It is true that to run a successful business, you need to have a solution-attending product or service and then have a great marketing strategy. However, a business can not fully be run by these two things alone. This is because, at some point, you will need to take your business to the next level, and to do this you need to know the importance of business metrics and how much they could benefit your company.
Knowledge is power, and when you launch your startup, you need to understand that as you begin to make all the visions for your business become reality, you will need to take steps for growth. Many businesses and entrepreneurs fail at this and have their startups come crashing down because they did not take the importance of business metrics seriously. The tracking and analyzing metrics are relevant to their business.
What are business metrics?
A business metric is a quantifiable measure used to track business processes and assess an organization’s level of performance. There are hundreds of these indicators because there are so many different types of businesses with many different processes.
Simply put, business metrics are numbers that provide important and accurate data about your business processes. By regularly tracking and evaluating your metrics, you can determine if your efforts will lead to success or failure.
If you want to take your business to the next level, you need to track your business metrics and make decisions based on the data you collect.
Types of Business Metrics
In general, there are two types of business metrics: operational and financial metrics.
Operational metrics are related to the performance of your employees as well as the overall efficiency of your business. You can see processing times, production times, and how long it takes to respond to customer inquiries.
Financial metrics include profitability metrics, the ROI of marketing campaigns, sales figures, etc. Billing and payment software can be used to track financial metrics. This is convenient because your deposit and withdrawal payments are all in one place. Combine this with time-tracking tools, and you have a winner. especially if you bill your clients by the hour and pay your employees.
Importance of utilizing business metrics in your company
Now that we understand what metrics are and the two types of business metrics. Now we need to understand the benefits of metrics in business organizations. The importance of business metrics can not be underestimated.
1. Metrics drive your operating model
For each functional area of your business, you should be able to identify a handful of metrics that drive the results you strive for every day and every week.
Functionality refers to departments such as marketing, sales, product development, operations, customer service, and finance. Once you have identified the desired outcomes for each area, you can drill down to identify the activities and effectiveness metrics that drive those outcomes. Results matter, but you can’t “manage” them.
However, you can control employee activity and effectiveness to achieve these results.
2. Metrics clarify performance expectations
Research from the Gallup organization shows that employee engagement begins when all employees can strongly agree with the statement, “I know what’s expected of me at work.”
Metrics help clarify performance expectations for feature teams and each role within the organization. Engaging employees in choosing appropriate behaviors and agreeing on realistic “red” (bad), “yellow” (more observant), and “green” (good) performance thresholds helps clarify, as I can tell you clearly.
By involving employees in the process, you gain alignment and buy-in from them at the same time. We all know and agree on what good and bad levels of performance look like. In these cases, if you’re struggling to find something to lean on, it’s best to focus on closely managing that person’s projects and tasks instead.
3. Metrics help you to manage more objectively
This is one of the importance of business metrics as metrics provide an objective measure of performance, and this data allows you to manage “fact-based.” Evaluating an employee’s performance isn’t about whether the employee works long hours or is busy. What did they actually achieve? It’s about the results they get.
To be an effective manager, you need to have good metrics data (or other data that objectively evaluates each person’s performance) in front of you. This will give you an idea of what kinds of conversations each team needs to have with its members in order to manage and lead effectively.
By displaying up-to-date metrics on live dashboards, admins can quickly identify individuals who need praise and recognition and those who need coaching and support.
4. Metrics drive business execution
Another importance of business metrics is that you get to keep your metric scores up-to-date, view them on your dashboard, and discuss them in weekly team briefings and 1:1 meetings to ensure consistency of performance and results. “If you look at a company that isn’t doing it, they likely aren’t measuring,” says Larry Bossidy, former CEO of AlliedSignal and co-author of Execution: The Discipline of Getting Things Done. And in Larry’s words. “… these companies that are not executing their goals are not measuring the right things.”
So it is a fact, that when you see companies executing their goals, it is because they take their business metrics seriously.
5. Metrics focus people’s attention on what is important
What is measured is definitely performed. Employees face many competing demands for their time. Knowing some of the metrics that measure performance can help you focus on doing the right thing, especially when the results are shown to colleagues on their dashboard in the software and shared with managers at weekly meetings.
6. Metrics help businesses run more effective meetings
You can’t have a good meeting without good data. You are wasting your time and the time of your attendees. This is an area where many companies struggle. They try to hold a meeting, but much of the data is outdated, missing, or inaccurate. I urge my client to always “tell the truth” on the dashboard when he attends weekly team or 1:1 meetings. Unfortunately, without the latest metric results, managers
- Can’t be sure which areas are working well or need attention.
- You can’t see who is doing well and who needs your help and support.
- Are unable to make informed decisions.
Additionally, if your dashboard software isn’t kept up to date, your ability to motivate your employees is greatly diminished. Keeping metric data up-to-date, visualizing performance, and discussing results on a weekly basis are proven factors of management success.
7. Metrics help businesses hold people accountable.
This is another area where many managers lose control. They invest in software dashboards to visualize performance, but they don’t close the loop. There is a saying that goes: “Successfully executing a business is 20%, which is knowing what needs to be done, while 80% is making sure it is actually done.”
Whether you use a management dashboard or an Excel spreadsheet, you should have effective weekly meetings to discuss metrics and guide your employees accordingly. This is a recommended course of action. If someone is struggling, talk to the non-doer in a supportive, non-threatening way, citing observable facts that appear on a dashboard or spreadsheet, and then ask them three questions:
1. What’s going on here?
Let the employee answer. There may be good reasons why something is not accomplished.
2. What can we do this week to improve this?
Let them find the solution first. Then suggest others. Capture agreed-upon actions as software dashboard tasks.
3. What kind of support do you need?
Make it clear that you are on their side and that it is your job to help your team members succeed.
Then follow up next week to make sure these tasks are complete and assess the performance impact of our metrics. It is important for both parties to be aware if performance issues are identified.
Then you will need to repeat the three questions in the same order weekly. It is important that the employee be held accountable for achieving her performance target level metrics each week to ensure the organization (and individual) is on track.
But progress is not just about holding yourself accountable. As a manager, your job is to guide your team to achieve its goals. Remember, you can only succeed as a manager if your team succeeds.
Before you go…
Hey, thank you for reading this blog to the end. I hope it was helpful. Let me tell you a little bit about Nicholas Idoko Technologies. We help businesses and companies build an online presence by developing web, mobile, desktop, and blockchain applications.
As a company, we work with your budget in developing your ideas and projects beautifully and elegantly as well as participate in the growth of your business. We do a lot of freelance work in various sectors such as blockchain, booking, e-commerce, education, online games, voting, and payments. Our ability to provide the needed resources to help clients develop their software packages for their targeted audience on schedule is unmatched.
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