Defining Success: 4 Key Measurements That Go Beyond Revenue
Entrepreneur's New Year’s Guide
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Successful leaders understand that their company’s success is closely tied to the overall happiness, health and wellbeing of the communities they serve and the constituents that help keep their operations running. Fortune 500 companies and startups alike are going beyond “employees as stakeholders,” and making them owners as well. Additionally, many consumer brands have advertising campaigns that are easily confused with those from advocacy groups.
While turning a profit is critical, seasoned entrepreneurs know that building a successful business isn’t only about revenue and margins. There are many other variables at play that can give a better assessment of the business' potential for growth. Here are a few to keep an eye on.
In years past, employees voiced their dissatisfaction with company owners and managers through unions and strikes. Today almost half of full-time American employees actually own a piece of the company they work for. And, when those employees are unhappy, they don’t strike. They leave and move to another company.
The line between personal and professional is blurred in our culture, making measurement more complex. Yet, most companies still fall on basic metrics like retention and benefits satisfaction. By the time an employee leaves it’s too late. An organization has not only lost institutional knowledge but potentially a shareholder as well.
Instead, start measuring changes in employee engagement. Run limited experiments to see if new management techniques change employee contribution levels. Are employees feeling collaborative? Are they dedicated to the company mission? Do they feel empowered to innovate? Do they feel their contributions are pushing the company forward?
Benefits of a strong culture extend beyond productivity and can directly impact key performance indicators (KPI’s). When a company has employees that help improve customer relationships, you know that it has a culture built for growth.
In some industries, the local economy and population closely track the fortunes of a business. Bigger employers are major local donors and the more benevolent leaders feel a strong responsibility to better the community.
As our economies increasingly move towards digital and “on-demand,” the communities are more difficult to define, but more important to the success of that “big employer.” For instance, Uber’s success starts and ends with the hundreds of thousands of “independent drivers” that provide its service. Similarly, companies like Etsy owe their enormous success to a worldwide network of sellers, suppliers, artisans and experts.
Leaders today need to measure partner, vendor and supplier engagement in the same way they do employees and customers. They also need to measure how changes in strategies affect the digital community that’s key to their success.
Customer loyalty is one of the most important factors to help grow a customer base. It allows companies to keep their focus on going after new customers while still maintaining those that they worked so hard to get. When companies develop strong customer loyalty, it has shown to lower customer churn rate by 5% and can increase profitability by 25-95%. Companies that successfully build customer loyalty can also benefit from strong word of mouth which exponentially increases the number of new business opportunities.
Leaders should measure repeat business and customer retention against changes in product, service, media coverage and general operations. Minor changes in the periodicity of repeat business can make a big impact.
In an age of social media, referrals are public. Companies can get a pulse on how their customer loyalty by viewing what they are saying on sites like Facebook and Twitter. Measurements should be made not only around key company marketing campaigns but other public changes in strategy and macroeconomic shifts. Smaller nuances in sentiment change can help uncover insights faster than many other marketing research techniques.
Ask any academic, and they’ll tell you measuring the impact of social programming is very difficult. Fewer than 10% of all social programs are evaluated. Of those, around 1% show scientifically valid evidence of long-term impact.
That doesn’t mean companies involved in social responsibility can’t measure the impact of their work. There are two kinds of measures: (1) outcome measures, which measure the long-term impact of a program, and (2) process measures, which measure the nuts and bolts of how the program operates.
Outcome measures typically require randomized controlled trials, or longitudinal outcome studies but process measures can be equally valuable. For instance, TOMS was one of the most popular brands to launch an integrated “giving back” component to their business several years ago by sharing the story of how they would send a pair of shoes to a person in need with every product that you purchase. TOMS can easily measure its social impact by simply counting the number of shoes it has given away.
Revenue and profit will always be the most visible indicators for determining how well a business is doing and gauging its potential for growth. However, looking into the many aspects that make up a business will allow entrepreneurs to figure out if they have the right setup to drive meaningful long-term growth.