Building your metrics framework: A 7-step guide

In How to Design a Winning Metrics Framework, we talked about how deciding which metrics to measure (and which ones you want to move) is a life-or-death decision for any for-profit business. 

It’s a tough balancing act ⚖️.

For your business to thrive you need to prioritize the most important metrics. Then, your team needs to try to move those numbers. But, all-too-often businesses can’t figure out which metrics to measure and which to move. Quantifying the value of that movement is also tricky, to say the least. It’s not uncommon for end-users to distrust the data, either.

Building the right metrics framework is an essential step that will help you address all of these problems.

I’ll walk you through the step-by-step process that you can use to build a winning metrics framework, but first… 

A word of caution

Even if you follow this guide to the letter, you’ll still have the urge to measure more than is reasonable. It’s understandable – there are a lot of potential metrics to monitor, measure, and move. 

Here’s the main thing I want you to remember as you build out your metrics framework: There’s a big difference between “We can measure this,” and “We should measure this.” 

If you make that your mantra, it’ll be a lot easier to build a data analytics program that will increase growth and profitability, instead of one that’s a drain on resources with no ROI.

Metrics framework evaluation guide

The process I’m about to share is based on an Evaluation Guide that the AirOps team developed to help organizations find alignment on business objectives, use cases, and technical requirements for their data stack.

In How to Design a Winning Metrics Framework, we introduced a fictional lemonade conglomerate, LemonDrops. We’re going to use them as an example throughout this process to showcase a (semi) real-world example of what an actual metrics framework might look like.

To keep things simple, let’s pretend that the marketing department at LemonDrops has decided to build out a metrics framework to help them better assess the performance of their campaigns. Here’s how they would go about it 🍋👇️.

Step 1: Assemble the team and set a timeline

To tee up the project, start by identifying who will be involved, the total number of stakeholders, and the primary contact. This helps rein in the scope and keeps everyone accountable.

🍋 In the LemonDrops marketing department, stakeholders might include the Director of Marketing, the Digital Marketing Manager, a Paid Advertising Manager, and someone from the sales department, like the Head of Sales.

There’s a reason I included the sales team – they’re the ones who feel the impacts of marketing’s decisions most acutely. For example, when qualified leads are down sales will have trouble keeping its pipeline full, which hurts revenue.

Once you’ve assembled a team, determine a reasonable target completion date. Once you understand the time investment that’ll be required to build out a metrics framework, it’s much easier to quantify the need for the solution. If the cost to find the solution is greater than the potential benefits, then the solution/metric in question may be a lower priority.

In other words, the juice isn’t always worth the squeeze. 

Here’s a (very) simple formula to calculate whether moving a particular metric is worthwhile:

Negative $ Impact + Time Investment $ < Positive Outcome $ = Good 👍️

Negative $ Impact + Time Investment $ > Positive Outcome $ = Not Good 👎️

In my experience, it can take anywhere from a few days to a few weeks (or possibly longer) to develop a metrics framework. However, expect to blow past your proposed target completion date because these types of projects are never really finished. 

Things change constantly – metrics definitions are iterated on, the business’s needs evolve, and the types of questions that you want to answer with data shift. Your journey toward data excellence should be a marathon, not a sprint.

With that in mind, some of the major factors that will influence your ultimate timeline include:

• Current state of your data stack
• Current and anticipated volumes of data
• Number of data sources
• Available resources
• The tools you’re using

For the LemonDrops marketing department, we’re going to estimate that it’ll take one or two weeks to design a winning metrics framework from start to finish.

Step 2: Take inventory of your current data situation

What are the “core data sets” that make up your business and where does the data come from? You’ll need to get an inventory of everything that currently exists before moving on.

Think of these as a list of the atomic units that represent a part of your business, where each row of the table has a unique identifier. For example, Sales typically has Leads, Contacts, and Opportunities each as a core data set (or business object), typically found in a CRM. For Customer Support, Support Tickets would be a core data set, found in a ticketing system like Zendesk.

🍋 As LemonDrops works on step two, here are some examples of the core data sets their marketing department might identify:

Step 3: Identify your challenges today and their negative impacts

What is the current state of your organization’s data stack? What challenges exist that make it difficult to make the data work for business end-users?

For example, are data sources scattered across multiple independent systems? Do departments define the same metrics in wildly different ways? Will it be difficult to scale and fundraise, because there’s no way for your teams to accurately report on their performance metrics? Are there underlying trust issues with certain core metrics and reports?

Once you’ve identified some challenges, assess the negative financial impact they have on the business. In other words, how much does it cost to deal with these challenges? Some common negative impacts that I’ve seen include increased operational costs (e.g., time investment), higher customer churn, and loss of revenue.

🍋 For LemonDrops, some of the marketing department’s top challenges and their negative impact include:

• There’s a ton of demand for lemonade and business is good, but they don’t have a holistic view of their digital marketing efforts. They can’t easily view and compare data about the performance of Google Ads, Facebook Ads, and other paid advertising campaigns.
• As a result, they blindly spend money on digital marketing and advertising but have no idea whether their campaigns are effective. 

