Have you noticed how many areas of our life are affected by and driven by measurements? Our financial markets are filled with measures like interest rates, rates of return, and transactional volumes. Students in school are measured through standardized testing and grades, and even our health care is driven by measures such as blood pressure and cholesterol levels.

Measurements touch every aspect of our life, and sometimes it can feel overwhelming just to understand what it all means. How many of these seemingly important measures really drive us to act differently, or are used in making decisions about ourselves and our future? Which measures really matter?

It’s no different in business – there are myriad measures being tracked and monitored on a weekly, monthly and annual basis but how many of these are meaningful and drive our organizations to  “do business” differently? A better question: How many management reports are you generating or requesting which aren’t even being used?

We have become such a data-driven society that we can easily become overwhelmed by numbers. Further, the more data requested of us, tracked, and measured, the more important this information seems to be – at least that’s the perception. Is it all really meaningful, though? Or have we become such consumers of measurements that we can’t discern what information is truly important to make intelligent decisions?

It’s time we all wade through the numbers and determine which measurements are truly important for the decisions we make in our lives and work. Being inundated with measurements only leads to the inability to make decisions – “analysis paralysis”. Instead, think about what kinds of measurements really make sense, and more importantly, which will contribute to good decision making.

Measure what matters

We have all heard the phrase “What gets measured gets done” (attributed to Peter Drucker). Granted, measuring is one way to influence employee performance toward a desired outcome, and we do need some sort of measurement to help us understand whether we are meeting our goals, to assess employee performance and such. However, we probably don’t need to measure everything – or at least most of what we are currently measuring in our management reports.

Take a look at the management reports and other measures you are currently tracking. Assess each of these measures, asking yourself the following questions:
• What knowledge is this measurement giving me that I don’t already know?
• Would a change in the level/outcome of this measurement drive me to do something different?

If the answers to these questions are “none” and “no”, may I suggest your measures are worthless?

Make Measures Make Sense

While good measurements influence us to behave differently, they need to drive the behavior in the right direction. In the business world, measures (and therefore behavior) should be driving employees toward the completion of business objectives. If your business objective is to increase sales margins, and you are measuring the number of sales orders you are processing, it’s highly unlikely you are getting the information you need to accomplish your objective. Instead, you should be measuring the margin on each of your sales, and analyzing sales to determine which are contributing to larger/smaller margins. Each of the measures you are tracking should tie directly to one or more corporate business objectives. If they don’t, then why do you care?

Another way to look at it is like this: what is the information you need to make good decisions on a regular basis? It’s quite likely that the data (or information) can be derived from some appropriate measures, structured in a way to provide you the insights and information you need. Think about your needs and identify the pieces of data and calculations which provide value to your decision making. These are measures which make sense.

Test and Eliminate

Whenever you develop a new measure, it is appropriate to test it for a few periods to determine whether the information you are deriving from the data is appropriate for the purpose. Check your underlying assumptions about what the measure should be providing, and the data sources, and make sure you are getting the information you expect. Remember, this could be different than the results you expect! Fine-tune the inputs into your measures until you are receiving good information and are able to make solid, confident decisions.

It is quite likely that the measures you initially define will not serve you over the long term, perhaps because the business objectives have changed or have been achieved, higher priorities prevail, or something else has happened. Don’t be afraid to eliminate measures which aren’t serving a purpose any longer. It’s amazing to see the number of management reports being created in the average business for which there is no need! Don’t contribute to “busy work” by continuing to demand measures which aren’t meaningful.

Each of us needs some amount of data to make good decisions – in both our personal and professional life. Be judicious, however, in the amount of data you consume. The idea is to make decisions – not be paralyzed into inaction.

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