Directional vs. Static Key Performance Indicators

by Joe on May 31, 2011

Many times we find ourselves measuring success with a singular static key performance indicator like profits, margins or revenues. But, there are other measurements that can inform us of our directional progress. These directional measurements ensure we are headed the right direction.
So how can directional trend variables help more than static variables? Well, for me, knowing YoY change of balance sheet items are much more valuable than knowing a snap-shot of a company’s liabilities, and beyond that it is even more helpful to know how that liability load compares to its shareholder equity.

So why do we continue to measure our success with static measures? It may be fun to know how many Starbucks stores there are (17,009 in 2010) or the average revenue per store, but I’d rather know the percentage of those stores that have revenues that are higher than their three year averages. This type of measure helps us understand the direction of the stores – growing or shrinking.

Another effective dynamic measurement is to apply a cohort analysis to examine groups trends. Analyze groups of customers, stores or members in any grouping to show how different groupings compare.

While it may be a bit NSFW, OkCupid, an online dating site, uses its massive profile database to chart and graph a wonderfully told story on its blog, OkTrends. However un-sexy our own data may be, there are some lessons to be learned from how they use dynamic measures and cohort anaylsis to tell stories.

The ability to build measureable triggers in our business processes is paramount to building businesses that can be measured directionally and further support our ability to achieve our objectives. Whether we choose an outcome measure or a process measure. The difference between these two types of measurement points are for another day.

One comment

Joe, I love this. It’s so easy to fall into the trap of looking at the obvious data points.

This is so funny. In the spirit of self-governance and transparency, we’re already planning on doing this type of analysis with chapter reports. We’re even planning on comparing this year’s recruitment numbers with the previous 3-year average!

I’m sending you an appointment for later this week to hear your thoughts about what metrics we use to measure our chapters. Nice work!!


by Geoff Lewis on May 31, 2011 at 5:52 pm. Reply #

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