What is a metric?
Metric is a measure expressed in qualitative or quantitative way.
Example of qualitative metric is excellent customer service or below average product quality. Example of quantitative metric is 25% sales growth or inventory value of $1,000. Business metrics are developed and used for tracking business performances and improving the business.
Because of that metrics are carefully selected and defined by management. Decision makers use metrics to continuously track them and compare them with a benchmark, target, or standard and also compare metrics from one time period to another in order to identify business trends and developments as soon as possible.
Business metrics should support the business strategy and identify trends as well as predict future business developments.
Effective business metrics should be:
- Specific – well defined and specific to the target of measurement.
- Measurable – feasible to collect the required data to measure the metric.
- Actionable – information received from the metric should actionable which means you can act in order to make improvement based on the information.
- Relevant – metrics should be relevant to the business strategy.
- Timely – data is collected and metrics are measured periodically.