What Should Your Company Measure Besides Financial Results?

Most people don't recognize that performance measurement lies at the heart of the improvements we humans have made in our standard of living in the past few centuries. That's because almost all of the gains can be linked to using the Scientific Method to determine cause-effect relationships - and that requires measurement.

For example, bloodletting to cure illness was a common practice in many cultures for over 2000 years until Pierre Louis used measurement to show the practice did not increase recovery rates (circa 1850). Although his discoveries were not quickly adopted, they eventually led to discontinuing this worthless, and potentially harmful, procedure.

Until Louis came along, everyone "knew" bloodletting worked because some people did recover after being drained of several ounces of blood. Sure, some died, but when that happened, the rationale was that the person was just too sick to be cured in the first place. It's hard to argue with that kind of thinking unless, like Louis, you have the data to prove otherwise.

But are things so much different today? They certainly are in the scientific community, where rigorous substantiation of theories by sound data is always required. The business community, however, is nowhere near as disciplined. Some companies have excellent measurement systems, but many are still in the Dark Ages when it comes to their executives and managers having the measures necessary to understand how their business works, how it is performing, and why it is performing as it is. Like tenth-century physicians, managers in these companies are making decisions based on subjective information, anecdotal evidence, and beliefs about what drives results that are simply not true.

As Pierre Louis demonstrated, when it comes to identifying cause-effect relationships, nothing beats measurement - and the same is true about identifying business problems and opportunities. So what should a well-managed company measure besides the usual financial results?