3 Ways to Pick Great Measures

How you Measure is critical for creating clear information to support your decisions.

The nitty gritty on how to get great measure – use a metric!

So far we have worked through a process to drive better decisions by improving reporting:

Firstly, a quick definition :  “A business metric is any type of measuring system used to gauge some quantifiable component of a company’s performance against a standard” so don’t get put off, this need not be complicated – in fact it is best when it is simple.

There are basically two types of metrics used in business:

  • Financial Metrics – these are used to report on the business (to the board, investors, media, etc.).  These focus on using past performance as a basis for predicting future performance good metric is one that makes your predictions more accurate
  •  Management Metrics –  used to optimize the business products, people, pricing, markets etc.  These focus on produce an answer/result that will drive decision making and activities to change behaviors, and preferably increase profit

Metrics that don’t support any kind of decision are likely to be “vanity metrics” –  there to make you feel good but with not much business value; or worse still just plain distracting.



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Here are three rules of thumb for what makes great measures:

  1. A rate or ratio is better than an absolute or cumulative value. “number sold” is not nearly as useful as “% of total sales” – for example “we sold 5 blue ones” doesn’t give as much information as “60% of Sales were blue”
  2. It is comparative to other time periods, sites, or segments. “% of total sales” is not nearly as useful as ”% of total sales per week” OR “% of total sales per shop per week”. The key here is where you track a metric over different groups (in this example shops) over periods of time. Keep it consistent, if you set your metric as weekly track and save the data weekly so you can report the metric properly – TIP – don’t set a metric as weekly but then enter all your sale as 1 July for the entire month of July – the data won’t support the calculation
  3. A good metric has to be incredibly simple and easy to understand. If it is tricky people can’t remember it and won’t discuss it. Make sure the metric name is less than 5 words and the calculation is easily described in under 10 words.

Document it and socialise it to make sure that every person reading the report knows the basis of the measures – the report should exist to help its readers make good decisions for reaching their objectives so it is VITAL they understand how their progress is measured RIGHT FROM THE START so there are no quibbles later when targets are not reached.

Review and update all your metrics – but start with just a few each week until your entire reporting process is clean and clear and you have great measures!

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Now that you have a taste of what we can do… here are some more options to improve your business profits: