Is your metric strategically oriented? Does it provide guidance and value?
- In the world of retail, there are a few common metrics. Number of customers, retail conversion rate, average sale and gross margin. Let's say we have a new employee in the company. Actually, they're new to the world of retail. The manager tells this person the numbers should all be high. As an employee it's her job to make those numbers big. But we have a problem. The new employee doesn't know what these numbers mean or why they're important.
Why are the metrics there? To motivate employees. To guide them toward good behaviors. The metrics are supposed to help our people make good decisions. The problem is if our people don't know what the metric means, how can they be expected to understand which behaviors they should change? Our best employees don't necessarily want to be told they're good or bad. They want feedback. They want to know where they're doing well and of course they'd like to know what in particular they need to improve.
Plus if you're a manager, especially a manager that can't be on location all of the time, you want metrics that are easy to understand so employees can manage themselves. This does not mean we need to eliminate challenging or advanced metrics. It simply means that if we plan on using advanced metrics, we need to first explain why the company is using that particular metric. Deconstruct the metric, basically take it apart so everyone can see how it's calculated.
Finally, we provide coaching. Make sure employees understand which actions make the metric improve. Actually, I think these three steps aren't just important for the more advanced metrics, these actions can also be extremely helpful with your most basic metrics, too. We've already established that organizations love to use metrics to motivate good behaviors. But, if your organization really wants to manage employees with the help of metrics, make sure the metrics are easy to understand.
And, when possible, provide coaching and make sure employees are trained on what the metrics measure and how the metrics will be used. Remember, employees can't make good decisions when they're confused.
- Metrics and human behavior
- Common corporate errors in measuring
- Developing a good metric
- Using the performance measurement tune-up
- Avoiding redundancy
- Using dashboards, infographics, and other data visualization tools