Business Metrics

Useless and Useful Metrics In Business

Written by: Coach Online

There are a myriad of metrics that are useful for businesses … measuring causes and results.

However, there are some commonly used metrics that can be quite useless and some others that are less common that can be important. This article looks at some of these.

Useless or Misleading Metrics:

  • (Aiming for low) staff turnover per se. Change itself and having the ‘wrong’ people should rule that out.
  • Vanity marketing metrics . Things like registered users, downloads and raw pageviews. “They can be easily manipulated and don’t necessarily correlate to the  numbers that really matter: active users, engagement, the cost of getting new customers, and ultimately revenues and profits”.
  • Metrics that take a long period of time to source when change is occurring rapidly.
  • Metrics that take more resources to source and collate than the expected benefits from the information they provide.
  • Benchmarks against competitors and the industry when the whole aim is to stand apart from them! This is a big one. Why compare the business to others when, surely, the most significant way forward is through disruption, innovation and creation?
  • Year on year comparisons when change has rendered the past year(s) less relevant.

Less Common Useful Metrics:

  • Amount of time spent in meetings. Too many businesses spend too much time in meetings and it should be measured to show this up.
  • Number of new ideas and initiatives that each person puts forward and are put into practice.
  • Time spent in the business coming up with new ideas and new ways.
  • Time spent by senior or key people on operational matters compared to strategy, direction, innovation and creation.
  • Staff engagement (compared to the more basic staff satisfaction), meaning how connected staff are to the business purpose, each other and the customer.
  • Attributes of customers … meaning age, sex, culture, location, etc. and how this is changing.
  • Return on Assets, calculated as a percentage of Net Profit Before Tax of the net realizable value of the business today (meaning what the business can actually be sold for) and Net Profit After Tax of the net realizable value of the business today. Both of these percentages represent the opportunity cost of owning and running the business, and therefore are crucial to a meaningful judgment of the return the business is generating. For example, if a business could be sold for $1m and has a NPBT of $75k then the Return on Assets before tax is 7.5%. This measure is extremely important for owners, to show them what they are actually earning from the business compared to selling up and investing elsewhere.
  • Proportion of people in the business:
    • Aged 18 to 25, 26 to 35, 36 to 45, 46 to 55, above 55.
    • Male, female.
    • With 0 to 3 years in the industry, 4 year to 7 years in the industry, 8 years to 12 years in the industry, > 12 years in the industry.
    • From different cultures.
    • Aged 25 or younger with influence over decisions.
    • Every business should be cognisant of the optimal ‘spread’ within each category above.

So, review the metrics you are using to ensure they are effective, efficient and that you are changing what you measure as part of your designed move forward.

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