Why Are Metrics Important In Business?

You’ve all heard the quote, “You can’t manage what you can’t measure.” But what exactly should we measure, and how do we measure it? This is a common question, especially in construction. In this blog post, I’ll share some valuable tools and tips to help you effectively measure the success of your business. 

Importance of Performance Metrics in Business

The full quote is: “You can’t manage what you can’t measure and you can’t measure what you can’t see.” Visibility of metrics is crucial, particularly in construction where things can get quite complex. When performance is measured, it tends to improve. Furthermore, when this performance is reported to teams, the company, and the executive team, the rate of improvement accelerates. Therefore, we must measure performance to understand how we’re doing.

Imagine if you were diagnosed with stage one cancer. Would you prefer to find out early when treatment is possible, or later when it’s too advanced? The answer is obvious—you’d want to know early, despite the pain of knowing, because it allows you to act. The same principle applies to your business metrics. Identifying, discussing, and solving your problems hinges on bringing everything to the surface.

Importance of Having the Right Metrics

Remember, if you tell me what you measure, I’ll tell you how people behave. For instance, if you measure project managers solely on cutting costs, they’ll likely cut essential services, jeopardizing project success. Similarly, if a company only measures project completion without considering employee wellness, it risks burning out its staff. Therefore, your metrics must focus on achieving the right outcomes.

How to Measure the Right Things in Business

To find your metrics, collaborate with your leadership team and seek input from your employees. Clarify your business focus and value proposition. Understanding what makes you different helps in defining effective measurements. For example, in construction, if you measure the critical path instead of trade flow and rhythm, you’re likely to encourage harmful practices. So, measure what predicts success.

Avoid focusing solely on financial metrics, which are often lagging indicators. Instead, measure leading indicators that can predict success. For example, in construction, instead of just measuring the percentage of completed plans, track roadblock identification and removal. This focuses on finding and resolving issues before they impact the schedule.

How to Identify Your Key Metrics

Identify your key metrics and ensure they’re leading indicators. For instance, instead of just measuring sales, track customer outreach. Instead of just revenue, focus on strategic hiring, growth, and market diversity.

How to Write Down Your Metrics

Articulate your metrics clearly and assign responsibility for tracking them. For each metric, track progress weekly over three months, aiming for specific goals. For example, if your goal is to make 15 key client connections in three months, track your progress weekly to ensure you’re on target.

How to Track & Make Progress Based on Your Metrics

Regularly track your metrics and report progress in weekly meetings. Make corrective actions if necessary to stay on track. For instance, if you’re not making enough sales calls or engaging with employees enough, adjust your actions to achieve your goals.

In the description below, I will link the template from Gino Whitman’s “Traction,” which can help you implement this system. By consistently tracking and adjusting based on your metrics, you can drive meaningful results in your business.