To quote the award-winning author, Scott M. Graffius, in his book, Agile Scrum: Your Quick Start Guide with Step-by-Step Instructions,* “If you don’t collect any metrics, you’re flying blind. If you collect and focus on too many, they may be obstructing your field of view”.
There’s nothing that specifically states that one metric is better than another. The same goes for a metric being worse. All metrics are useful. It’s all a matter of using the right metric. Specifically, the metric that’s most relevant to your business at a specific period in time.
Simply put, you should base the measurements that your company uses on the stage of their development and the current conditions of the market.
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How Do You Know Which Metrics Are Important?
There are numerous factors involved in choosing the right metric. However, any “good” metric has the following characteristics:
- Relevance to your company’s current status, projected future growth, and primary objectives.
- Capable of measuring progress and pinpointing weak areas with room for improvement.
OKRs, for example, are not typically recommended for smaller businesses. On the other hand, even for larger businesses, this system is not recommended. In fact, experts advise the importance of having everyone, from the top bass down to the lower-level employees, buy into the system first.
The main purpose of the OKR system is to connect a large team of individuals to achieve often outlandish goals on a company, departmental, and individual level. The system does so by making them work together in a unified direction with measurable and tangible results with a focus on growth.
On the other hand, a KPI is best used when a business or company needs to track its progress towards a specific goal over a period of time.
This means that, whereas the OKR system requires constant tweaking, a KPI only changes when the goals do. This means that a KPI from three months ago will not be as relevant as a KPI from today.
While most goal-setting tools follow the same basic principles, there are key differences between each of them that make one more suited than the other.
Case in point, the strength of the OKR system is that it can adjust and evolve while goals are being achieved without necessarily complicating the progress. Not to mention, the targets and goals are intentionally stretched. This is done to minimize complacency and maximize growth. This essentially guarantees that, once the OKRs are set, everyone within the company is still likely to remain on the same page.
In comparison, KPIs usually fail because the data becomes too difficult to quantify.
By combining data with the objectives of the company, as well as targets and goals, the lack of data can lead to the downfall of KPIs. As a result, KPIs become conceptual in nature, essentially defeating their very purpose.
The thing about business metrics is that they’re not as set in stone as one might think.
It’s All About Learning As You Go
Ironically, measuring growth, profitability, and company performance (ROI) can feel like guesswork at times. This is especially true during those times when you fail to hit your set targets and goals. However, as discouraging as this may be, you should not let this get to you.
Perhaps the most important thing when it comes to measuring business performance isn’t just knowing what the right metrics are, but also the ability to adapt and learn from your mistakes, customers, as well as your company overall.
The more time you spend understanding the whys and hows of your business, the better you’ll become at measuring metrics and setting goals that matter the most to your team.
But, don’t let the fear of failure and making a mistake stop you from having goals and measuring business performance in the first place. Remember, moving two steps forward only to move a step back is still a step further than where you used to be in the first place.
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