Are you measuring what matters?

“People do what you inspect, not what you expect.” – Lou Gerstner, former IBM CEO in his book Who Says Elephants Can’t Dance?

I love that quote! I’d also highly recommend the book – it’s a fun read and full of great advice.

Effective metric design isn’t just for managers; it’s a critical skill for everyone.

Why care about metrics? Well, they’re useful in all sorts of ways. They help you understand how the area or business you’re responsible for changes and help you focus on the results you want to achieve. However, as Gerstner also points out if you use metrics that don’t measure what you intend to measure then you can be in for a nasty surprise.

Metrics: The Basics

There are a few simple guidelines to keep in mind when designing a system of metrics:

Good metrics focus on what you care about. Often people will try to measure EVERYTHING. Well, you can’t and you shouldn’t try. You should focus on measuring the small set of things that really matter. This is especially important for managers because managers who are focused generally have highly effective and happy teams.

Good metrics are actionable. You only want to measure things that you intend to act on and that you know how to affect.

Good metrics incorporate any two of the following three things: 1) beginning state; 2) end state or 3) an amount of change. If you specify any two of these things then figuring out the 3rd is easy. For example, the following metrics, while stated slightly differently, are really the same:

• “Increase customer registrations from 6MM to 6.6MM users in FY15”
• “Increase customer registrations by 10% to 6.6MM users in FY15”
• “Increase customer registrations from 6MM users by 10% in FY15”

Good metrics measure outcomes (results) rather operational efforts. For example, if your goal is to get a plan approved, “Get Plan Approval by Jane Smith by End of Q3” is a much more effective metric than, “Run meetings to get plan approved.”

Good metrics have reasonable measurement costs. Your focus should be driving change rather than measurement, so spend a reasonable amount of time and money on measurement. For example, measuring Seagate brand awareness in every country we do business in would be incredibly expensive so we select a representative set of countries to measure.

Good metrics have a single named owner for the metric. Multiple ownership of a metric usually means no one owns it. If a group is responsible for a metric then putting the group leader’s name as the owner is a good practice.

Good metrics balance each other. The Engineering and Operations folks out there know this one well. People do focus on what they’re measured on and will sometimes optimize their results on that metric at the cost of other things that are important. For example if you measure unit production (manufacture X units in Q2) without a balancing quality metric then you can end up with a high quantity of units that aren’t high enough quality to ship to customers. However, something like “manufacture X units that achieve 98% quality in Q2” balances production AND quality.

Metrics for Marketing

For my fellow marketers, the good news is there is a finite set of metric categories for you to work with. I’ve come up with five and they’re listed below with some examples.

• Completion: Plan Approved, Product Launched, Program Launched
• Sales: Units Sold, Subscriptions Sold, Unit Mix
• Financial: Revenues, Profit/Margin, Cost Reduction
• Customer/Partner Impact: # of Customers or Partners Registered, Customer Satisfaction %, Partner Satisfaction %, Unique Website Visitors Annually, Partners Trained
• Awareness/Preference: Awareness %, Preference %, Event Attendees, Unique Website Users

The marketing team at Seagate generally focuses on a small list of key metrics. Individual teams do have their own metrics since they focus on specific areas, but in every case must ask how an hour or a dollar spent will eventually show up as an impact to those few key metrics.

To sum it up – creating metrics and using them to manage how you and your team focus is a critical skill for everyone.

Comments and feedback are always welcome.

Scott