When a company promises and delivers on quality, there is a good chance that customer satisfaction and retention will be high. But paving the road to success depends on companies being well-informed about their own business. They achieve that knowledge by developing and utilizing effective metrics.
Why Do We Need Metrics?
Metrics are used to drive improvements and help businesses focus their people and resources on what’s important. The range of metrics that companies can employ vary from those that are mandatory – for legal, safety or contractual purposes – to those that track increases in efficiency, reductions in complaints, greater profits and better savings. Overall, metrics should reflect and support the various strategies for all aspects of the organization, including finance, marketing, competition, standards, or customer requirements and expectations. Metrics indicate the priorities of the company and provide a window on performance, ethos and ambition.
Ultimately, metrics will help tell the organization:
- Where it has been
- Where it is heading
- Whether something is going wrong
- When the organization reaches its target
Benefits of Metrics
To derive the most benefit from metrics, it is important to keep them simple. Defining a metric is similar to telling a joke – if you have to spend too much time explaining it then it will not work. Employees need to understand the metric, how they can influence it and what is expected of them. For example, it is clearer to state that a metric’s target is to reduce complaints down to two per month than have a 50 percent reduction per month. This communication element is a detail often overlooked, but it is important that employees have a good sense of what success might look like.
Good metrics will:
- Drive the strategy and direction of the organization
- Provide focus for an organization, department or employee
- Help make decisions
- Drive performance
- Change and evolve with the organization
- Produce good internal and external public relations
How to Implement Effective Metrics
The following five steps cover the basics for setting up organizational or process metrics:
1. Define the metrics
All metrics should be clearly defined so that an organization can benchmark its success. One way to keep metrics understandable is to use the SMART (specific, measurable, achievable, relevant, time-based) model. The Achievable step in this model is particularly important. There’s no point setting targets that cannot be achieved, as people will feel defeated even before they begin.
A word of warning: Set metrics carefully, or they could damage the business. For instance, a bus company with a metric based on how many buses complete routes on time could result in bus drivers speeding, jumping traffic lights, taking short cuts or missing skipping bus stops to make better time. Metrics should not encourage employees to take negative actions.
2. Secure buy-in from senior management and employees
The successful implementation of any new metric requires the approval and interest of senior managers. They have to lead the culture change from the top. Using a new set of metrics to measure performance is a change that may well attract resistance from across the company, so high-level endorsement and open communication is needed to get everyone on board. Also, linking bonus payments to metrics can be an effective way of achieving buy-in. But the payments must reflect the priority of the metric. For example, if the company has stated that safety is its number one priority and then only apportions 10 percent of the total individual bonus to safety programs, that sends a contradictory message to employees.
3. Understand what data is needed and how to collect it
It’s not unusual for companies to set a metric, only to discover that either their processes or tools (or both) cannot generate the data they need. It could mean some investment is required, but be clear about how much the business will benefit from having the metric before spending money. Metrics need to be reliable and give out the same answer no matter who calculates it. They also need to be standardized, with data being collected in exactly the same way across single or multiple departments, facilities and offices, nationally or internationally.
Fudging metrics benefits no one. To deliver real progress, everyone involved with the metric needs to be completely honest. This may be a difficult pill to swallow because it can raise questions about why the business is not performing as well as had been thought. But understanding the company’s true position is the first step toward improving it.
4. Measure and share the results
It may seem a little obvious, but a large number of companies go to the trouble of designing metrics and buying expensive tools, and then do not actually do very much with the results. Usually it is because too many metrics have been set. So keep it manageable – it is better to have five meaningful metrics that the organization will use than 50 that it won’t.
Use metrics to learn from others. Never hesitate to contact another person in the company and ask how they are progressing. If the organization has multiple sites or divisions, leaders should set up regular meetings to review progress, share experiences and successes, and discuss problems.
5. Do not forget the “continual” part of improvement
When implementing metrics, don’t forget that the organization will need to revise its metrics from time to time. The process is needed because businesses evolve and changes will surface as time goes by. Make sure the metrics still measure what they intended to measure. After all, if the metrics are out of date, then what is the purpose of retaining them?
The aim of a setting metrics is to improve the business, so set targets that challenge the company. It will provide more value than focusing on something that is easily achievable or is already being achieved.