Performance metrics are used to quantify various activities in a company, including productivity, marketing, financial performance, customer relationship management, and environmental impact. These metrics can reveal bottlenecks, waste, and opportunities for improvement. Feedback from metrics is used to map out a strategy, and the relationships between different metrics are key to unlocking valuable insights.
Performance metrics quantitatively define the performance of various activities in a company. Types of performance metrics include those used to analyze business productivity, marketing and sales, financial performance, customer relationship management, and environmental metrics. This list is not all inclusive, as metrics can include anything within a company’s business domain that can be measured analytically.
Productivity metrics analyze factors such as hourly production, days lost due to injuries, and the frequency of supply chain disruptions. An example would be using performance metrics to determine which shifts are more or less productive or how many hours of work have been lost due to workplace injuries. Another example would be manufacturing output measured against performance incentives.
Quantitative productivity data can be used to justify retooling costs, for example, or to reconfigure the manufacturing operation as a whole. Production metrics can also reveal bottlenecks, slack in the system, or excessive waste. Some companies have significantly reduced manufacturing waste by tracking and analyzing waste material, then using those metrics to adjust future orders of goods and materials up or down.
Marketing metrics can be used to measure product line performance, sales team performance, competitor analysis, or to measure consumer demand and engagement. Responses to advertising campaigns and data derived from opinion polls are also examples of the types of metrics used to quantify a company’s marketing efforts. An article published in CFO magazine in 2007 reported that Best Buy discovered, through monitoring performance metrics, that a 0.1% increase in customer engagement correlated with a USD $100,000 (USD) increase in operating income year of a shop. Financial metrics analyze a company’s fiscal strength and performance in terms of cash flow, profit margin, overheads, cash reserves, and other similar quantitative data.
Stakeholders, such as consumer advocacy groups or company shareholders, can consider corporate responsibility as revealed through an analysis of actual social performance. Such environmental metrics can also track social responsibility by calculating a company’s environmental footprint. Environmental metrics can also quantify the impact of weather patterns on productivity or how the local labor market can impact recruitment and job retention.
Tracking feedback from performance metrics produces hard evidence, which a company uses to map out a strategy. Collecting raw data alone is not enough. The key to unlocking valuable nuggets of information is to associate one set of metrics with another. Only then are the relationships of one metric key to another revealed.
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