Harvard Business Review: 5 Ways to Measure Business Performance

January 28, 2014 by Stacey Barr

You’ll get better quality measures when you start to deliberately choose the best way to quantify your measures. It’s too easy to default to counts and percentages. Instead, learn these five basic quantification formulae so you can make better choices in the future.



TAKE ACTION:

Have you limited your measures and KPIs to counts and percentages? Check if these really are the most appropriate quantification formulae for your measures, and perhaps you’ll discover you can get much more meaning if you try something else.

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  1. Very nice, as usual. It was fun to see you and hear you! Since I’ve only conversed with you via email, it was neat to meet you more personally! Thanks for the chance to watch the video!

    I love your break out of the five different ways to measure performance. I have to confess that I don’t think about them in this way, but I will add this to my knowledge base. I do require that each measure has a range of expectations – basically an estimate of what is normal. I do this because I start with measures being used as indicators of change – either change that has occurred, is occuring, or may occur. If the owner doesn’t know the norm for the data set, usually, the data itself can show what the norms are. In this way, when they data is trending or shows an anomalie, we look deeper to figure out why.

    Marty

    • Stacey Barr says:

      Marty, I want to reiterate that I only offer these 5 methods because too often people just stick to ‘number of…’ and ‘percentage of…’ and forget that there are more ways to quantify performance.

      By no means do I recommend that we need ALL of these quantification methods for every measure, NOR do I recommend that these are the only options. For example, measuring the standard deviation of a data set might be another useful way to quantify performance over time.

      It’s just about making sure we don’t limit ourselves, particularly when numbers and percentages don’t tell us what we need to know.

  2. Rob says:

    Stacy –

    I really like the concept, but have a question.

    How is percentages and ratios different?

    Rob

    • Stacey Barr says:

      Hi Rob,

      A percentage is a type of ratio, but it’s where the numerator is a subset of the denominator. For example, the number of people who ride mountain bikes is a subset of the number of people who ride bikes. These produce a percentage value that cannot be smaller than 0 and cannot be larger than 100.

      But with a ratio, the numerator does not have to be a subset of the denominator. So for instance, the average hours that mountain bikers ride each week is not a subset of the average hours that road cyclists ride each week. But we might be interested in the ratio of the two, in order to gauge over time how much one group is riding longer or shorter than the other group.

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