The Primary Metric Debate: Money Metrics vs. B.S. Metrics
In every organization, metrics gauge success – but not all metrics are created equal. There's a critical distinction between what I like to call "money metrics" and "B.S. metrics," and understanding this difference is paramount for teams across various departments, including Marketing, Product, Sales, and beyond. In this blog post, we'll delve into this debate, explore the importance of choosing the right metrics, provide examples of how to do it, and discuss how aligning on primary metrics can drive organizational success.
Defining Money vs. B.S. Metrics
At the heart of the matter lies the question: What truly defines success for your organization?
Money metrics, or primary metrics, involve outcomes that directly contribute to the bottom line. These include metrics such as revenue growth, return on investment (ROI), customer retention rates, conversions from free to paid users, SQLs (Sales Qualified Leads), demos, trials, and form submissions. Think bottom of the funnel metrics. They are the bedrock of success and should serve as the primary focus for teams.
On the other hand, we have B.S. metrics – or what might be termed vanity metrics. These metrics, while not entirely valueless, can lack a correlation to the bottom line. Examples include metrics like video views, click-through rates, and other superficial indicators that may offer surface-level insights but fail to connect to financial performance.
Choosing the Right Metrics
When considering what to measure and base successes on, it's crucial to distinguish between primary, secondary, and possibly tertiary metrics. Primary metrics, as previously mentioned, should overwhelmingly focus on money metrics – those directly tied to financial outcomes.
Your secondary metrics can offer supplementary insights and context, but they should not form the basis for decision-making or program evaluation. Relying on vanity metrics can lead to misguided conclusions and ultimately detract from the primary goal of driving revenue and profitability.
For example, it could be possible for a company’s engagement and click-through rates to increase, while overall purchases, form submissions, or other money metrics are declining. By basing success solely on vanity metrics, you might not see the financial ramifications of the tests you’re running or the changes you’re making as a result of testing.
Ways to Implement Alignment
Achieving consensus on metrics is essential not only within individual teams but across all levels of the organization. By harmonizing metrics across departments, companies can streamline decision-making processes and enhance overall performance.
To get there, I recommend goal tree mapping. Goal tree mapping fosters open discussions and can facilitate alignment, ensuring that everyone is working towards the same objectives.
Goal tree mapping is a structured approach to goal-setting that involves breaking down your company’s biggest objectives (i.e. earn more revenue) into smaller, actionable components. Starting with the highest objective, the process entails creating a visual representation of the hierarchy of goals, with sub-objectives branching out and further breaking down into specific tasks or outcomes.
Key metrics are identified for each component to measure progress, and responsibilities are assigned accordingly. Regular review and refinement ensure alignment and effectiveness, while communication and collaboration facilitate shared understanding and accountability. Overall, goal tree mapping provides a clear framework for goal-setting and tracking progress toward company objectives.
Another powerful way to ensure alignment on primary metrics across an entire organization is through the implementation of Objectives and Key Results (OKRs). OKRs provide a structured framework for setting and tracking goals, fostering alignment, transparency, and accountability at every level. By establishing OKRs company-wide, teams can rally around shared goals and focus their efforts on driving outcomes that truly matter. This approach not only encourages collaboration and cohesion but also reinforces the importance of prioritizing primary metrics that directly contribute to the organization's overall success.
If you are someone who has to answer to the C-Suite at the end of the year for how well your tests performed, the last thing they want to hear about is the total number of video views or how many sessions a landing page received. They want to know how these efforts impacted the bottom line and your answer will likely determine how much funding your team receives in the year ahead. Whether you use goal tree mapping, OKRs, another methodology, or a combination of those, you’ll want to make sure you have organizational alignment on the biggest objectives and a clear pathway for discussing how your team’s efforts clearly contributed to those.
TL;DR
In the quest for success, the debate over primary metrics versus B.S. metrics underscores the importance of clarity and focus. While superficial indicators may offer fleeting gratification, it's the money metrics that truly move the needle and drive sustained growth. By prioritizing tangible outcomes and aligning on key metrics, organizations can set themselves up for success.
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