Every business has metrics, but too many use vanity metrics that make them feel good about what is being done rather than providing insights to be better. For example, we’ve all suffered from the call center that is so focused on wrapping up the call rather than resolving the problem. Why? Because the more calls, the more efficient they believe they are, as their vanity metric shows how many calls per hour a person can handle. Although this trend has started to reverse in customer-focused companies, there still are a significant number of firms that are more focused on the number of calls rather than satisfaction.
The worst vanity metrics are those metrics that don’t allow you to change your behavior based on the metrics. Good metrics are actionable metrics, whereas vanity metrics make great press releases. When you read, “XYZ web traffic increased by X percent after an upgrade,” that is almost for sure a vanity metric. Another vanity metric is “XYZ is investing $X million in developing revolutionary software.” Both of those metrics do more to promote the company than it does to make the company better. Sadly, competitors will react to vanity metrics and a vicious cycle begins.
Traffic to a website doesn’t have to be a vanity metric, but it usually is if taken alone. If sales from your website aren’t growing, the traffic could still be (and likely is) generating profits. You can use other metrics to determine if the traffic is contributing. For example, we had a tremendous amount of traffic coming from a single state, but sales were proportionately low in that state. By excluding traffic from that state (which was caused by a specific data center known for crawling websites) in our reports, we were able to see traffic patterns more accurately. We then measured other factors, including time on site, as well as revenue along with the traffic metric.
Sometimes metrics need to be fuzzy, yet you can and must focus on actionable metrics. As an example, we launched new software recently that was optional. We knew it would take time to generate revenue from the new software, so we set a goal of number of users and number of sites. The users statistic was a bit of a vanity metric because people would sign up and not do much, but having the number of users who built two or more sites helped us see those users who really were using the software. Plus, we were able to see when we had the right feature set as the number of people with two sites grew. Not surprisingly, the revenue grew as the number of users with two sites increased.
Salespeople typically focus on revenue booked, and that is a very good metric. Yet, you can’t take much action based on booked revenue. So an important metric for sales and business is the pipeline. If your pipeline is full, your booked sales likely will come. So, using pipeline helps you take the appropriate action.
Avoid vanity metrics. Use actionable metrics instead. When you have a metric that isn’t actionable but is important, try adding another metric that, when combined, creates an actionable metric.
A strong word of caution: Properly measuring how efficiently you do the wrong thing will still lead to bad results. The call center that measures how quick you finish calls will alienate customers and hurt their business long-term even as their call center continues to beat the target metric. You must choose the right metrics that drive the right behavior.
