The promise offered by emerging technology trends like big data and cloud-based analytics should have helped executives develop greater insight into their business, allowing them to transform and innovate, thus heralding a new era of productivity gains for the larger economy.
If executives are tracking the wrong numbers, then the true business issues are missed. IT firms in particular need to focus in on tracking the metrics that actually matter to their success. By identifying and tracking just a few key metrics, organizations will be able to perform better and grow. Here’s how you can arrive at the metrics that matter:
Narrow your focus
Too often, companies begin amassing dozens of reports, tracking numbers on top of numbers, hoping they’ll all fit together and light the way to success. But with attention being pulled in different directions by so many reports, hours are wasted tracking the wrong metrics.
Consider the typical doctor-patient annual check-up. The doctor monitors several basic health indicators of the patient—such as blood pressure and heart rate—at every regular visit. They don’t add on MRIs, EKGs, explorative surgeries among myriad other tests just to assess your basic health. Doctors understand that there are only a few key numbers that they need to review to track a patient’s overall health. They focus on a few specific measurements, rather than pulling out every health assessment available to them. Only if there is something unusual that stands out will they add on other diagnostic tests to investigate potential problems further.
IT firms should follow the same process. Companies must focus on a few key metrics that indicate the true health of their business, rather than getting lost in dozens of less important metrics. Those key measures should directly relate to business goals. What are you trying to manage? For example, if you’re trying to increase revenue significantly over the next year, you should be tracking revenue predictability closely – are your forecasts accurate enough?
One way of ensuring you’re tracking the right metrics is understanding the connection between your metrics and your overarching company vision or mission. Not sure how? Try a “performance cascade,” a process by which you break down your organization’s mission statement into a series of steps that are assigned to specific team members and subsequently measured and tracked. This creates links from the top of the organization to frontline workers and helps ensure that you’re measuring how your company is progressing towards its goals.
Prioritize metrics that will help with forecasting
A major issue among IT firms is that many of the business performance reports they develop are looking in the rearview mirror, when they should be more focused on the road ahead. Once the firm has identified the most important reports to focus on, it should ensure that they always first consider the data points necessary for business forecasting. IT firms should always focus on the KPIs that can bolster forward-looking business plans because tracking these metrics is key to maintaining continuous improvement and growth. These often include measurements such as billable utilization, annual revenue per billable consultant or profit margin.
Part of the key to collecting the right data for solid forecasting is avoiding “vanity metrics.” You certainly shouldn’t let your attention be distracted by reporting on the numbers that paint the rosiest picture. Every business needs to plan ahead in order to make the best strategic decisions and avoid speedbumps and, therefore, forecasting-related KPIs should be prioritized above other measurements.
Use measurements as motivation
As tech-focused as IT firms are, you can’t forget about the human aspect of the business. Creating an environment that revolves solely around metrics creates stress, lower engagement and lower productivity. In essence, if meeting benchmarks is the only thing that the firm seems concerned about, then the business will suffer.
After identifying and beginning to focus on the right metrics, it’s up to the leaders to coach employees based on these numbers. If employees aren’t meeting their metrics, it’s counterproductive to criticize them. Managers should instead consider the whole picture painted by the data and use that to inform how they lead their teams moving forward.
There are potentially thousands of data-driven insights that can be interesting and can throw up new revenue opportunities, cost savings or efficiencies. But what if, in winning those battles, you lose the war? It can be death by a thousand cuts to meander from one initiative to another based on whatever newly discovered metric is in vogue. That’s not a long-term strategy for business growth. Establish the things you want to achieve and then narrow down to just the metrics that are most relevant to that goal. Measure what matters.