Measure the Right Stuff

There was a news report about the city of Auburn, WA reinstating their traffic cameras in school zones (not red-light cameras). The spokeswoman for the city talked about how without the cameras the percentage of cars going 26 miles per hour or more (the speed limit is 20-mph) is higher than when there were cameras.

That’s great but is it the right metric? I’m all in favor of school zone speed limits, fining people who exceed those limits, etc. but wouldn’t a better metric be the comparison of incidents with and without the cameras? And how it differs based on the speed limit, which used to be 15 mph years ago?

The same philosophy goes in business. Are you measuring the right things? A client kept talking about revenue, revenue, revenue (goals). I asked why they weren’t focusing on their gross and net margins. It can be easy to generate revenue at a low margin. Too low and you don’t make a profit. Or in a professional service business like mine, you work a lot more for the same net.

In time and materials business (legal, accounting, engineering, etc.) it’s all about the utilization rate. What percentage of your time is billable versus marketing, administration, collaboration, and similar? A firm with 40-50% utilization won’t make money. At 60-70% there should be a lot of profit.

Know what you should be measuring not what’s easy to measure.

“Being right half the time beats being half-right all the time.” Malcolm Forbes

“A hat should be taken off when you greet a lady and left off for the rest of your life. Nothing looks more stupid than a hat.” P.J. O’Rourke

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