Business metrics is an area that is easy to talk about but not so easy to implement. If you ask someone for a definition, they will probably tell you that, 'metrics are the quantifiable measures of your business performance', or something to that effect. And, while that's a true statement, it doesn't necessarily help you actually do anything about improving your use of metrics.
One of the problems I've found in working with metrics definition is that people usually want to start at the wrong end of the equation. What I mean is that often the first thought is about what numbers are available to gather rather than identifying what key indicators will help you understand your processes better and contribute to improving the bottom line. Once you identify what indicators are important, then you can see if you are collecting the appropriate data to define the transformations that will convert that data into meaningful information and knowledge.
The second issue I often encounter is considering metrics in a "one size fits all" way. The metrics that are meaningful to the CFO are much different than those that concern account managers or traffic managers. So it's important to recognize that something like 'utilization rate by resource type' may be extremely interesting in one context, but meaningless in another.
As you look at metrics that will be useful within your organization it's helpful to think in terms of metric categories. For instance, metrics at the job or project level might include things like:
- Job count by type - this could help inform your resource planning
- Job count by month - many organizations experience seasonality changes in demand which, again, can help with resource planning
- Costs by type - very important for pricing structure
- Profitability by type or client - this may lead you to change your sales focus or even fire a customer!
At the fulfillment level you may track task details such as duration by type and by resource which can help drive standardization and efficiency improvements.
Next, and some would say most importantly, you can track Key Process indicators (or KPIs). Some examples would be:
- Rounds of approval - if you segment your jobs and track things like new creative separate from more derivative projects, this can point out some interesting discrepancies.
- Errors - this is, of course, an important thing to understand. You want to do everything right the first time, but it doesn't always happen. The important thing here is to take a long hard look at how you define errors. (It's not an error if the customer changes their mind.)
- Change Orders - speaking of changes, it's important to understand how often projects are changed along the way. And it's especially important to track reasons for changes and work with your customers to reduce changes. They usually result from a lack of up-front planning, and can result in a lot of wasted effort.
Finally, what do you do with all of this information that you are collecting and calculating? Well, that's a big topic by itself, but here are some requirements for communicating metrics information.
- Be Current - Metrics should drive decisions, not just be an historical report
- Be Relevant - Each audience has their own set of important measurements
- Be Concise - Raw data is usually not very meaningful. Identify the summary statistics or the calculated values that impart the most information in the most efficient way.
- Be Creative - Consider what kinds of summaries or charts or other indicators will most effectively communicate the important facts
When used effectively, business metrics can help improve your process efficiencies, help you bring more value to your customers, and improve your bottom line.
Les Johnson , a Cella consultant, has nine years of experience providing technical solutions and process improvement in the Creative Services environment. Les is a certified Six Sigma Black Belt and provides process analysis and improvement services to clients. These services include process mapping, improvement activities and recommendations for process changes to improve efficiencies and reduce costs.