Why do You Measure what You Measure?

Category: Strategy

In 2011 I had the opportunity to hear Howard Schultz, the founder of Starbucks, speak at the World Business Forum in NYC. Personally I love Starbucks. I am addicted to Chai Latte’s, especially the lightly sweet version. And Starbucks is one of my favorite places to read, write and relax…and to meet with people. When I’m traveling, I always look to see if there is a Starbucks in the area.

On a business level, I have a great deal of admiration for the company and for Howard Schultz. I believe that small business owners can learn from both Starbucks’ successes and failures. And there were definite failures. In fact, Howard Schultz readily admits this.

One of the key points in Howard Schultz’s presentation was that Starbucks went off track when they began to measure and reward the wrong things. Their emphasis shifted from being a great ‘third place’ to how many stores were opened and how much same store sales increased over the prior year.

Store openings and sales growth may sound like good things to measure. After all, Wall Street uses these measures. The problem is, these measures focus on the outcomes rather than on the brand elements that make these outcomes a reality. The result of this change in focus was decreasing sales per store. Sales went down, sometimes due to increased internal competition (does NYC really need a Starbucks on every corner?) and sometimes because stores were losing their uniqueness and quality of service.

In other words, Starbucks took their eye off the ball and started focusing on the goal post instead. Anyone who has ever played any sort of sport with a ball knows that this is a recipe for failure.

What do you measure in your business? More importantly, why are you measuring what you measure?

Here are some bad reasons for measuring things:

·         It’s always been done this way.

·         It’s easy to measure.

·         Someone I respect said I should.

·         It’s what my competition, other companies, etc. measure.

Here are some better reasons for measuring things:

·         It relates to and reinforces the company brand, especially core values.

·         This strength is unique or otherwise is core to company success.

·         This activity provides value to our customer and drives sales.

Starbucks lost their way when they started emphasizing growth over quality and the Starbucks values. In the short run, the company stock soared. In the long run, the company faltered and many in the press thought that Starbucks’ dominance was over. What turned Starbucks around was measuring and rewarding those brand elements that really matter: fast and accurate service, baristas that know how to pour the perfect latte every time, and quality coffee.

What are you measuring in your company? Will tracking it create the future company you desire? If not, start looking for new measures…today.