When it comes to measuring the success of a business, the first thing that probably comes to most people’s minds is profit. It’s true that businesses exist to make a profit, and that there are cold, hard numbers to determine just how financially successful a business is. But, are these figures the only way to measure success?
As Inc reports, Chip Conley, founder of Joie de Vivre Hospitality and head of global hospitality for Airbnb, put it this way:
“In any business, we measure cash flow, profitability, and a few other key metrics.
But what are the tangible and intangible assets that we have no means of measuring, but that truly differentiate our business?
These may be things like the company’s reputation, employee engagement, and the brand’s emotional resonance with people inside and outside the business.”
Should tracking go beyond just the numbers?
Are there aspects of a business that can’t simply have a number slapped on them, but that are still a good indicator of the health and success of a business?
The answer is yes. Qualitative information can often be hugely telling when it comes to the overall health of a company, and can shed light on aspects related to the overall health of a business that can’t be measured by simply tracking the numbers.
But these qualitative aspects are not as easy to track as the crisp numbers, performance indicators, and reliable calculations by which most business success is gauged. Furthermore, as McKinsey & Company reports based on the results of research they conducted between 2003 and 2011, the healthier a company is, the higher the profits.
How to measure the health of your company
What makes a healthier company? What aspects of a business are difficult to measure but are integral to the success of your business at least as much as the hard numbers of profit? There are actually quite a few of them.
What makes an employee happy? What makes them satisfied in their role? And how do you measure that happiness and satisfaction? The traditional way to determine if employees are happy has been to conduct ad hoc and routine surveys. Forbes reports on a system that asks questions, but keeps it short and sweet.
Questions to ask employees on a daily basis:
- What their mood was when they arrived at work
- What their mood was when they left work
- The extent to which they enjoyed their work tasks that day
There are also companies that provide software and apps, such as Celpax, that can be used to measure how an employee’s day was. Of course, surveys are still used, but open discussions with employees can also provide a lot of data. This can be done in weekly and monthly team meetings, building trust between employees and management.
This aspect might be overlooked, but if your business relies on suppliers, then this is an incredibly important piece of the success puzzle. In fact, Entrepreneur points out that your relationship with your suppliers should be taken as seriously as your relationship with your customers.
Again, this relationship and your suppliers’ satisfaction are difficult to measure, and surveys are the primary source of data on how satisfied a supplier is in a buyer-supplier relationship. Even just a few questions, perhaps posed with each order or on a monthly basis, can make a difference.
Ask suppliers questions such as:
- Are they are happy with the timeliness of your payment?
- Are they are happy with the lead time you provided for your order?
- Are they are satisfied with the overall relationship, and if not, what they would change?
Remember, if your suppliers aren’t happy, your customers will bear the brunt of that dissatisfaction. Satisfied suppliers mean better quality, quicker delivery, better prices, and increased innovation. This all leads to increased profits.
The satisfaction of your employees and your suppliers will directly affect your customers. However, you need to be able to measure that level of satisfaction. Again, the customer survey is a common method to collect data. Focus groups have also been a traditional method used for this purpose.
However, Userlike reports that the digital age has given us better tools with which to measure customer satisfaction.
Ways to measure customer satisfaction:
- Using the objective measurement approach, which is a way to analyze historical data such as online behavior and purchase scores and relate those to the business model.
- Assessing attributional satisfaction via apps such as Qualaroo.
- Using tracking tools to gather data on exit rates and abandonment rates and using a live chat window to find out the reasons behind these exits and abandonment.
- Using net promoter score (NPS), which allows you to determine how likely your customers are to refer you to another person.
- Using things gone wrong (TGW), which is a way to measure the rate of complaints about each product or service you offer (you want this score to be as low as possible).
Just as with employee satisfaction, employee engagement has traditionally been gauged by way of conducting surveys.
However, as Harvard Business Review points out, this really only provides a picture of the overall attitude of employees. This is certainly valuable information, but it is important to have data that comes from the direct measurement of employee engagement.
Ways to measure employee engagement:
- How much work is done outside of regular work hours.
- How many network connections an employee has and how many people they associate with outside of their own team/region.
- How much they participate in random initiatives and meetings, as opposed to the ones that are regularly scheduled and expected of them.
- How often they spend time working with customers outside of their regular work requirements.
Essentially, measuring these analytics allows you to get a good view of actual employee engagement rather than the perceived level of engagement.
Presence of innovation and growth
Innovation is the lifeblood of any company, and the ability to measure it in assessing a company’s success is key.
Fast Company reports that Faisal Hoque created what he has called the Sustained Innovation Index as a way to measure the innovation of a company.
Levels of innovation:
- Chaotic or ad-hoc—No or Very Little Innovation.
- Able to be repeated and operationally doable, with supporting documentation—Emergent Innovation.
- Well-defined and able to be repeated on a consistent basis, with documentation—Threshold of Sustained Innovation.
- Management is consistent and well-disciplined and there is measurement and analysis of performance—Measurable Improvement in Innovation.
- Optimization is continuous and improvement in operations and proactive management are present—Fully Sustained Innovation.
Companies that have achieved sustained innovation experience collaboration across departments, a convergence of disciplines, and structures that are sustainably innovative.
The reputation of a company matters more today than it ever has, but as with the other qualitative metrics, it is very difficult to measure the reputation of a company.
Nielsen reports that measuring a company’s reputation has to come within the context of the business goals of the company and the view of the stakeholders, rather than just based on the reputation in the eyes of the customer.
So, a company should implement a reputation measurement program, and the Branding Institute provides a report that outlines the nine reputation dimensions as follows:
- Quality of products and services
- Business performance
- Ethical business practice
- Marketing and sales effectiveness
- Management quality
- Employer attractiveness
- Social responsibility
Each of these contributes to the overall reputation of a business and each must be taken into account in terms of the whole, as well as the stakeholder groups most affected by each of them.
Emotional resonance of a brand
Businesses are advertising—as they always have—but the form of advertising used has changed dramatically over the past ten years. Digital marketing is the new normal, but despite this, understanding the emotional impact of advertising a brand is still lost on us—or at least until recently.
Forbes reports that there are a number of companies that offer a way to get some idea of the emotional response people have to brands and marketing.
Knotch is one such company. Those who use Knotch can ask viewers of their content or advertisements a specific question regarding that content or the brand. It’s short and sweet and provides a very visual method of response. Similar companies exist, such as Realeyes, which actually tracks facial expressions using the webcam. When people view marketing content from a company that uses Realeyes, these people can choose to share their facial expressions, thus giving the company the ability to track their emotions.
Yes, measuring the bottom line of a company is relatively simple, but measuring the qualitative aspects of the company that are responsible for that successful (or not) bottom line is more challenging, because they are related to people rather than hard quantitative results.
However, if you want to improve those quantitative numbers and your business’s overall performance, then you absolutely must have a way of measuring the qualitative aspects as well. The fact is, the health and success of your business also relies on these soft metrics, so don’t take them for granted.