While the ways in which to measure outcomes in a professional services business controversy have grown significantly in recent years, a basic question still remains, what metrics should be followed and how best to measure them. It can feel like a lot like weight loss, watching calorie intake all week but the number on the scale still shows the same results.
Unfortunately, the scale offers only rudimentary insights into a person’s efforts. Any number of things can impact weight loss, from calories to exercise to sugars and carbohydrates to genetics itself. Like weight loss, the issue when establishing a program to track key performance indicators is determining those meaningful resources that will help track greater change.
Every metric provides a certain amount of business intelligence, but many services businesses can cite over 50 meaningful metrics. In the book, “The Balanced Scorecard,” David P. Norton and Robert S. Kaplan introduce the concept that “existing performance measurement approaches, primarily relying on financial accounting measures, are becoming obsolete.” Thomas E. Lah, in his book “Building Professional Services: The Sirens’ Song,” describes the 10 metrics that can help companies improve their business and gain strategic insight. He suggests that companies approach the challenge from five different perspectives before determining on the metrics that suit them best:
Functional Perspective: What business function does this metric help evaluate? Your sales organization? Your delivery teams? Service marketing?
Economic Perspective: Almost every internal company initiative has one of two objectives: improve operational efficiency or create future revenue (economic value). Does the metric track improvements in operational efficiency or assess the economic value of the business?
Timeframe Perspective: Just like economic data, is the metric a leading or lagging indicator of how the business is performing? Does the metric indicate you currently have a real problem, or does the metric warn that soon you will have a problem if the current trend continues?
Scope Perspective: Does the metric measure the performance of specific individuals, specific projects or the entire business unit?
Stakeholder Perspective: Does this metric provide insight on how your external stakeholders view you? External stakeholders would include customers and partners.
Like stepping onto a scale, metrics do not tell the full story. There are important metric “must haves” that provide the greatest insight into managing a services business and tell an even greater story. How can the five perspectives be applied to help create and effective metrics portfolio? To explore the 10 essential metrics that matter when measuring professional business services, download: NetSuite OpenAir-Metrics that Matter 2017.