The importance of metrics, KPIs and scorecarding for a small, growing company cannot be overstated. Adding a layer of analytics, especially predictive analytics, can provide a significant boost to its performance, in my opinion.
The first step in this should be baselining. Baselining will let the company establish a base for comparison in the future and will need the company to monitor / track/ measure various KPIs and metrics for a predetermined period. The degree of accuracy in the baselining will depend on the patience that a company has. If a company waits for a full annual cycle to gather and record the various KPIs/metrics, they would have a clearer picture of the current state which allows for the vagaries of company performance over several quarters. This is especially true and significant for companies that operate in a cyclical industry.
Baselining beyond a year will, in my opinion, not provide significant enough benefits to justify it. The cost-vs-benefit graph would be a downward curve that quickly tapers off in terms of benefits beyond a year. Baselining for less than a year would be perfectly fine for a company with a steady stream of revenues across the quarters in a year.
A company like Procter & Gamble, which deals in common household products and consumables will usually have a steady stream of revenues across the quarters of an year. In contrast, companies like Amazon would typically have revenues weighted heavily towards the end of the year when holiday shopping (Thanksgiving, Christmas) is at its peak.
The advantages of baselining beyond a year is to compensate for non-organic factors or extrinsic factors like the economy, oil prices, currency fluctuations, etc. Baselining for an year will allow the company to visualize and take action on organic or intrinsic factors affecting the company’s performance.
The first step in this should be baselining. Baselining will let the company establish a base for comparison in the future and will need the company to monitor / track/ measure various KPIs and metrics for a predetermined period. The degree of accuracy in the baselining will depend on the patience that a company has. If a company waits for a full annual cycle to gather and record the various KPIs/metrics, they would have a clearer picture of the current state which allows for the vagaries of company performance over several quarters. This is especially true and significant for companies that operate in a cyclical industry.
Baselining beyond a year will, in my opinion, not provide significant enough benefits to justify it. The cost-vs-benefit graph would be a downward curve that quickly tapers off in terms of benefits beyond a year. Baselining for less than a year would be perfectly fine for a company with a steady stream of revenues across the quarters in a year.
A company like Procter & Gamble, which deals in common household products and consumables will usually have a steady stream of revenues across the quarters of an year. In contrast, companies like Amazon would typically have revenues weighted heavily towards the end of the year when holiday shopping (Thanksgiving, Christmas) is at its peak.
The advantages of baselining beyond a year is to compensate for non-organic factors or extrinsic factors like the economy, oil prices, currency fluctuations, etc. Baselining for an year will allow the company to visualize and take action on organic or intrinsic factors affecting the company’s performance.
