Business Performance Metrics: 7 Experts on What to Track & How

If you can’t measure it, you can’t manage it. That’s the premise behind business performance metrics—the numbers that tell you whether your company is healthy, growing, and heading in the right direction.

I’ve put together advice from entrepreneurs, business growth experts, and management consultants and organized it around the questions that matter most. Keep reading to learn what numbers you should focus on and how to leverage them.

Key Takeaways

The specific metrics you choose will depend on your business, your stage of growth, and your goals. But a useful starting framework is this:

1. Anchor everything to profitability.
2. Identify the handful of numbers that truly predict performance.
3. Make those numbers visible and owned.
4. Build in a regular rhythm of review.

Iterate from there, and let the data lead the way.

Why Business Performance Metrics Matter

Entrepreneur and bestselling author Gino Wickman likens many entrepreneurs to pilots flying blind with no data to help them determine where they are or where they’re heading. They might talk to a few people and gather subjective opinions about the company’s health, but opinions and instincts aren’t enough to make good decisions. In his book Traction, Wickman writes that a handful of business performance metrics, reviewed weekly, let you check the vital signs of your business, spot problems and trends, and make course corrections before problems become crises.

Legendary leader Horst Schulze makes a similar case in Excellence Wins: Rigorous, ongoing measurement helps leaders identify areas where they believe the business is performing well, but it isn’t. These blind spots arise easily when leaders assess their business using anecdotal evidence or gut feelings alone. Consistent measurement, by contrast, allows companies to identify issues and adjust their processes before small problems become large ones.

Start With the Right Goal: Profitability Above All

Before deciding what to measure, it helps to ask what you’re actually measuring toward.

Business management guru Eliyahu M. Goldratt argues that productivity means bringing a company closer to its goal—and the goal of every business is to make money (otherwise, you have no business). In his book The Goal, he warns against elevating to the top spot any metric that’s actually a subgoal, such as decreasing cost per part, manufacturing efficiency, product quality, customer satisfaction, or market share. None of this matters, contends Goldratt, unless it contributes to the Goal of profitability.

He also cautions against different departments over-optimizing their subgoals without meeting the main goal. For example, renting warehouses to store excess inventory can make the whole company less profitable. If you improve efficiency at one step without increasing overall output, you aren’t being more productive; you might even be causing excess inventory and increasing the cost per good sold.

Goldratt identifies the minimum number of metrics you need to tell whether you’re making money:

• Net profit (the more positive, the better)
• ROI (relative, to tell what the base is)
• Cash flow (to make sure the company stays alive)

He also translates these into more actionable day-to-day measures:

• Throughput—the rate at which the system generates money through sales
• Inventory—the money the system has invested in purchasing things to sell (money currently stuck in the system). Any investment you can sell is inventory; R&D to improve throughput can’t be sold and thus isn’t inventory.
• Operational expense—the money the system spends to turn inventory into throughput (including labor, leases, and R&D to improve throughput)

Goldratt’s advice: Try to improve all three at once. Be wary of a change that affects only one of these metrics—there could be second-order effects that backfire. Adding robots to improve efficiency without reducing workers or increasing output doesn’t increase profits. As Goldratt puts it, a plant in which everyone is working all the time is very inefficient.

What Metrics Should You Track?

Once you’re focused on what you’re measuring toward (profitability), determine exactly what you need to measure. Several frameworks offer complementary guidance here.

Track Smart Numbers and Critical Numbers

In Mastering the Rockefeller Habits, entrepreneur and business growth expert Verne Harnish recommends tracking two distinct types of metrics:

• Smart Numbers give a clear impression of your company’s financial health and general productivity. For example, a social media platform’s Smart Numbers could be the percentage change in new users week over week, the ROI for current advertisements, and the daily active user rate. Studying these in real time allows you to detect rapidly changing market conditions and unforeseen budget problems before they escalate.
• Critical Numbers measure the company’s short-term progress toward long-term goals. Every year, Harnish recommends deciding on a new quantifiable Critical Number that reflects significant progress toward your BHAG, and setting a smaller Critical Number every quarter that marks progress toward the year’s target. This ensures that everyone stays unified around the same top priority.

(Shortform note: A BHAG [Big Hairy Audacious Goal] is a huge, seemingly impossible objective that can inspire outsiders and stakeholders alike. The concept of the BHAG (pronounced bee-hag) is explored in Jim Collins’s book Built to Last. I read that book over 20 years ago, and the BHAG concept is still prominent in my mind and never fails to motivate me!)

Track People Satisfaction and Business Potential

Horst Schulze (Excellence Wins) identifies three categories of metrics that should appear in virtually any business’s measurement system: customer satisfaction and loyalty, employee satisfaction, and lead measures.

