I'm really passionate about this topic, because I believe that metrics are incredibly powerful tools with the power to guide an agency to exponential growth or closure. Metrics are all about numbers and statistics, but they mostly tell a story. Metrics' considerable power is proven by how much damage they can do to an organization. A metric's value is rooted in the inherent ability of metrics to ignite conversations and focus our attention on those things that really matter. Yet, they should not be viewed as the truth. While they may be facts, they may not be measuring what was intended or interpretation of the facts may be incorrect. Metrics are simply indicators.
Metrics have been with us for considerable time. The first reference I could find was a quote attributed to Galileo sometime in the 16th century. "Measure what is measurable, and make measurable what is not." Now this guy was truly a visionary. More recently Peter Drucker, an acclaimed Economist and business author, said, "What's measured, improves." I believe he's right...whether you're measuring your waist or a process. If we want to measure something, we need it defined and, once defined, we can collect metrics to give us that critical feedback we need to make informed decisions.
So, what are metrics? Investopedia defines it as "Parameters or measures of quantitative assessment used for measurement, comparison or to track performance or production." I think that's a good definition, and the best I was able to find. But to me, metrics are more than just statistics. To me a metric is the way to tell a story for the purposes of improving the organization. If our organization was being run perfectly we wouldn't need to spend resources to design, collect and analyze metrics. But. of course. you wouldn't know for sure how well it was running if you weren't measuring it. Your opinion would be purely subjective and likely carry little weight with others. Metrics are a way to answer our most important organizational questions and convince others of their truth.
There are 4 main reasons to use metrics:
- To improve products and services
- To improve organizational health
- To guide process improvement
- To make credible business cases for additional resources
One of the most significant benefits of using metrics is that they act as a catalyst to investigate and discuss organizational issues. They focus attention on those issues that really matter. They also provide a feedback mechanism. Most improvement tools like Lean and Lean Six Sigma rely on metrics before, during, and after you conduct improvement efforts. "You can't fix what you can't measure" is an old business adage. I think that's true. You first need a baseline so you can measure the effects of any changes made, and then you will need to monitor those changes over time to ensure their effectiveness. Metrics make it possible to make credible business cases for more resources. Finance will prefer to make decisions on a business case supported by quantitative data over a business case supported by qualitative data. The one with the data usually wins the battle for competing resources.
But metrics can also have a dark side. Metrics are indicators of current or past conditions--they are not truth. The proper initial response to any metric anomaly is to investigate not act because your conclusions regarding the metrics can be wrong. Let me give you a few examples:
Example 1--We had a client that was quite concerned that client demand had decreased over time, but they felt busier than ever and could not understand how this could be the case. They believed they were facing a layoff once Finance discovered this fact and were quite concerned for the future of their department. Upon investigation we discovered that demand was being measured by total job volume and by this measure their volume was down nearly 20% from the previous year. However, we also looked at their billable (value added) hours which were up nearly 10%. They were not tracking job by tier (complexity), which was rectified, but it was also likely that their job complexity was increasing. This is why job volume is not a good indicator of demand. This is a case where the metric job volume was not accurately measuring client demand.
Example 2--We had a client that confused utilization and productivity. She was collecting utilization metrics (billable time/available time) but she wrongfully interpreted low utilization as low productivity. Over time she was replacing people with low utilization and kept those with high utilizations. As it turned out the company policy was to distribute work daily and relatively evenly across the department. The more productive staff was those with low utilization because they were faster at completing their work. This is a case where the metric was misinterpreted.
Example 3--We recently asked a client if they measured utilization and what their average utilization was across the department. We were told that it was north of 95%. This seemed unusually high and likely not sustainable for long so we investigated further. As it turns out they were calculating utilization incorrectly as entered time divided by available time. This methodology measures time entry compliance not utilization and should always be 100%. The proper calculation is billable time divided by available time and should measure the amount of time we are adding value to our clients' projects. This is a case where accepting the metric as truth without further investigation may have led them down the wrong path.
Metrics are powerful tools. Like most powerful tools they can do considerable good, as well as serious damage. You need to be careful, take precautions and respect their power. But don't elevate metrics to the position of truth. Metrics should never replace common sense and personal involvement. Metrics can point you in the right direction but can't solve your problems.