As a measurement consultant, I work with companies to evolve their metrics and envision how they can measure what was once thought immeasurable. Some find it daunting to take “fuzzy” qualities like happiness, engagement, and satisfaction – whether we’re talking about customers, users, employees, or anyone else we interact with – and boil that down to a number that tells a story. It can be even more challenging to take an old school, tried-and-true metric – one that everyone has accepted, used, and understood for decades – and replace it with something new and different.
We all know the world has changed, with far reaching effects for businesses and organizations of all shapes and sizes. Now more than ever, it’s imperative that we change the way we look at measurement. My colleagues have written several pieces over the last few months about some ways we can look at old metrics with a fresh set of eyes. A perspective fit for the new normal we live in.
Related Reading: Do We Measure Employee Engagement Right?
Allow me to reassure you: it IS possible to change your measurement perspective, and what you’re currently measuring can actually be a great starting point.
Many times, we find that the key to modernizing a metric is to move from counting stuff to counting high quality stuff. You’d be surprised how often this comes up:
- Sales replaces calls made with calls made to high-quality targets
- Marketing enhances click-through rate by looking at high-quality traffic, those that complete certain goals upon arrival
- HR moves from time-to-fill towards time-to-fill with a quality candidate
- IT focuses less on ticket completion rate and more on quality of results, or internal customer satisfaction
- Even Finance is not immune to this – gross revenue reporting will never go away, but increased focus on Environmental, Social, and Governance (ESG) criteria mean we’re now also measuring the quality of revenue
We tend to look at “quality” and “quantity” as antonyms, and this tendency bleeds into our perception of what is and isn’t possible to measure. In fact, a surprising amount of the measurements we arrive at end up boiling down to more or less the following formula:
- Take that thing you are measuring right now
- Redefine the thing in terms of the best possible version of that thing
- Rethink your original metric as no longer a raw count of the things, but rather of high quality things (or if you’re feeling particularly adventurous, include a sliding scale of the relative quality of the thing)
If it sounds like I’m oversimplifying this – you caught me. Restating your metric to include some allusion to quality is super simple. The tricky part is defining quality. Quality is subjective. It is non-standard. It can vary from business to business and from leader to leader, even within an organization. It can be subject to the whims of the beholder. The data can be noisy, and also harder to collect.
When I guide our clients through the process of coming up with newer, shinier metrics, one of the first things we aim to establish is a Shared Definition of Success. We use collaboration, brainstorming, and design-thinking principles to figure out what it means to achieve a high-quality result. Coming to agreement on this point is critical. It allows us to establish a framework that cuts through subjectivity.
Let’s imagine you work for a community bank. Naturally, you have reports that show you the number of depositors and borrowers that have relationships with your bank. In the modern economy, you know you need to deliver a high level of service to compete with larger banks or fully digital institutions. You’d like to identify high quality customers so that you can provide special offers and ensure those relationships stay with your bank.
But what makes a high-quality bank customer? Think about the different factors and how they may or may not work well together:
- A customer with a high loan balance that makes payments on time is a guaranteed source of steady interest income.
- A customer with the same balance that misses a payment here and there brings in income from fees, and if it’s part of a repeated pattern, that customer might have had a high interest rate to begin with.
- A customer with a huge savings balance is great, because you can invest those deposits in loans.
- But the same customer that actually has that balance in a CD is a little less profitable because you’re paying them more interest.
- A customer with a low checking balance might overdraw their account a lot. Overdraft fees collected!
- A customer with a high checking balance might use their debit card quite a bit. Interchange fees collected!
- You might target customers that you know are about to embark on major life events, like owning a home, starting a business, buying a car, or putting a child through college. These are all cross-sell opportunities regardless of account balance.
- Or, there might be a customer with $10 in their account that has been with the bank for years and years and tells all her friends how wonderful you are and that she’d never bank anywhere else.
All you want to do is move from number of relationships to number of high-quality relationships, and yet there are eight different ways to interpret quality, and various combos thereof. There’s no one-size-fits-all here. Your unique strategy will determine how you want to define success.
Quality doesn’t just play a role in quantitative measurement; its role is often fundamental. Once you’ve defined the quality of what you want to measure, it’s simply a matter of counting the instances of that “thing” that meet your definition.
To learn more about our KPI Finder methodology, designed to help you measure the immeasurable, click here.