Customer Satisfaction and Loyalty

After serving customers, survey them to discover whether they’d want to buy from you again and whether they’d recommend you to others. This provides clear data on whether customers are truly having a positive experience that will lead to more business.

(Shortform note: Some experts argue that customer satisfaction is an overrated metric for businesses trying to maximize loyalty. One study of 75,000 customers found that people who were immensely satisfied with a customer service experience were only slightly more loyal than if the company had just met their basic needs. Instead of aiming to maximize customer satisfaction, consider reducing the effort customers must exert to resolve issues they have with your product or service. For instance, give customer service reps the authority to fix problems rather than forcing them to transfer customers to another department.)

Employee Satisfaction

Every dip in employee satisfaction signals a greater likelihood of turnover, which loses you valuable expertise and forces you to spend resources on replacements. Staying up-to-date on how engaged and motivated employees feel will show you when you must take action.

(Shortform note: What can you do to increase your employees’ job satisfaction and minimize the risk of turnover? Operational management expert Russ Laraway contends that employees are happier and more engaged when managers actively coach them. Although coaching does involve correcting workers’ mistakes, Laraway notes in When They Win, You Win that the majority of feedback should be encouragement and praise for what employees are doing well. This frequent recognition helps employees feel valued, helping them enjoy their jobs more.)

Lead Measures

Lead measures are metrics that accurately predict your business’s future performance, allowing you to be proactive rather than reactive. If you run a barbershop, one lead measure might be the number of fully booked-in-advance days on your calendar—a leading indicator of future revenue.

(Shortform note: In The 4 Disciplines of Execution, Chris McChesney, Jim Huling, and Sean Covey explain that the opposite of lead measures are lag measures—metrics that indicate your success but don’t directly influence your future performance. Although lag measures indicate whether you ultimately succeed or fail, you can’t influence them directly—you can only increase them by working to increase your lead measures. For instance, the revenue your website generates on a given day is a lag measure. To increase this lag measure, focus on lead measures such as the percentage of users who click on your advertisements or your ranking in search engine results.)

Track Your Core Growth Levers

In Hacking Growth, entrepreneur Sean Ellis and renowned growth marketer Morgan Brown recommend identifying your core “growth levers”—the few metrics that impact your business the most—by looking at your data to find what correlates best with your product’s core value.

Consider a hypothetical SaaS product that aggregates and recommends popular newsletters. If the core value comes from seeing excellent recommendations, the key metric might be the email open rate for weekly recommendation emails (since users who consistently open above a 50% rate tend to stay). Secondary growth levers might be how often users click through to recommendations and whether they share them on social media.

How to Design Metrics That Actually Drive Action

Choosing the right metrics is only half the battle. How you design and present them matters just as much.

Set Achievable Benchmarks

Mike Michalowicz (Clockwork) advises that each metric’s benchmark be achievable rather than ambitious. The measurement’s purpose is to indicate a problem, not to indicate when your business exceeds expectations. For instance, an average customer review rating between 4.5 and 5.0 is achievable; between 4.9 and 5.0 is overly ambitious as a baseline.

In Measure What Matters, venture capitalist John Doerr offers the counterpoint that some of your benchmarks should be achievable and others should be ambitious. He claims that striving for several ambitious benchmarks motivates you and your employees to challenge yourselves.

Make Metrics Easy to Spot

Michalowicz also emphasizes that each metric should be easy to see; a single glance should tell you whether things are on track. He recommends assigning teammates the responsibility of keeping metrics visible and up-to-date.

Verne Harnish goes further, recommending that Critical Numbers be displayed prominently, with large visuals in a communal space. Employees are more engaged when they can clearly see the effects of their work. Gino Wickman similarly suggests a company “scorecard” displayed at weekly meetings, with each metric owned by one accountable person (usually the department head) who updates it in advance. This scorecard should include both the benchmarks you want to achieve and the data reporting what you did achieve.

(Shortform note: Of course, nonprofits also measure performance. Being part of a church for many years, I’ve seen quite a few large visual indicators of progress toward the church building fund, missionary projects, and the like. These charts—often set up in the lobby or fellowship hall—never fail to inspire everyone to work toward the goal.)

Focus on One Priority at a Time

Harnish recommends restricting Critical Numbers to one area of improvement at a time rather than trying to improve every aspect of your business simultaneously. Organizations make progress much more quickly when they focus all their efforts on a narrow goal. He also recommends creating a fun quarterly theme around each Critical Number—complete with visual branding and a team reward when the target is hit—to keep employees motivated and engaged.

