Metrics, metrics everywhere but where they should be

Despite being a finance blog, I recently came across an article in Businessweek about the dangers of overmeasuring that I thought was worth sharing. It’s pretty simple but drives the point home. I’ve worked in technology companies most of my career and they all claim to be data-driven. Few really are, and what’s worse, the amount of overhead that goes into producing so-called metrics reporting is horrendous in comparison to the value of its output.

Just because you have a dashboard with 72 metrics doesn’t mean you understand your business…in fact, if anything, it probably means quite the opposite. What that tells me is that you’re not putting your people to good use, and you don’t know how to distinguish what’s important from what’s noise in your business.

Instead of putting in all those man-hours to produce graphs that really don’t tell you anything (and that you likely don’t read anyway), why not take the time to really think about what you need your business achieve and the 3-4 indicators that you’d need to track? How should they be tracked? Remember, sometimes, it’s easier to talk to a person honestly in a one-on-one conversation than trying to measure something in a roundabout way. Like everything else in business, creating meaningful measures and indicators takes a lot of time, thought, and communication.

At the next level down, more detailed metrics can likely be tracked a bit more passively and set off an alert only if something goes awry (say, beyond a particular average, for example). Then you can spend your time looking into what caused that anomaly rather than putting together manual reports each week that don’t really add any insight. I heard a quip at work once that drives this point home. When you read an executive dashboard, it should be intelligible and useful while driving 60 mph, just like in the dashboard of a car. If yours can’t pass that test, then it has far too much info on it.

What’s ironic is that while many analysts spending their work hours busily dicing data every which way, they probably don’t spend enough time measuring in their own personal lives. What’s your monthly budget? How many credit cards do you have? How’s your 401K performed versus the market? Few of us can answer these questions or even think about them on a regular basis. Maybe it’s time to set our priorities straight :)

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