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It is important to measure a performance

Is it really important to measure a business performance? I think if you will even need to purchase someone's business, then you will never ask this question and the answer will be “Yes! Sure!”, because if you do not measure the performance of the business that you are going to purchase you will be going blind. Then why people don't like to measure the performance of their own businesses?

When you are inside, you see a lot, I would say you can see to much business and business mechanism, you are flowed with unimportant data, you having too many things to care about and sometime you even don't understand where this business is going. If you are a manager, then it is not a problem, but if you are CEO, then you have to think about things like this.

You will need some information diet, e.g. very limited information, which will tell you a lot about your business. There are different names for this diet, some call it balanced scorecard, another key performance indicators (KPI), also people are using “metrics” and “measures” to understand business better.

That's great, but do we really know what we do? Once someone found a new type “diet” his is trying to use it for his business, but it is a wrong approach. Your business is different, there are departments, such as Sales, HR, Security, Financial. These departments function in a different ways and if you will apply the same information diet to all of them you will fail.

For instance, if you deal with Financial department and have to measure bank loans efficiency. What will you do? Will you be measuring customer satisfaction, growth opportunities and your ability to work with “internal process”? All these indicators means NOTHING! What is “customer satisfaction” for bank loan (if you are customer yourself) or if you are bank? You use this words, but you don't want to detail them into some real-life metrics and indicators. That is the most important thing. I'd better have 6 bad indicators, that 60 great mission statements without any mean.

If you will ask me about performance and how to measure it, I will not answer you that you should measure customer satisfaction or bank's loan financial aspect, I will answer you: “Give me metrics!”, “Give me indicators!”

What is bad, good and great performance indicator or metric? It is up to you and up to your business, but there are some common issues one must remember.

First, metric or indicator must measure. It should me math formula, equation, function. It must look like X = F(A1, A2, … An). Where A1-n is the number of indicators you must look at and the F is the function which tells what to do with indicators. X is the performance value.

What is bad indicator? It is when you tell, let's measure customers' satisfaction in bank loan niche. You don't tell about what are you going to measure, how you are going to measure this, it's not a metric, but it's a good mission statement that tells about nothing.

What is great indicator or metric? It is the good metric (which we where talking above), but it is taken from some real-world business. So, it's not just your idea or ideas of some reported from business magazine, it's idea that works and it was checked by you. What you will need to do? You will need to pass it through you own business and optimize it to your business tasks. Work hard with business performance, and soon you will have a great business control tool.