Question

How can internal metrics be used to manipulate the performance of a company? Are these metrics subject to the same regulation and audit as other numbers? How can same store sales be used to manipulate performance metrics? Are they still important and can they be relied on?

Answer 1

How can internal metrics be used to manipulate the performance of a company

Measuring Against Yourself

Grave risk of falling into the first trap of performance measurement is looking only at your own company. To measure how well you’re doing, you need information about the benchmarks that matter most—the ones outside the organization

Looking Backward

Along with budget figures, your performance assessment package almost certainly includes comparisons between this year and last. If so, watch out for the second trap, which is to focus on the past. Beating last year’s numbers is not the point; a performance measurement system needs to tell you whether the decisions you’re making now are going to help you in the coming months.

Putting Your Faith in Numbers

Good or bad, the metrics in your performance assessment package all come as numbers. The problem is that numbers-driven managers often end up producing reams of low-quality data.

Gaming Your Metrics

You can’t prevent people from gaming numbers, no matter how outstanding your organization. The moment you choose to manage by a metric, you invite your managers to manipulate it.

Sticking to Your Numbers Too Long

you manage what you measure. Unfortunately, performance assessment systems seldom evolve as fast as businesses do. Smaller and growing companies are especially likely to fall into this trap. In the earliest stages, performance is all about survival, cash resources, and growth. Comparisons are to last week, last month, and last year. But as the business matures, the focus has to move to profit and the comparisons to competitors.

Are these metrics subject to the same regulation and audit as other numbers

Yes, the metrics are subject to regulation and audit as other number. It helps to answer the below questions:

• Do performance measures include both leading and lagging indicators?

• Do performance measures refl ect the mandate and role of the activity?

• How effectively are performance measures used for continuous improvement

How can same store sales be used to manipulate performance metrics

At the store level, capture rate, conversion, frequency and duration of visit integrated with sales per shopper and average transaction value could develop a quality of traffic and interactions/transactions metric that balances the traffic declines

Are they still important and can they be relied on

It’s open to interpretation.While it’s true that the nature of retailing today is making traditional performance metrics more challenging to interpret, they still provide valuable insight that can be compared across retailer types and categories.

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