Friday, September 04, 2009

Keeping Honest with Metrics

Last weekend I purchased the Nike + iPod device. It's a small sensor that fits into my running shoe plus an interface unit that plugs into my iPod. It keeps track of how far I've run, my pace, even calories burned. It's really pretty effective and accurate.

What the tool is really doing for me is keeping me honest. I used to go out and run for 45 minutes or an hour and not worry about the pace. "I'm going around 8:00 minute/mile pace" is what I would tell myself, knowing a lot of times I was really going slower. With my new toy, I know exactly what pace I run. The end result is I am running harder so that I do keep at 8:00 minute pace or better. The proof is here.

This same theory applies to managing business processes. Maybe you know it takes about 5 business days to do end of month processing and get your invoices out the door and your customers take around 30 days to pay the invoices. Is this good? If it used to take you 8 days to do invoices, this is an improvement, but do you really have the metrics to make good decisions? Should you work to improve this process, or is there another process that would be more important to focus on?

However, let's say you knew that by cutting your invoice processing to 4 days and getting your money into the bank sooner, you would earn another $21,000 in interest a month. Now there seems to be more value in capturing detailed metrics on your process and using those to optimize the process.

Like my running, businesses need good metrics in order to run the business effectively. In my case, the results will be in my race times, not increased profits, strong stock price, or increased customer satisfaction.

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