Establishing and measuring success metrics is an important skill for business leaders to develop so that they can monitor and evaluate their team's performance. In this article, we discuss the importance of business metrics, as well as which metrics your team should track to achieve your business goals.
When you implement a new business strategy, how do you know whether or not your strategy is working? The most common way to ensure that your strategy is working is to identify success metrics before implementing your initiative.
Success metrics give your team a quantifiable way to measure your progress. By setting metric-based goals, you have the ability to gauge whether or not your strategy is successful. While there are many different goal-setting methods to choose from, measuring your progress with success metrics is a commonality between them.
A business success metric is a quantifiable measurement that business leaders track to see if their strategies are working effectively. Success metrics are also known as key performance indicators (KPIs). There is no one-size-fits-all success metric; most teams use several different metrics to determine success.
When the right metrics are properly tracked, leaders can use these metrics as a benchmark for how well the business is performing. It’s important to set the metrics before initiatives start to see progress from beginning to end.Read: New to strategic planning? Start here.
With an unlimited number of metrics you could be keeping track of, why should business leaders go through the effort of measuring them? Here are a few reasons why keeping an eye on your business success metrics is a good idea.
One of the benefits of using success metrics is to connect the work that your team is doing to the goals that you want to achieve as a company. If your team is aligning their work to specific business goals, they can better prioritize the tasks they need to get done.
If you're implementing a new strategy or tactic with your team, use success metrics to gauge whether or not it's working. If you measured your team's metrics before you implemented a new strategy, you can use those metrics as a benchmark. As you implement the new strategy, you can compare those new metrics to your benchmark and see how they stack up.
Similar to how you would use past metrics as a benchmark for new strategy, you can use historical data to help your team make smart business decisions.
Take a look at a specific year's metrics. Were they different than usual? What strategy did your team implement to get you those metrics? Was anything happening during that time that you can reflect on? Use these numbers to make decisions on how to move forward in the future so you can make more educated decisions.Read: How to capture lessons learned in project management
If you're measuring many different metrics, and you notice a dip in one, you can easily pinpoint what part of your strategy is lagging behind. This can give your team the opportunity to adjust their strategy for the next initiative.
Each team in your business is there to achieve a different goal, so it only makes sense for different teams to have different success metrics. Here are a few examples of success metrics by team.
Gross profit margin: Gross profit margin is measured by subtracting the cost of goods sold from the company's net sales.
Return on investment (ROI): The ratio between the income and investment. ROI is commonly used to decide whether or not an initiative is worth investing time or money into. When used as a business metric, it often tracks how well an investment is performing.
Productivity: This is the measurement of how efficiently your company is producing goods or services. You can calculate this by dividing the total output by the total input.
Total number of customers: A simple but effective metric to track. The more paid customers, the more money earned for the business.
Recurring revenue: Commonly used by SaaS companies, this is the amount of revenue generated by all of your current active subscribers during a specific period. It's commonly measured either monthly or annually.
Daily web traffic users: This is the number of users that visit your website daily.
New web traffic users: This is the number of users that visit your website who have never visited your website before.
Email open rates: This metric is particularly important for email marketing teams. Email open rates measure the percentage of your audience who has opened your marketing email.
Number of leads generated: Particularly good for the marketing teams that work cross-functionally with sales, this metric measures the number of qualified leads that marketing team generated and passed over to the sales team. Note that the definition of a qualified lead can vary depending on your team's goals.Read: Marketing vs. advertising: What's the difference?
Net promoter score (NPS): This metric is one of the most common measurements of customer loyalty and satisfaction and is sometimes referred to as a customer satisfaction score. It's a numerical value in response to the question, "How likely is it that you would recommend [your product or service]?" You can calculate NPS by subtracting the percentage of individuals who voted between 0-6 from the percentage of individuals who voted 9-10.
Customer retention rate: This metric measures how many of your customers remain customers over a set period of time. It's up to your team to determine what timeframe makes sense for your business and industry.
Customer churn rate: This is the opposite of the retention rate. Customer churn rate measures how often your customers stop doing business with your company. It's up to your team to determine what period of time makes the most sense for your business and industry.
Customer feedback: While not a quantitative measure, anecdotal customer feedback can be extremely valuable to your company and can be used for testimonials and marketing strategy. Your customer experience is something that your team can curate, and the better experience they have the longer they stay a customer.
Average customer lifetime: This is the average length in which a customer stays your customer. This metric is used to calculate customer lifetime value.
Customer lifetime value (CLV or LTV): This is the amount of profit a company expects to earn from a specific customer over the average lifetime of a customer relationship.
Qualified leads: A qualified lead is an individual who exhibits all of the characteristics that your team identifies as the ideal individual to sell to. This could include demographic, role, company size, or any other important qualities.
Lead to customer conversion rates: This is a good metric to identify because it can give both your sales and marketing team some insight to the audience you're targeting. If the conversion rate is high, you're targeting the right audience and your team is focusing on the right priorities. Low conversion rates indicate that potential customers are leaving somewhere in the pipeline.
Customer acquisition cost: This is how much your team spends on both marketing and sales strategies to convert a lead into a customer. Ideally, you want this number to be as close to zero as possible.
Total new customers: Tracking this metric can give you an indicator on how quickly your customer base is growing.
Product uptime: This metric measures the time that your software is working over a given period of time.
Bug response time: This is how quickly your team takes to identify a bug, find a patch solution, and push the fix into production. Issues can range from quick, five-minute fixes to full-fledged projects.
Daily active users: This is the number of users that use your software daily. This can help you understand how many of your customers actually use and value your software. If there is a large gap between the number of customers and the number of daily active users, then your customers may not be finding value in your product.
Cycle time: The time it takes for a specific project to go from the very beginning to implementing the strategy into production. This is good to measure because it can help project managers get a sense of how long certain projects will take.
Throughput: The measure of total work output a specific team develops. This includes anything that is ready to QA and push into production.
Employee satisfaction: Similar to a net promoter score, an employee satisfaction score indicates how likely your employees would recommend your company as an employer to a friend or colleague. This is an important metric for HR teams because it can surface issues with company culture and policies that can be resolved.
Employee retention rate: Similar to a customer retention rate, employee retention rate measures how many of your employees stay with your company over a determined period of time. This is often measured annually.
Employee feedback: Anecdotal employee feedback is just as valuable as customer feedback, if not more so. Employee feedback gives your team the opportunity to offer suggestions to help your company become a better employer, and in turn, increase employee retention rate.
More likely than not, your team’s work directly contributes to one or more key success metrics. But without a clear way to connect daily work to larger goals, team members can lack clarity on what to prioritize. Instead, track work and measure metrics all in one place with Asana. Asana helps you connect the work your team is doing to the goals you set so you can achieve them together.Try Asana for free