If You Want to Manage It, Measure It.

“What gets measured gets managed.”    Although this is embraced without question,  lots of business owners are slow to understand its criticality when it comes to effective and sustainable business.   There are many reasons why this is the case, but I suspect that several key reasons top the list. First, many (most?) business owners left their jobs because of  paperwork / ‘red-tape’.  Second, SMEs histori­cally relied on the impression and feeling that their business was doing good more than they did on hard facts andlifeless statistics. Lastly, for a great many quantitative analysis is simply too hard and hence not a priority. So let’s take a brief look at “5 Ms” of measures:-

1. Does measurement really matter?
2. What should you measure?
3. How should you monitor these measures?
4. How do you use measures to moti­vate?
5. What’s the message?

Does Measurement Really Matter? In their book Bullseye! Hitting Your Strategic Targets Through High-Impact Measure­ment, William Schiemann and John Lingle document the differences measurement makes in organizations.

Not surprisingly,  businesses that measured scored 41% higher across the 4 parts of business than  businesses that did not measure.

More importantly,  71% of companies that measured achieved their business plans while only 8% of companies that did not measure achieved their business plans.  Which side of the ledger do you want to be on?   Lets agree that measurement really matters, so exactly what should a business measure? Measuring the Critical Few Every business has four parts: inputs, throughputs, outputs, and outcomes.

• Inputs are generally measures of resourc­es and efforts. That is, how much time, tal­ent, effort or budget went into a particular program, project, event or activity.
• Throughputs are often measures of effi­ciency that deal with things like cycle times. For example, How long does it take to issue a receipt once an invoice is paid?  Clearly, a payment/receipt time of 4 hours is much more attractive than a week.
• Outputs are measures of productivity.  For example, for a millinery company the num­ber of hats distributed to outlets  would be an output.
• Outcomes, on the other hand, would be the number of hats actually sold. Out­comes speak to the end results that your business is seeking. Likewise, a coach might conduct 24 coaching sessions (outputs), but how were skills of participants actually enhanced and what did the participants subsequently impact as a consequence (outcomes).

The simple rule of thumb on metrics is “80/20” – where 20% of your measures will yield 80% of the desired results, insight, or action needed.   To find your 20%,  first identify the Key Result Areas (KRAs) important to your business’ mission and vision.  Generally, there are four to seven areas (more than seven raises questions as to how key the areas really are or how clear your business mission statement is).   How do you know if your KRAs are really key?  They are truly key if:

1. Success in these areas and failure in others will probably not matter.
2. Fail in these areas and no amount of success in other areas will matter.

Once the KRAs are known, you need to identify the Key Per­formance Indicators (KPIs) within each of these KRAs.   For  example, most businesses would say that the area of e-marketing is a Key Result Area. Within this KRA, measures like new vs. old visitors, page visits, bounce rate, cancellation rate, number of orders and average value of order would likely be key perfor­mance indicators. There are some things to be aware of :-

1. There are people,  due either to their aversion to accountability or simply naiveté, like to claim that what they do really can’t be measured. My response!  “If something exists, it exists in some amount,  and if it exists in some amount, it can be measured.”
2. The mere fact that it can be measured doesn’t mean it should be measured, that it’s important to measure it,  or  that it’s cost-effective to capture the data, etc
3. Strive to measure what you want (i.e., those measures that are really impor­tant), rather than resigning to what you can currently measure.
4. Heed Albert Einstein “Make things as simple as possible, but no simpler.” The fewer measures you have without leaving key measures out, the better off you’ll be. Your real goal is to achieve and sustain a strategic focus on what matters most, the more you clutter your dashboard the more this entire exercise becomes self-defeating.

Monitoring Measurement is the first step that leads to control and eventually to improvement. If you can’t measure something,  you can’t understand it. If you can’t understand it,  you can’t control it. If you can’t control it, you can’t improve it