A business metric is any type of measurement used to gauge some quantifiable component of a company's performance. Business metrics are part of the broad area of business intelligence, which comprises a wide variety of applications and technologies for gathering, storing, analyzing, and providing access to data to help enterprise users make better business decisions. Metrics are about neither technology nor business strategy. Efficiency and effectiveness metrics are two primary types of IT metrics. Efficiency IT metrics measure the performance of the IT system itself including throughput, speed, and availability. Effectiveness IT metrics measure the impact IT has on business processes and activities including customer satisfaction, conversion rates and sell-through increases. Effectiveness focuses on how well an organization is achieving its goals and objectives, while efficiency focuses on the extent to which an organization is using its resources in an optimal way. However, operating in the upper left-hand corner (minimal effectiveness with increased efficiency) or the lower right-hand corner (significant effectiveness with minimal efficiency) may be in line with an organization’s particular strategies. In general, operating in the lower left-hand corner (minimal efficiency and minimal effectiveness) is not ideal for the operation of an organization.
Explain why a business would use metrics to measure the success of strategic initiatives.
Metrics are the heart of a good, customer-focused management system and any program directed at continuous improvements. A focus on customers and performance standards shoes up in the form of metrics that assess the ability to meet customers’ needs and business objectives. The following metrics will help managers measure and manage their strategic initiatives:
Business Process Reengineering (BPR) and Enterprise Resource Planning (ERP) Metrics
1. Business Process Reengineering (BPR) and Enterprise Resource Planning (ERP) Metrics are large organization initiatives. Measuring these type of strategic initiatives is extremely difficult. One of the best methods is the balance scorecard.
2. Balance Scorecard: is the management system, in addition to a measurement system, that enables organizations to clarify their vision and strategy and translate them into action. It provides feedback around both the internal business processes and external outcome in order to continuously improve strategic performance and results.