Revisiting Drucker: What Gets Measured Gets Managed

Written by Paul on October 26th, 2008

Seems that everyone’s interested in analytics these days — well, maybe not interested, but there sure are a lot of people talking about analytics on the web these days. Regardless, it’s great to see that people are starting to see the value of clear dashboards and actionable metrics. Though, I do wonder how they made decisions without all the fancy new dashboards that are available out these days.

Peter Drucker once said, “What gets measured, gets managed.” Let that sink in for a minute.

The problem with most small businesses these days is that they don’t actually know whether they’re actually successful or simply lucky to be surviving.

“But Paul,” you might say, “my store/website/lemonade-stand received 2,200 visitors last month and it generated 35 sales.” My response: “Great! So, was last month a successful one for you?” And then, I get nothing but a blank stare. (Seriously, I have a conversation like this at least once a week these days.)

Look, everyone knows that selling more stuff can usually mean that your business is doing just fine. But, the key is to define a clear, measurable goal.

“Sell more stuff” is not a goal. “Sell 30 widgets and 50 hubcaps every week” is much, much better.

As a rule of thumb, always start with your goal. You can’t create a good plan until you know your objective. So, be crystal clear on exactly what you intend to achieve. (Use this template to track your goals.)

Then, measure compulsively. Seriously, you’ve got no excuse — spreadsheets, Google Analytics or the 872,345 other tools out there will all do the job for you. Besides the usual operational stats, other useful metrics might be CPO (“Cost-Per-Order,” which includes advertising, fulfillment and expected returns, chargebacks, and bad debt), ad allowable (the maximum you can spend on an advertisement and expect breakeven), and projected lifetime value (LV) given return rates and reorder %.

In the end, just remember that you’ve got to start thinking about how to systematically build the business that you’ve started. Setting goals and measuring progress towards them is the smartest way to get there without wasting a ton of time and energy along the way.

Need some expert help to sort out the right goals or get some sort analytics package in place? Let me know.

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4 Responses to “Revisiting Drucker: What Gets Measured Gets Managed”

  • Paul – I completely agree with you! Measuring actionable results (keyword: actionable) are what many businesses, and quite frankly, “dashboards” are missing. Metrics such as “time on site” or “total visitors” don’t mean much out of context. How about giving me the total visitors who didn’t use ytour brand name as a keyword to find you, stayed on the site at least 2 minutes, but not more than 10, and consumed at least 5 pages. Or, how about my organic conversions are running at a 50% lower cost of acquisition than my paid conversions. Now that’s analytics!

    — 10/27/08 at 7:22 am

  • Ben

    Paul – Great post! I love the story about the researchers that surveyed a graduating class at Harvard (in the 50′s I believe) and found that only 3% had written, measurable goals. Then, some years later, they surveyed the same class and found that the 3% with goals had amassed more wealth than the entire 97% without goals combined! I know why many small business owners don’t set goals. Vince Vaughn sums it up perfectly in the movie “Dodgeball”. If you set goals and don’t achieve them, there’s pain. No goals, no way to fail! I think people that live this way need to redefine how they feel about failing.

    Related to Ryan’s comment – we love it when prospective clients tell us that they are already tracking their website (often with Google Analytics, Webtrendz, etc.). But when asked, “what are you testing this quarter based on your analytics data from last Quarter?” – we get the vacant stare!! There’s no shortage of data available on the web. The key (s you’ve suggested) is action!!

    — 11/15/09 at 9:51 am

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