Trace Metrics Back to Actionable Steps

Wickman cautions that scorecard numbers should be activity-based and traceable to an originating step. For example, tracking new revenue as it comes in means you can’t react to sales slumps in time. Instead, trace the sales process backward. Track new leads received each week so you can predict how many leads you need today to hit a sales target in the future. When a number misses its goal for the week, mark it in red to create a visible sense of urgency at your team meeting.

Connect Your Metrics to Your Goals

John Doerr (Measure What Matters) offers the OKR (objectives and key results) framework as a way to ensure your metrics are always tied to meaningful goals. The objective is the ultimate goal—what your team exists to achieve. For a sales team, that might be total net revenue. The key results are the sub-goals on the ladder toward that objective (e.g., total calls made, new inbound leads, conversion rate).

Doerr emphasizes that objectives must be measurable, concrete, and action-oriented; if they’re intangible or not something individuals can work toward, they’re not truly objectives.

Doerr provides a two-step process for implementing OKRs:

1. Identify the most important tasks your company needs to accomplish within a set timeframe.
2. Direct departments, teams, and individuals to set their own objectives aligned with the company’s top ones.

OKRs are different from KPIs (key performance indicators). OKRs are a more expansive framework for directing a company’s growth. KPIs measure performance on specific tasks within an existing framework. Individual KPIs can sometimes be synonymous with key results in the OKR framework, but OKRs go further by tying those results to an overarching purpose.

Building a Scorecard and Creating Accountability

Once you know which metrics to track and how to design them, the practical question is how to build a system that keeps everyone aligned.

Build a Weekly Scorecard

Wickman provides a five-step scorecard process in Traction:

• Brainstorm with your leadership team about what numbers best reflect how the business is doing week to week—revenue, sales activity, customer complaints, accounts receivable, production output, etc. Aim for about a dozen numbers in a spreadsheet that shows 13 weeks at once.
• Assign accountability. Each metric should have exactly one owner—usually the relevant department head.
• Set a weekly goal for each category, aligned with your one-year plan.
• Designate someone to update the spreadsheet each week for leadership review.
• Review the Scorecard weekly with your leadership team, and take any necessary steps to stay on track.

The authors of The 4 Disciplines of Execution recommend you track both lag measures (results that tell you whether you’ve achieved your goals) and lead measures (the actions that predict future results). The most effective lead measures have two qualities:

• They’re predictive, directly affecting your lag measures.
• They’re influenceable, something your team can control without depending on outside factors.

By including both types of metrics in your weekly tracking spreadsheet, you create a more complete picture of your results and the actions driving those results.

Give Everyone a Number

Wickman recommends going one step further by giving every individual employee a single, meaningful number they’re responsible for meeting. Here’s why:

• Numbers are objective. Managers get concrete data instead of vague impressions.
• Numbers create accountability. “Keep accounts receivable under 40” is specific, but “Be responsible for collections” is not.
• Numbers boost production. In one of Charles Schwab’s steelmaking plants, crews competed to produce the most batches of refined steel each day. Each crew chalked its number on the floor, and the next shift tried to beat it. Overall production increased.
• Numbers create teamwork. When a team has a number to hit, they work together to make it happen.

(Shortform note: Some experts caution that number-based accountability systems can backfire. Research shows that only 21% of employees feel their performance metrics are within their control, which makes accountability feel arbitrary and demotivating. To make number-based accountability work, experts recommend focusing on solutions rather than blame—working with employees to identify meaningful steps for improvement rather than simply assigning a score. Provide consistent feedback, acknowledge your own role in their work, and treat mistakes as opportunities for growth rather than punishment.)

Keep Reviewing—and Don’t Forget the Big Picture

Harnish recommends that your strategic thinking group meet weekly to assess the progress of your growth initiative, using real-time data from customers, employees, and suppliers. Like Wickman, he also notes that, while a weekly scorecard is invaluable for spotting near-term problems, it doesn’t replace monthly and quarterly financial statements; you need both to get the full picture.

Explore Business Metrics in Their Broader Context

Business performance metrics aren’t just administrative housekeeping—they’re the nervous system of a well-run organization. The authors surveyed here don’t agree on every detail, but they share a common conviction: The right numbers, tracked consistently and reviewed regularly, allow businesses to replace guesswork with clarity, align teams around shared goals, and catch problems before they become crises.

To understand metrics in their broader business context, read Shortform’s guides to the books I used to prepare this article:

• Clockwork by Mike Michalowicz
• The Goal by Eliyahu M. Goldratt
• Mastering the Rockefeller Habits by Verne Harnish
• Scaling Up by Verne Harnish
• Excellence Wins by Horst Schulze
• Traction by Gino Wickman
• Hacking Growth by Sean Ellis and Morgan Brown