There are two types of metrics, input metrics (behaviors) and output metrics (results.) By understanding their differences and being able to identify them in our day to day activity, we can significantly increase our effectiveness in achieving our goals.
Output Metrics (Results)
Goals. Most of our goals are set around output metrics: $5 million in sales, $500k in profit, customer NPS score at 10, etc. Furthermore, our entire financial statements are completed with output metrics (revenue, expenses, cash, all of it.) Output metrics are fantastic at measuring where we are, getting a baseline of our reality, and allowing us to set goals against. What it doesn’t do; however, is help us with our day-to-day behaviors.
Input Metrics (Behaviors)
Input metrics are the less popular brother of output metrics. Some input metrics are: number of phone calls made, number of blog posts written, and number of hours spent. A good way to look at input metrics are behaviors that you have 100% control over. Since input metrics are 100% dependent on us, these are great metrics to focus on when attempting to move the needles of our output metrics. (ie. We can wake up in the morning and set a goal to make 5 phone calls (input / behavior) and the only factor between achieving it or not is ourselves. As opposed to waking up and setting a goal of closing 1 sale (output / result,) which is dependent on a whole lot more: making the phone call, someone else actually picking up, listening, then agreeing to buy.
Drivers are exactly what the name suggests: they either cause or influence another metric. Being able to identify drivers is probably the most important technique to learn when deciding what to measure and what to focus on. When we set goals we want to accomplish, we want to identify its drivers down to the smallest actionable increment. By doing so, we will be able to make small behavior changes and see big impact.
We were working with a customer on their profit goals and came up with the following (super simplified):
Goal: increase profit by 500k
>>Driver: Revenue / at 30% profit margin, we needed roughtly $1.6m in new revenue
>>>>Driver: Sales Won / at avg. ticket of 50k, we needed 32 new clients
>>>>>>Driver: Sales Conversation / at close rate of 1 in 5, we needed 160 conversations
>>>>>>>>Driver: Web Visits /1% visit turns into conversation, we needed 16,000 visits
>>>>>>>>>>Driver: # of Blogs Written /we didn’t actually have a metric to know how our posts drives visits, but it didn’t matter at the moment
After we were able to identify the life cycle and the relevant metrics for each stage. We chose to focused our efforts on the conversion between number of sales conversation and number of sales won. Because we found out we WERE having >160 conversations but they weren’t converting 1 in 5. So the company decided to focus effort on sales training. We set a budget, metrics to measure, timeframe, and now we are monitoring this new behavior and trying to see its impact.
What do you think? Do you have similar use case in your business where you can hone in on where you can spend your time and money on? What was the result of it?
Update 6/16/2016: Interestingly, here’s an awesome blog by Pipedrive about activity based selling that touches on the same general idea of input metrics.