Full Sail Partners Blog

You might be tempted to think that the hardest part of using business performance metrics to guide your business is gathering and analyzing the metrics. 

But equally important — maybe even more so — is selecting the right metrics to begin with. Of course, there are some people who observe that there are no “bad metrics.” The argument goes that a metric itself is neither good nor bad; it could be just as likely that your data is wrong, or possibly that the metric is simply not a good fit for your needs or your organization. 

But even though the metric itself is neither good nor bad, there are other ways that business performance metrics can be failing you. Let me describe three of the most common problems. 

1. Inconsistency. One of the most common ways a metric can go south is inconsistency. Granted, some people think consistency is overrated: the philosopher Ralph Waldo Emerson once railed in his classic essay, Self-Reliance, that “A foolish consistency is the hobgoblin of little minds.” (It’s good stuff — look it up!)

2. Unintended consequences. Another problem is if your metrics are somehow incentivizing your employees to do the wrong thing. For example, imagine your firm has put a recent focus on customer service. Unfortunately, last year you notified all employees that their pay raises will be based on employee utilization rates. The longer your employees spend keeping your clients happy (non-billable work), the lower their utilization rate. You are telling your employees one thing, but your actions are saying the complete opposite.

Although it should go without saying, it’s absolutely critical to make sure that the math and logic that feed into your business performance metrics remain consistent, regardless of the timeframe or operating unit being analyzed. 

So in this example, a better metric would be to incentivize your employees on a combination of utilization rate and customer satisfaction — more complicated to gather, but ultimately closer to what you want to reward and encourage. What’s more, a great reason to plan your metrics with care! 

3. Understanding Lagging vs. Leading Indicators. To be most effective, you need business performance metrics in as close to real-time as possible. Understanding the difference between lagging vs leading indicators can often be the defining factor for setting your firm on the correct course. Lagging indicators help your firm indentify historical trend information, while leading indicators provide predictive information that can allow you to make data-driven decisions to change future outcomes.

QuickBooks, Excel and other office applications can help in collecting and analyzing data, but lacks the sophistication to provide real-time insight. A purpose built ERP, like Deltek Vision, provides front and back office functions insight into historical and predictive information. Whatever tools you use to gather your metrics, be sure to automate the process as much as possible to provide your team with the ability to make the best data-driven decisions.

Start measuring!

So how does one avoid the pitfalls of metric management? A great starting point is to understand your business and what your version of success looks like. For example, is it total revenue, net profits, other measures, or a weighted combination? 

At Full Sail Partners, we work with a large number of professional services firms — especially those that are project-based. As a result, we have a lot of insight and experience into the metrics that are most telling for them. To learn more, keep exploring our blogs, or contact us.