Book of the Week: Developing Business Scorecard Metrics + Smoot’s Ear

What are three char­ac­ter­is­tics of good busi­ness score­card met­rics? In con­struct­ing an effec­tive met­ric, the designer needs to look at three fac­tors before set­ting targets:

1) Sim­plic­ity: Is the met­ric sim­ple and easy to under­stand? Is there a direct rela­tion­ship between action and result? For exam­ple, say this is a retailer who oper­ates in mul­ti­ple coun­tries and the met­ric is “watches sold”. This is eas­ier to mea­sure than con­struct­ing a com­pos­ite met­ric where “watches sold” is mea­sured on 33% dig­i­tal watches, 33% data watches and 34% ana­log watches. There may be a busi­ness need to sell each cat­e­gory, but the addi­tional com­plex­ity makes it more dif­fi­cult to com­mu­ni­cate and execute.

2) Fair­ness: Is the met­ric fair to the var­i­ous groups which use it? Can all equally achieve the tar­get? Using the exam­ple of “watches sold”, this mea­sures unit sales (high vol­ume). Sup­pose one group has low vol­umes, but lux­ury watches so their total sales are actu­ally much higher? While it’s pos­si­ble to set tar­gets and com­pen­sate for this, the met­ric wouldn’t directly mea­sure busi­ness health equally for all.

3) Mea­sur­a­bil­ity: Is the met­ric eas­ily mea­sur­able? Can it be con­sis­tently and accu­rately mea­sured week after week? Are there pre­cise def­i­n­i­tions as to what counts and what does not? In the watch exam­ple above, what does “watches sold” mean? Is it total num­ber of units sold? shipped? is it adjusted for returns? are free sam­ple units (demos and pro­mo­tions) excluded? What are the pre­cise time peri­ods? Is it 12/​31/​2012 11:59pm Pacific time?

Think­ing about how we mea­sure, this week’s book of the week is Smoot’s Ear: The Mea­sure of Human­ity by Robert Tavenor. While this book won’t tell you how to con­struct a busi­ness met­ric, it’s a fas­ci­nat­ing look at how we mea­sure things, from human mea­sure­ments like “feet”, “pounds” to more abstract like the meter , which was orig­i­nally defined as 1/​40 mil­lionth of the cir­cum­fer­ene of the earth through the poles to The metre is the length of the path trav­elled by light in vac­uum dur­ing a time inter­val of 1299,792,458 of a second.

The book’s name comes from the Smoot which was a mea­sure­ment unit devised as a fra­ter­nity prank at MIT in the 1960s. Oliver Smoot, a pledge was rolled across the Har­vard Bridge which con­nects Cam­bridge and Boston. The bridge was deter­mined to be 364.4 Smoots +/​-​1 ear. Smoot day was cel­e­brated last year at MIT. The Har­vard Bridge is painted with “smoot­mark­ers” as you walk across it.

Harvard Bridge (Massachusetts Avenue

Har­vard Bridge (Mass­a­chu­setts Avenue), con­nect­ing Cam­bridge and Boston. The bridge is 364.4 Smoots long +/​-​1 ear.

The book is a great week­end read on what it means to mea­sure some­thing and what the human impli­ca­tions of mea­sure­ment are.

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