Business Metrics

Business Metrics (a partial extract from my upcoming book “R for Business Analytics”

Business Metrics are important variables that are collected on a periodic basis to assess the health and sustainability of a business. They should have the following properties-

1) What is a Business Metric-The absence of collection of regular update of the business metric could cause business disruption by incorrect and incomplete decision making.

2) Cost of Business Metrics- The costs of collection, storage and updating of the business metric is less than the opportunity costs of wrong decision making cause by lack of information of that business metric.

3) Continuity in your Business Metrics- The business metrics are continuous in comparing across time periods and business units- if necessary the assumptions for smoothing the comparisons should be listed in the business metric presentation itself.

4) Simplify your Business Metrics– Business metrics can be derived as well from other business metrics. If necessary and to avoid clutter only the most important business metrics should be presented, or the metrics with the biggest deviation from past trends should be mentioned.

5) Normalize your Business Metrics- Scale of the business metric units should be comparable to other business metrics as well as significant to emphasize the difference in numbers.

6) Standardize your Business Metrics– Dimension of business metrics should be increased to enhance comparison and contrasts without enhancing complexity. This means adding an extra dimension for analysis rather than a 2 by 2 comparison, to add time /geography/ employee/business owner as a dimension .

Author: Ajay Ohri

http://about.me/ajayohri

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