It’s always fascinating to learn what separates a thriving business from those that crash and burn. As part of our quest to understand what makes businesses tick, we recently commissioned a survey from Censuswide of more than 250 small and medium businesses (SMBs) in the US. The results make it obvious that the most successful companies are increasingly metrics-driven.
Did you know that 1 in 10 SMBs have no growth targets? And only 1 out of 10 SMBs that do have growth targets, track them in real-time. Without setting targets and monitoring key performance indicators (KPIs) on a regular basis, a vast majority (77%) of these businesses remained small in scale, reporting less than $100K in revenue annually.
In contrast, metric-driven companies - those who set and track their KPIs - are far more likely to hit their targets with 96% hitting some of their targets and 41% hitting all their targets compared to just 23% of companies which were not metric-driven.Metric-driven companies are more than twice as likely to hit goals.
Tracking key business metrics in real-time
The data is clear, those companies that set and track key metrics are more likely to hit their targets, and those that monitor key metrics in real-time are more likely to hit their targets again. We found that 50% of companies who tracked metrics in real-time met all their goals in the last 12 months compared to only 24% of companies who did not track in real-time.
Also, 92% of companies that tracked their metrics in real-time met some or all their goals in the last 12 months - compared to 64% of companies who did not track in real-time.
However, the overwhelming majority of respondents (70%) stated they don’t have insight into their company’s performance on a daily basis. In fact, only 14% of businesses reported they monitor their KPIs in real-time. Less than 9% of executives say they look at their company’s data in real-time.
Given the evidence, it’s alarming how many businesses and leaders are neglecting metrics and not tracking them consistently.
Younger leaders value metrics-based decision-making
The survey revealed that the younger generation of business leaders are more inclined to define key metrics and monitor them consistently. Of the leaders who track their metrics in real-time, 33% were under 35 years old and 58% were under 45 - with only 13% of leaders 55 or older tracking data in real-time.
It seems like younger leaders have been brought up in a business world where instant access to important information is expected. This means that they are more inclined than their older counterparts to track key metrics in real-time. Considering that companies who track data in real-time are twice as likely to hit their targets, more experienced leaders clearly need to take a page out of their less experienced counterparts book and start tracking data in real-time.
Improve employee performance
While tracking metrics is crucial, it’s not enough on its own. Business leaders must also make key metrics available to the entire staff to motivate team members towards achieving goals.
According to the survey,
companies cited the most important factor contributing to business growth is every employee having clear objectives.
The second most important factor is every employee being aware of the key metrics which help the company grow. Despite these priorities, 6% of companies never share KPIs with their employees.
Companies that don’t share their data tended to have older leaders (80% had leaders that were 45 years or older) and tended to represent smaller companies (100% had less than 100 employees and 66% had less than one million dollars in revenue). Younger leaders were much more open to transparency in sharing company performance, perhaps a nod to a more democratic modern management style vs a more traditional autocratic management style.
Use key metrics to grow your company
There are so many things outside of an entrepreneur’s control, but establishing and tracking key company goals is not one of them. Businesses failing to track key metrics are limiting their chances of growth before they even get started.
When executives and employees have constant access to their progress against key goals, they can take the necessary action to immediately impact their company’s performance. The longer you wait to define goals and key metrics and then make them accessible, there’s less likely you’ll be to affect company growth.
If you want a quick overview of the data, take a look at the infographic below.