Well designed metrics programs enable firms to focus on what is important and what really adds value for themselves and for their customers. However, designing and executing a metrics program requires work and effort. At the same time, it is too easy to misuse the metrics. You have probably seen these classic examples of metrics gone bad, and have plenty to share of your own.

• Scott Maxwell on his post highlights the 10 best ways to lie with metrics.
• Dilbert tackles the challenges of establishing software metrics where Wally writes himself a new minivan.
• Joel Spolsky shares his customer service experience and the impacts of measuring customer service representatives based on the number of calls taken per hour.
• Yet another airline is proud to achieve successful on-time gate departure, while you sit on the tarmac for the next 2 hours before the actual take-off.

As valuable as the metrics are, falling into common traps can result in dysfunctional behavior, cultivate the wrong intents, and ultimately hurt the firm, its customers and shareholders. Here are some of the most common metrics mishaps:

• Too many (or too few) metrics — Your metrics should be aligned to support your strategy. Too many metrics is a clear distraction, not to mention a ton of work. At the same time, too few metrics will not help track the real issues or progress. Your metrics should be insightful and actionable, and not become your self-imposed prison.
• Ill defined metrics — Your metrics should not be left to interpretation by your team, and create additional confusion. They should bring clarity to your strategy, and to your performance measures. Take the time to explore and define your intents and objectives with your metrics, especially when it comes to measuring intangibles such as building an innovative culture, delivering quality products, and even increasing customer satisfaction.
• Conflicting metrics — Your metrics are the levers you will use to maximize the performance of your company. So, beware of conflicting metrics, as they will send mixed messages to your organization: are we cutting cost or becoming more innovative? Where needed, you can use weighted methods to prioritize your metrics.
• Lack of communication and training — Metrics have the power to build teamwork by pulling everyone in the same direction. However, this requires the leaders of the organization to clearly communicate the strategy, explain the purpose of the metrics program, and provide the needed training to support the teams.
• Inaccurate metrics — You may have your metrics well defined, but are you measuring them correctly and accurately? As an example, before you celebrate the large number of visits you received on your web site, ensure that you are not counting the search engine crawlers, or the number of comments you received do not include spams (my latest headache…).

So, what do you do, and where do you start? I have recently finished reading Bob Phelp’s Smart Business Metrics: Measure What Really Counts & Manage What Makes The Difference. This book is a good reminder of measuring what really counts, along with several case studies that discusses the process of building these metrics. In the past, I used Balanced Score Card performance metrics, which is a good management tool for aligning your organization top to bottom. However, I enjoyed the simplistic approach Bob shared in his book for building metrics program to specifically address the business issue at hand, and ensure that it is aligned with the business strategy. He refers to this as the value web: “a framework for the sort of measures that are needed to guide a business and its managers.”

Since the value web framework is focused on building value for the organization, the process starts by identifying a few key output metrics: things that really matter and should be measured as the output your business produces or wants to produce. Once you have determined your output metrics and ensure their alignment with your organization’s strategic direction, the next step is to determine the value drivers (factors that drive present value) and value builders (factors that drive future value) that impact the output metrics you identified. This clear separation of roles in the value web framework brings clarity, focus on what really counts and ensures present and future value is included in the metrics. Once the value web is built, the next step is to identify process improvements to support the objectives: reward and recognition programs, communication programs, training programs, etc. It is important to note that creating the value web requires in-depth analysis of drivers and their impact on the value whenever possible, using tools such as variation analysis, decision trees, regression analysis, or conjoint analysis.

However you build your metrics, make sure your metrics are clear, actionable, supports business objectives, and based on data and facts. Also remember, metrics drive behavior, so understand how your organization’s behavior might change before you launch into your next metrics program.

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