Do your metrics have a positive ROI?

Metrics are important but not everything needs to be measured in a data-driven world. It is easy to add a metric without really understanding the upstream and downstream consequences. That is why it is important that your metrics have a positive return on investment (ROI).

ROI is a simple calculation where the benefits are divided by the cost and if the benefits are greater than the cost you have a positive ROI. This might sound obvious but most of the time metrics are implemented in silos and upstream and downstream impacts are not understood and accounted for.

So what are the potential benefits and costs of metrics:

Potential benefits:

  • Enhanced clarity by leadership resulting in enhanced decision making outcomes

  • Changed behavior that results in more revenue generating activities or reduced cost generating activities

  • Benefit of not having to maintain other metrics and related costs if a metric is replacing one or more metrics

  • Reduced friction between areas with metrics that align teams or departments with organizational objectives

Potential costs:

  • Time spent in calculating metrics by individuals

  • Storage and processing costs in creating metrics

  • Time spent rolling out new metrics

  • Time spent communicating out and reviewing metrics

  • Changed behavior that results in less revenue generating activities or increased cost generating activities

  • Enhanced friction between areas with metrics that misalign teams or departments

Each metric that is implemented should have a clearly positive ROI. The purpose of calculating ROI is not just to come up with a precise measure though. We think calculating ROI related to new metrics is most valuable because it provides a process for deliberate thought around implementing new metrics and maintaining old metrics.

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Just as importantly as determining the ROI on new metrics you should make sure the ROI on existing metrics still is positive. While metrics are not something that should be changing all the time, they should be reviewed and updated in a deliberate fashion.

Hopefully this post helps you think more about your metrics and their ROI. Much of being a data informed organization is simply the critical data thinking that goes about aligned to desired organizational mission.

This is the first in a series of posts we have planned around metrics. We think metrics should be front and center in an organization that values data because metrics are something that people are already familiar with and use regularly. More importantly, we think good metrics that are well communicated can unite and accelerate an organization.

Looking to implement metrics & KPIs in your organization? Check out our latest workshop “Designing Metrics & KPIs That Work” in Minneapolis, MN on October 15th and in Chicago, IL on October 22nd!


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