Yesterday I looked at reasons to be skeptical of metrics, which carry inherent dangers. However, that is not to say that metrics should be thrown out. Measures of your organization and its performance provide hugely valuable information when done well. Here are four tips for making the most of your metrics.
Let logic drive your metrics, not the other way around. Metrics exist to answer questions. However, in practice they often dictate the questions we ask, simply because they lend themselves more easily to answers. Your use of metrics should be based on 1) how you intend for your organization to add value and 2) understanding why it is or is not doing that.
When you think through the metrics you’ll use to measure your business, start by thinking about the strategic outcomes you’re trying to impact. Generally these will be fairly straightforward. That’s good, since you’ll want to spend most of your time thinking about the levers that will facilitate or impede your ability to have that impact.
This is the way to build a organizational metrics framework or dashboard. It’s not about simply picking from the IRIS list. Their suggestions may be helpful, but if your dashboard includes zero metrics that are unique to you and your social enterprise, you’re in trouble.
Think tachometer, not speedometer. Think about your car dashboard. You probably spend the vast majority of your time looking at only one of the many bits of information available there – your speed. Yet, that information only allows you to answer one question. That is, “Am I driving at a safe speed/within the speed limit?” It tells you nothing about how the engine is performing, your fuel efficiency, or the danger of over-heating, running out of gas, or popping a flat tire. On the other hand, the tachometer, which measures your RPMs, can, indirectly, tell you your approximate speed, the stress you’re putting on the engine, and also give you information regarding your probable fuel consumption.
The point here is that the unsexy operational metrics that help you understand what is going on in your organization are often much more valuable than the benchmarks and bottom-line measures, whether those be economic, social, or environmental. In fact, when done well operational metrics enable better decisions and even prediction of future performance, whereas bottom-line metrics generally tell you how you’re doing without helping you understand “why.”
Revise your metrics regularly and be careful in your use of benchmarks. Firstly, your metrics should serve you, as a manager, first and everybody else outside the organization second. So don’t be afraid to measure your organization in ways that are unique to your goals and your model. If that means blowing off benchmarks, that’s okay. After all, benchmarks, at best, allow you to roughly compare yourself to others and, at worst, force you spend time measuring things that are not very helpful.
In addition, as your organization evolves, as you learn more about what drives it, and as the environment surrounding it changes, so must your metrics. So assume you’ll be revising them regularly, based on the new questions that arise.
Don’t just build metrics – build measurement capability. Using metrics to answer your unique questions and revising them regularly to keep up with changes in your organization means that building measurement capability is more important than building metrics. If you want to be a metrics maven, worry first about having the infrastructure and processes to support data-based decisions and second about whether you have the perfect dashboard.
Contributor Profile: Mike Shoemaker
Mike is a graduate of St. Olaf College in Minnesota and a former Fulbright Scholar at the Universidad de los Andes in Bogota, Colombia. Mike currently manages strategic alliances for a global consulting firm, is a volunteer and advisor to The Ayllu Initiative, and blogs at Human Ventures.
Twitter: @soccapital
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Great article Mike and so true. As I work on the @BTFE program at General Mills, metrics are starting to drive all that I do and why I do it but I think it's so important to constantly re-examine the why's. Along the sames lines, we're trying to do the same with @SocialEarth!
[...] post covers three inherent challenges of metrics and reasons to proceed with caution. Tomorrow’s post will discuss how to make them work better for your social [...]
Metrics serve two purposes:
1. They inform on progress to the overarching strategic objectives. These are usually tough metrics to grab, but incredibly meaningful. In the microfinance world, this would include number of lives transformed or number of markets with liberalized bank lending practices. These metrics should be outward-directed, and closely tied to the long term goals for the organization. These metrics tell whether you are effective, and you should be plotting your progress toward the long term goals to ensure that your trajectory is adequate.
2. They inform on organizational health or capacity. These metrics are internal, and they tend to be activity-related. Again from microfinance, examples might include money raised, loans granted, articles generated, or spending to/beyond the budget. These metrics are important to tell you whether you are being efficient in your use of capabilities, but they do not tie directly to your results.
I view the latter as being closer to the dashboard metrics you discuss in your article – vehicle speed as well as engine speed tell you whether you are operating safely and within the capacity of the machine and the road, but you need another set of metrics – provided by your GPS – to tell you whether you are actually getting closer to your location and time goals.
Great points. Thanks, Jose. I like the GPS analogy.
Great points. Thanks, Jose. I like the GPS analogy.