Developing Performance Metrics:
There are ten to twenty key financial metrics that all organizations should measure. Outside of these should be the key measurements that show the effects our efforts have had, or will have on the key financial metrics. These are much tougher to define than the basic financial metrics. Developing them should start with a need, and the need comes from the desire to achieve some sort of improvement/goal. If you are tirelessly searching for other things to measure, you are approaching it from the wrong angle and should stop. The approach should always be based on the goals and desired outcomes. If you know where you want to end up, that is the best place to start in regards to defining what should be measured and tracked in order to ensure success.
The number of metrics we should measure:
The importance of each metric matters much more than the number of metrics we track. Not everything we can measure is worth tracking. As the organization grows, what was once worth tracking may no longer be important. Periodically we should de-clutter our metrics and make sure the organization is focused on what truly matters.
How to measure the impossible:
Sometimes the only way to measure something is by taking an indirect approach. We may have to measure a couple of things that will get us to the answer we are looking for. For example, if the organization puts on some sort of events and we want to measure how effective they are, we may need to track multiple criteria such as number of attendees, number of leads, and number of resulting sales. Each metric tells us something different, and all of them combined tell us the success rate of the events. When we find it tough to come up with a measurement, we really just have to break it down into the inputs, and in some cases we must resort to tracking these inputs and then combining them to evaluate overall performance.
Don’t know where to start?
If you have not started with metric tracking, start by tracking the key financial metrics. Anything else you track should be derived a problem that needs correction, or a goal that needs to be achieved. And in regards to the time periods to track, it is best to measure things on a monthly, quarterly, and yearly basis, and another good thing to do is to have a 12 month rolling average for every metric, that is recalculated at the time of inputting each new monthly metric. This allows us to see trends and to be proactive in making necessary changes that will lead to improvement.