is not measuring properly then the numbers become a type of smoke and mirrors to what is actually happening.

Metrics should be used to create a full picture but also should not supplant common sense in managing entire process. If the numbers take on a life of their own organizational targets may not be hit even though the metrics are giving positive results. Adjusting and changing the metrics from time-to-time can ensure people don’t only focus on the numbers.

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