The Importance of Metrics

Running Head: The Importance of Metrics

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The Importance of Metrics

University Of Phoenix

Abstract

Establishing metrics is crucial to any organization, especially in technology related company projects. Metrics permit organizations to measure its performance against industry sectors to determine how well the company is doing. Furthermore, metrics allow organizations to evaluate and improve the effectiveness and efficiency of its processes. Metrics are designated in different categories. The categories identified in this document include output, in-process, and people. (Duris 2003) The organization must first determine exactly what the company is trying to accomplish or determine. Metrics are then identified based on what is relative to the subject matter. Finally, metrics are verified when tracking progress against previous records or a company given standards or goals.

Importance of Metrics

Establishing metrics is crucial to any organization, especially in technology related company projects. Metrics can be defined as a system of parameters or ways of quantitative and periodic assess of a process that is to be measured, along with procedures to carry out such measurement and the procedures for the interpretation of the assessment in the light of previous or comparable assessments. The results of the metrics can be used to record trends, efficiency, capital, and etcetera. Metrics permit organizations to measure its performance against industry sectors to determine how well the company is doing. Metrics allow organizations to optimize its productivity.

Categories of Metrics

Categories of metrics differ according to the type of company and its goals. An article written by Paul Germeraad (2003), describes in detail different segments of metrics that are used in measuring Research and Development processes which is a critical technical competency. Each category of metric is calculated or measured differently. The categories identified in the article Measuring R&D 2003 include output, in-process, and people.

Output metrics can come in tangible or intangible form. Some of the tangible output metrics include return on investment, capital gain, quality of products or service, quantity of products or service. The measure of the return on investment (ROI) is essential. The ROI is used to assess the effectiveness of an investment such as a technology related project. To calculate ROI, the benefit (return) of an investment is divided by the cost of the investment; the result is expressed as a percentage or a ratio. The ROI is an accepted metric across many companies due to easy calculation and comprehensiveness. Capital gain is also a good metric used by many companies. Using the capital gain as a measure will yield notification of whether or not the project is successful. The value of the project must be worth more than the cost of implementing the project in order to receive positive capital gains. The quality of products is another good output metric. A technology company can compare the difference of its previous products to its new products to determine whether or not the quality is better, the same, or worse. This would identify if the new project or process was a success or a failure. In addition, the quantity of products or services is also used as a metric. Technology companies can compare the amount of products produced in a specific time frame with its new investment to the amount of products produced by the previous process. For example, cell phone companies may find a new process of mass producing cell phones more beneficial than producing each cell phone individually providing that the quality is still the same if not better. The intangible metrics include customer satisfaction and knowledge gained.

The in-process category of metrics is tracked by setting benchmarks or milestones to ensure a project is completed in an effective and efficient manner. The milestones may include a variety of different items dependent upon the type of project that is given. Examples of milestones used in web-development include items such as developing the project plan, developing the prototype, meeting for client review and approval, construction and testing. Other in-process metrics that companies can use for managing its technology-related projects include tracking the number of meetings held, number of management actions, number of people trained, and number of reports and publications relative to the project.

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