Business Data Analysis: Don't Be Sloppy with Your Metrics

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What metrics does your business use to measure success? Does your management team believe that every metric is a worthwhile metric? As a business data analyst with years of metric management consulting experience, I can tell you that how your management team measures success is critical to actually succeeding. The metrics you choose will determine the effectiveness of your analytics.

The essence of choosing metrics wisely is to look at from the other side. In other words, do not be sloppy with your metrics. Do not choose your metrics based on what everyone else is doing or something you read in a blog post somewhere. Choose metrics that are quantifiable in relation to the short- and long-term goals your management team is trying to achieve.

There are four basic categories of metrics known as process performance metrics or key performance indicators (KPIs), whichever you prefer:

  • Financial Metrics (revenue/expenses, net income, cash flow, etc.)
  • Internal Metrics (inventory, quality control, resources, etc.)
  • Customer Metrics (satisfaction, retention, branding, etc.)
  • Employee Metrics (worker satisfaction, turnover, skills, etc.).

Under each of these four basic categories are numerous metrics that may, or may not, apply to your company. Do not fall into the trap of thinking you have to put time and effort into measuring three or four dozen metrics per category. Only measure what is necessary to move your company forward in the moment.

Guide Without Controlling

Being sloppy with your metrics goes beyond not choosing them wisely. It also extends to not using them wisely, either. As a business data analyst, I have witnessed numerous cases of companies being completely controlled by their metrics rather than being guided by them.

One of the goals of metric management consulting is to teach management teams how to be guided by metrics. It starts with a basic understanding of what a metrics is. A metric is a data point used to measure some sort of perceived value. All the metrics in the financial category measure the financial health of the organisation.

The danger with business metrics, especially when we approach them as KPIs, is one of allowing them to completely dictate the direction of the organisation, as though they were rules to be followed rather than measurements of value. Metrics tell you where you are and where you might be headed down the road. They are not foolproof. Use them to guide business decisions, but do not take them as the gospel truth.

I am a business data analyst that turns routine business data into meaningful information that management teams can use to drive their companies forward. I am a firm believer in being thoughtful and wise with metrics. I'm a firm believer in avoiding sloppiness.

How you use your business data is critical to the success of your organisation. So let's sit down and talk about your metrics. Let's talk about which metrics you use, why you use them, and how they are helping your management team lead your organisation.

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Author: Chris Scanlon

Hullo.  I'm a graduate chartered accountant with 25 years experience in blue chip businesses and the last 15 years in owner manged businesses.  My particular skill is turning data into information. Bringing the performance management of the business alive so that ...