How to Develop Business Management Metrics

“How you gather, manage, and use information will determine whether you win or lose” Bill Gates.”It would be nice if all of the data which sociologists require could be enumerated because then we could run them through IBM machines and draw charts as the economists do. However, not everything that can be counted counts, and not everything that counts can be counted”. William Bruce Cameron.Dr. Edward Deming, one of America’s foremost quality management gurus, is renowned for helping the Japanese recovery process. Japan was the China of the 1960s; flooding the world with low quality products. When Dr. Deming visited Japan; he taught the Japanese to focus on quality instead of quantity. He introduced the concept of Kaizen (never ending improvement) into the Japanese work culture. This concept was responsible for propelling this war-ravaged country to becoming the second biggest economy in the world and remains the mantra of most Japanese until this day. One of the tools Dr. Deming introduced to the Japanese was measurement of results.In order to constantly improve, you need to be aware of your past and present position and future destination. Measurement of management metrics is very crucial for the success of any business venture. It is no accident that the most successful companies of our time: Microsoft, Google, Facebook, YouTube are all technology oriented companies. With the tools available to them, those companies are capable of testing and measuring every aspect of their business operations.

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This ability to test and measure their activities gave them huge advantage over other types of businesses. Before producing an iPod, Apple would have an estimated guess that is as close as possible to the amount it is going to sell.What to MeasureIn any business, the critical elements that must be measured if the business wants to succeed are:
• Marketing activities and results.
• Customer acquisition and retention.
• Financial results.
• Employee performance.
• Business development.
• Supplier performance.There are other metrics that can be added to this list, depending on the industry, however, the metrics listed above can work in any industry. Even though there may be the temptation to create lots of metrics it is very important that metrics are limited to essential measurements.Every metric must be:
• Connected to the overall goals of the organisation.
• Acceptable to all stakeholders.
• Measurable.
• Directly linked to past, present and future performance of the organisation.How to Develop Business Management MetricsThe process of developing business management metrics must start with the development of a core metric. This could be a single marketing denominator such as number of customer acquisitions per month, amount of profit per customer acquisition or staff performance.After you have decided on your core metric, ensure it is communicated to every employee in the organisation.The next step in the process is to segment your metrics into the following categories:
• Business visionary metrics: this relates to the vision you have for your business. Is your business progressing the way you envisaged from the start? Are you achieving the goals you set for your business?• Management metrics: this relates to the actual running of the business. How is the business performing in terms of cashflow, profit, operations and processes?• Systemic metrics: this relates to your systems. Do you have the right systems in place? Are your activities automated? Can they be duplicated and replicated? Are they transferable and teachable?What to Focus on in Each Key MetricMarketing metrics:
• Quality and cost per lead.
• Closing ratio.
• Cost per customer acquisition.Employee performance metrics:
• Acquisition cost.
• Training Cost.
• Turnover ratio.
• Salary as a percentage of income.
• Cost as a percentage of profit.Customer relationship metrics:
• Number of customer acquisitions.
• Cost per acquisition.
• Percentage of retention.
• Cost of retention.
• Number of lost customers.
• Customer complaints.
• Customer satisfactions.
• Customer value.
• Profit per customer.
• Value per transaction.Financial metrics:
• Profit per transaction.
• Cashflow.
• Gross and net profit.
• Return on investment.
• Current and future income.
• Current and future profit.

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Supplier metrics:
• Achievement of objective.
• Quality of delivery.
• Delivery timeframe.
• Cost of late delivery.
• Profit per supplier.
• Cost per supplier.Metric TimeframeMetrics need to be divided into quarterly, annual, five or ten year goals and constantly monitored for improvement.However, no metric is written in stone; your metrics have to change as the company grows.Assigning AccountabilityAccountability for metric measurement and compliance is vital for ensuring achievement.
Every position within the organisation needs to be assigned a different set of metrics to monitor.Below is an example of positions assigned with metrics to monitor:
• CEO – income and profitability.
• Marketing director – marketing metrics.
• Operations director – performance and customer relationships.
• Human resources – employee performance.Accountability also helps to reduce unnecessary conflict in the work place. When all staff members understand the metric by which thier work is going to be judged it enables the smooth running of work assessments and appraisals.You cannot hit a target you cannot see.
What get’s measured get’s done!
Always remember that.