Entrepreneurs and business folks today use all kinds of metrics to measure the health of their company. Many times, however, these metrics might not give a true sense of what's actually happening in the business. The inability to arrive at what is working and what is not can be very frustrating.
A successful business almost always has a set of processes to get things done. These might be well documented or just be known by a few key people. A process is made up of a set of actions with or without constraints. An action further has a set of influencers (like people, product, assets etc.) which either influence or are influenced by the action.
Now that these terms have been established, I'm going to outline a 3 step process which can be used to arrive at a set of metrics for a business. Let's consider the business of a grocery vendor who delivers groceries every morning as an example...
Step 1: Understand and deconstruct the processes involved.
A grocery vendor might have several processes like Procure, Deliver etc. You can map the various processes involved by looking at the business through the lens of some aspects like...
- Effectiveness: Doing the right job
- Quality/Efficiency: Doing the job right
- Capability: Ability to do the right job and the job right
- Progress: Extent to which the job is done
- Availability: Bandwidth to do the job
- Output: Result of doing the job
One of the key processes, Delivery, can be deconstructed as shown below...
Step 2: Ask the right questions.
This is easier said than done. Let us take the understanding of various aspects shown above to deconstruct the process and start asking the right questions. The goal here should be of evaluating the business through these questions. Let me illustrate...
| Aspect/Process | Delivery |
|---|---|
| Effectiveness | → How many of the scheduled orders are delivered? |
| Efficiency | → How many orders are delivered as scheduled? |
| → How many orders are delivered rightly to designated customer? | |
| Capability | → How many orders can be delivered to designated customer in time as scheduled? |
| Availability | → How many of the people available are used to deliver the orders? |
| Output | → How many orders are delivered ? |
| → How much revenue is generated out of those deliveries ? |
These questions are not exhaustive. Additional questions may (and should) be asked with respect to situational context, geography, business environment etc.
Step 3: Define the measures and metrics.
Now that the hard part of asking the right questions is over, it is time to define metrics that answers these questions.
- How many of the scheduled orders are delivered?
Number of Orders Delivered / Number of Orders Scheduled - How many orders are delivered as scheduled?
Number of Orders delivered in time / Number of Orders delivered - How many orders are delivered rightly to designated customer?
Number of Orders delivered to designated customer / Number of Orders delivered - How many orders can be delivered to designated customer in time as scheduled?
Total Man hours / Time taken for each delivery - How many people available are used to deliver the orders?
Man hours taken to deliver the orders / Total Man hours - How many orders are delivered ?
Total Number of deliveries - How much revenue is generated out of those deliveries ?
Gross Revenue
There you go. This is a simple yet effective way to map your metrics without missing out on any critical pieces.