The Oakland Athletics are a baseball team that revolutionized their sport by understanding management indicators.
See, until they blew up the market, teams were guided to rate (and financially value) players by metrics like their hits.
In addition to these metrics, they trusted the scouts, who evaluated the players based on their ability to run, throw, etc. …
However, the Oakland Athletics showed that these metrics have little to do with the actual performance of the players.
After statistical analysis, they discovered that there was a much more predictive metric of a player’s performance: the ability to get to the next base.
Based on this discovery, the Oakland Athletics were able to create a low-cost team (players who score high in this metric were not overly prized) with which they were able to revolutionize their sport and results.
Although this is analysed in depth in a classic business book adapted to film, Moneyball, companies have not internalized it.
Companies continue to choose their management indicators poorly
There is a clear and real example of why we continue to be poorly chosen.
A fast food chain determined that customer satisfaction was key to profitability.
Similarly, they determined that customer satisfaction was linked to employee turnover. The lower the turnover, the higher the satisfaction.
“We simply know that it is the key factor,” explained one company executive.
The company was busy reducing turnover, but as the data came in, they discovered that some shops with high turnover were very profitable and others with low turnover were not.
After delving further, they discovered that the metric that related to high customer satisfaction (and therefore profitability) was manager turnover, not overall staff turnover.
There are four errors in determining management indicators
The way in which these indicators are determined is key and, almost always when it fails, it is for one of these 4 reasons:
- The indicators of another company are adopted.
- The “expert” judgment of the internal teams is trusted.
- Focus groups are set up to define them.
- Surveys are conducted to define them.
To avoid making these mistakes, you have to follow a different process.
To do this, you have to start with a question:
What are the most important management indicators?
Most companies say they are customer-centric.
However, most companies have KPIs focused only on their own company:
- Etc. …
If you really want to be focused on your customer, you can keep sales KPIs focused on your business, but you also need metrics focused on what your customers want.
In addition, it is very profitable.
A silly example, imagine an insurance company.
Their KPI is to get requests for quotations, so they invest tons of money in advertising and the quotations are piled up at the door.
However, when a user makes a request, they receive a message that their case will be studied and an agent will soon be contacted.
On the other hand, a company focused on what its customers want, rather than spending money on advertising, does so by automating the response to these requests. Customers know instantly how much the insurance would cost them.
That is what interests the client.
Which company do you think will get better results?
When a manager from the first company wants to contact an opportunity to talk about their case, many times they will find that the user has already advanced in the process with the second company, which has been quick to respond.
This makes your customer-based management indicators so important.
Establishing good management indicators for your business
The first clue, we find it by asking ourselves this question:
Which is the goal of our customers?
The second question would be:
What factors will help you to achieve that goal?
The best way to find these indicators is not through surveys, focus groups or similar, but through contextual research.
A qualified researcher who talks to clients and observes them interact with the company in real environments.
In the end, management indicators are a matter of data
The key to finding good indicators is, as always, a combination of asking the right questions, and answering them properly.
And to answer them, you need data.
The best way we know of to collect, store and manage them is through a CRM.
And Efficy, is the best of all.
You can try it out right now:
Try Efficy CRM
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