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Business Metrics

A business needs to measure its performance from time to time. This helps guide the objectives of the business toward a prospective direction. Business metrics consist of the gauges and measures that indicate quality of performance. The efficiency of performance is judged with the help of business metrics.
There are different types of business metrics, and they serve different purposes. Some purposes that business metrics serve are -

  1. Accountability of performance
  2. Organizational improvement
  3. Efficiency in strategies
  4. Worth of a business
  5. Quality improvement
  6. Evaluation of growth
  7. Estimation of future potential

The above mentioned purposes are just a bird's eye view of what business metrics do. They are used for other purposes too, with each one catering to a different purpose. Any changes in the functioning of a business are bound to change the strategies and measures. A timely and adaptive measure is to make use of the appropriate business metrics to handle the tight and tough situations.

Since different metrics solve different purposes, choosing the right one is often challenging. However, there are standard features for determining a good metric. Some of the properties are -

A good metric must reflect good progress in performance and quality. Going beyond a strategy, the metric must provideclarity on the measures implemented.

Long-run Performance
A good metric must be able to achieve the long term goals of a business. Too much focus on short-term gains should be avoided.

Metrics should be formulated based on each and every aspect of the plan. Emphasis on just one element or factor of a plan is not wise. The benefit arising from the implementation of the metric should be contributed to all the elements of the system.

Companies need to be prepared for changes, internal and external. Change is an inevitable part of a business. Hence, the adaptability of business metrics to those changes is essential. Poorly formulated metrics will not serve any purpose and the company will not enjoy any increased profit margins. If metrics are used well,  the company can witness a positive change in the financial graphs.

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