Metrics are derived from data.
What is data?
Data is anything that we measure within our business, data is the raw numbers.
It is simply anything we measure within our business.
What gets measured gets managed, and what gets managed gets mastered.
Collecting data within your business is vital, however, this training topic considers what makes data a metric.
How does data become a metric?
To make data a metric, you need to add a comparator.
Therefore, data plus a comparator equals a metric.
What is the difference between data and a metric?
Very little initially, because all metrics contain data.
However, not all data are metrics.
Data is just the numbers, to turn those numbers into a metric. The data needs to be quantitative.
This requires a comparator, a measure to compare against, which turns your data into information, which can be turned into reports that can then be used to make business decisions.
That’s the key difference.
The interesting thing about data is we can’t choose it.
The data is the data.
The numbers are the numbers, whatever you decide to measure within your business you should accept the raw data for what it is.
You can’t choose your data.
You can choose what to measure but you can’t choose the data.
However, you must choose your comparator.
The thing that turns raw data into a metric, into something useful to you, information is in your control.
When is a metric a KPI?
Well, that’s up to you. You can turn a metric into a KPI simply by knowing what you want to achieve, your objective. A key performance indicator is a metric that compares the data that you are measuring towards your objective. The comparator is called a Key Result.
The Key Result comparator is the data that will allow you to achieve the objective.
Therefore all KPIs are metrics, but not all metrics are KPIs.
Some metrics are not key performance indicators.
How do you identify the KPI’s and key results within your business?
You need to know what the objective is. If you don’t know what the objective is. How can you have a KPI?
Just because your garage management software calls it a KPI, doesn’t mean that it is.
Unless they know all the things that you’re trying to achieve.
They’re performance indicators, but are they key?
Not, necessarily because unless it is quantitative, it has a comparator that tracks the progress towards your goals. It is not a KPI.
They must be your goals, not somebody else’s or a software-driven analytic.
What is a comparator?
Basically, a comparator is another piece of data that you use to compare with the new data. The new data is compared to some existing data, the existing data is the comparator.
Comparators can be either internal or external.
For example, an internal comparator can be your previous business performance.
Last year’s turnover was £100,000.
Broken down into daily, weekly, monthly, and quarterly income, it becomes a comparator.
Your metric tracks your current sales performance against the previous data.
Are you above it? Are you below it?
You can then turn that quickly into a percentage are you 10% ahead or 10% below the datum/comparator?
It turns the data into information because you know if sales are above or below where you want to be.
A useful internal comparator is the previous performance of the business.
However, you can also set targets that have nothing to do with previous performance.
For example, you are doing something new. For example, you bought an MOT bay, so you have no previous data because you have never done an MOT on your premises ever before.
Therefore you have no previous data.
But you know to break even on the investment the number of MOT’s you must do month by month to cover the investment cost.
That is your break-even point. So for zero return on investment, to break even, you have calculated you must do three MOT’s a day.
Now have a comparator. It’s three MOTs a day. If you do four, you are above the break-even metric, if you do two, you’re one below the break-even metric.
Can you see how quickly data has become useful information?
Because it is a metric, because you are comparing it to something else.
They are good examples of internal comparators.
What’s an external comparator?
An external comparator is data that’s not from your business.
For example industry standards. The norms in your industry?
For independent garages, what is the normal data?
What is the average?
You could research overall efficiency for independent garages with less than nine staff.
To find that garage efficiency is in the range of 50 – 75%.
The average. 62.5% that is now a comparator.
When you measure your efficiency, the raw data, the numbers this is just Data.
Adding an external comparator makes it a metric.
Do you compare with the bottom end of the estimate 50%?
Do you compare with the top end of the estimate 75%
Do you compare with the average 62.5%?
That’s totally up to you.
You choose the comparator, you can’t choose the data. The data is whatever it is, you can choose what to measure, but you can’t choose the result or you shouldn’t influence the result because you should not introduce bias to your data.
Remember to always use reliable sources.
You want to be comparing your business to other businesses that are similar to yours. But no two businesses are identical.
To grow and scale your business, I always recommend internal comparators wherever possible.
You want to improve your business, not somebody else’s.
However, sometimes you have nothing else to go on. You have to use an external comparator.
Why are metrics important?
Metrics are important because they’re an easy way to illustrate the distance travelled towards your objectives.
They indicate a direction, and display trends, both good and bad.
Are you on course?
Are you in front or are you behind where you would like to be right now?
Are you travelling due north towards your goals or north-northeast?
This information can be used in a variety of ways within the business.
The best way to use metrics is as KPIs, to measure progress towards your plan, your goals, and your business vision. For this, you need to know the Key Result.
Number of sales.
If you counted the number of sales every week in your business, you would have a number.
Let’s you did 12 transactions.
What does that mean?
It means absolutely nothing because we don’t know the value of the transactions.
We don’t know how that compares with previous data.
It is just raw data, it’s just a number.
To turn that into a metric, we need to add a comparator.
The comparator is the previous performance of the business. An internal comparator.
This business typically does 10 sales per week. The comparator is 10 sales.
This week is 20% above the average.
This is a metric.
How does the metric become a KPI?
The business plan for this year is 30% sales growth, which is 13 transactions a week, the Key Result.
Although they are 20% up on average, they are 10% down on their objective.
That is how a raw piece of data, by adding a comparator becomes a metric.
When compared to the key result, it becomes a KPI.