‍Step 4: Set some goals for tomorrow, always tied to business objectives

Alright, now that you understand your biggest challenges and their negative impacts, let’s focus on the exciting stuff: goals and objectives.

When setting goals for tomorrow, you’re answering two big questions: 

1. If you could provide your stakeholders with access to data (or better access) how would that improve your business? 
2. How do you envision your company achieving its goals?

As data leaders, we always want to tie our performance back to financial ROI. For the business objectives part of this step, figure out the monetary impact of your data analytics efforts. For example, would solving your challenges and meeting your goals reduce costs or increase revenue?

It helps to make a chart with all of your answers for steps 3 and 4, like this:

🍋 Here’s what the LemonDrops marketing department’s chart might look like:

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Step 5: Determine your top use cases for data

Now, it’s time to determine your leading business use cases for data, aka choosing exactly what you hope you accomplish with your new metrics framework. 

In general, there are three main categories of metrics to consider:

Company-wide Metrics: To determine which company-wide metrics to track, choose the 2 - 3 most important metrics/KPIs you measure (or would like to measure) to understand overall company performance.

Functional Metrics: For each of your major functions or departments (e.g. Marketing, Sales, Operations, Customer Support), what are the 1 - 2 most important metrics/KPIs you measure (or would like to measure) to understand function/department performance? 

Customer Metrics: If you have metrics that you would like to regularly share with customers or other external stakeholders, list them out.

🍋 In the case of everyone’s favorite lemonade stand, the marketing team wants to track data across digital marketing campaign sources. This would allow them to view and compare metrics from Facebook, Google, and Instagram ads, and then compare them with data from Salesforce to determine whether their campaigns are attracting more customers. They need the data to be accessible in Google Sheets and presentable in Google Slides.

🍋 LemonDrops Marketing might also want to understand how much of their sales come from new vs. returning customers and how to engage customers to return to drive up customer Lifetime Value (LTV).

Step 6: Outline critical requirements

Next, outline your critical requirements, including details about which metrics you need to measure and why measuring them is important to the business. 

Let’s look at the critical requirements for the marketing team at LemonDrops to give you an idea of what this step looks like:

Step 7: Putting it all together

Once you’ve completed steps one through six, the ideal outcome will be a solid metrics framework that you can iterate on (more on that in a second) and a clear understanding of what could happen if you aren’t monitoring and moving the right numbers.

The work isn’t done yet, though. (Spoiler alert: It’s never really finished.)

Make it a practice to review and assess your metrics framework at key inflection points, like the launch of a new product, an upcoming quarterly business review (QBR), or a big fundraising push. Some inflection points are regular and can be anticipated, like a QBR, and others are unexpected, like a sudden economic downturn.

During inflection points, it’s helpful to ask,  “Are we measuring the right things?” This doesn’t mean you need to re-do your metrics framework every other month – it’s simply a question that you can use to help guide data-related decisions.

Here’s a good rule you can follow: When there’s a critical decision that needs to be made, consider reviewing your metrics framework to make sure it’s still applicable to the business’s goals and objectives.

🍋 To complete step seven (and beyond), the marketing team at LemonDrops might schedule quarterly review sessions with the project’s main stakeholders. If something comes up in the meantime, like a sudden global lemon shortage, they might also reconvene to see if their current metrics framework is still relevant.

There are so many metrics, how can I possibly choose which to measure? 🤯

The itch to measure everything can be a tough one to ignore. But, I’m going to repeat the same advice that I opened this guide with: There’s a b-i-g difference between “We can measure this,” and “We should measure this.” 

I know, easier said than done. 

Luckily there are two approaches that you can use to make sure you don’t go too deep into the weeds. Each one is based on the concept of outcomes, outputs, and inputs that we talked about in How to Design a Winning Metrics Framework (so review that information real quick if you need a refresher!) 

‍Top-down view from the executive level, where you choose:

• 2 main Outcome metrics (using a mix of growth, quality, and efficiency measurements)
• 2 - 3 Output metrics (making sure each one rolls up to one of your Outcome metrics)
• 1 - 2 Input metrics (making sure each one rolls up to one of your Output metrics)

Bottoms-up view from the department and team-level, choose the:

• 2 - 3 most important Output metrics per team
• 1 - 2 Input metrics driving each of the Output metrics

When choosing which metrics will have a place in your metrics framework, remember: In any given quarter, it’s really hard to have any meaningful movement on more than 2 - 3 output metrics. 

How to use your metrics framework

Once you’ve completed this seven-step process, you’ll have more than a metrics framework to use within a specific department or throughout the entire company. 

You’ll also have a quantifiable understanding of the true financial costs of the negative impacts of the data-related challenges that your company faces. Plus, when you and your team have confidence that you’re moving the right metrics to increase growth and profitability, it’s much easier to prioritize problems and make educated decisions.

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