Since the beginning of time, Humans have had the need to keep track of everything they interact with, from how many sheep in my heard (back in ancient times the more sheep, goats you had signified great wealth), how many slaves do I have under my rule that can build me a couple of pyramids, at what angle the sun is in relation to the earth to be able to track time, to the millions of dollars in revenue in sales did a Fortune 500 company produced this quarter, and how much manpower do they employ to the man hours they work weekly. If you think about it, metrics are everywhere, Yes! Everywhere.
Every time you look at your watch, or when you glance at the speedometer of your car to make sure you don’t exceed the number of miles per hour posted on that sign you totally ignored just now and the police cruiser appears in your rearview mirror so you can start pressing the brake because you were not going eight or ten miles over the limit but rather 20!. The point is that as humans, we have the need to track everything. Your bank account app tracks the money you earn and spent by overviewing this information that goes through that specific account, even as I write this article I have a little tracker that tells me how many words I am typing. So know that I got you attention and your mind is mildly blown because you really never thought about the importance of measuring and keeping track lets focus a bit more in the business and technological side of metrics.
The dictionary has several definitions to describe the word Metrics, this based on what type of metrics you are focusing on, I find that fascinating because it tells me that this subject is so incredibly broad that the word that describes it has several variables in its own definition. However we are going to go with the simplest one published on the Webster Dictionary which describes metrics as “Denoting the science of measuring as applied to a specific field of study, a method of measuring something, or the results obtained from this”. The word finds its origin in the Greek word metron, or metrikos which translates to meters, which was one of the first units invented to measure distance. In business, the definition can be expressed as a quantifiable measure that is used to track and assess the status of a specific business process.
It is imperative to denote that these business metrics are targeted to reach specific audiences surrounding a business, for example investors, customers, employees including executives that want to track the performance of their workforce. Every area of the business has a specific performance metric that should be tracked, for example sales managers track monthly sales, they can also measure the performance of their team as a department in general or by individual salesmen.
So why are business metrics so important?
Let’s go back to the simple example of the speedometer. Imagine if you were cruising down the freeway and suddenly your speedometer stopped working? How could you know how fast you are going, if you are going at the correct speed in order not to get a speeding ticket? You may say “ Well I will try to keep up with other drivers, but do you really trust other drivers? What if they are speeding as well, they just don’t care? Well the same thing happens with business metrics and this is also the part where technology plays a crucial part. Let’s say that Bob is a Sales manager at a retail company. He is in charge of his store sales and has to submit a monthly report to the regional manager who in turn has to gather all the store sales in the region to submit to corporate headquarters and the numbers just keep climbing all the way to CEO levels.
Bob’s job is crucial at submitting accurate data on his numbers, if he submits less or more than what the branch actually made, guess what? Yes this will affect the regional numbers which will affect the national results, and so on and so on. The company may end up submitting a final number that is not real and this can affect the revenue, performance and credibility of this company (just for starters). This is where technology is playing a crucial part, let’s face it a supercomputer with the ability of process and calculate millions of numbers is going to beat your brain at performing the same task. Technology helps reduce human error and make metrics more and more accurate also making the data gathering and delivery much quicker. In my many years crunching metrics for banks I have personally seen the evolution of these methods.
If you still think Excel is totally awesome and enough to perform in today’s environment? Guess again. There are thousands of technological companies out there with incredible platforms that can withhold incredible quantities of data, create the appropriate graphs and charting for the visual enjoyment of their targets. These companies also have the ability to personalize their services to their client needs making metrics even more interactive, accurate and user friendly than ever before when you had to count your sheep or your crops manually.
So it is safe to say that the basic information in this article is a good introduction to the incredibly wide world of metrics and how it can apply to virtually anything. Next time you look at your bank statement, your investment portfolio or even your car speedometer you will remember how crucial it is not only to be able to measure and track this information but also the importance of this data to be accurate.
The next time you look at your bank statement to realize you had less money than you thought and discover these numbers are actually true after you review your activity summary reminding you of that weekend shopping spree, or actually identifying a transaction you didn’t do and allowing you to report this to the fraud department, you will realize how truly crucial carrying business metrics or metrics in general are in our lives. In future publications we will get into specific markets and subjects of business metrics.