Metrics don’t lie. As a COO, you always want to pay attention to metrics to determine how your efforts are moving your business forward. Specifically, you should focus on metrics that drive performance.

But which metrics should you consider, and how can you act on them? This article will tell you everything you need to know.

How to Identify the Best Metrics for Your Department

With so many metrics available, it’s best to focus on a few important ones, considering the following factors.

• Clarify on Outcomes: Ensure your metrics are tied to company goals and strategic outcomes.
• Select 3-5 KPIs Per Level: Your levels may include company, function, and team.
• Schedule Meetings: Talk to people in your departments and collaborating departments to determine which metrics to focus on. They may also provide insights on how to handle the information.
• KPIs vs. OKRs: COOs need to understand the difference between KPIs (key performance indicators) and OKRs (Objectives and Key Results). OKRs are a goal-setting framework that defines objectives while KPIs track a business’s ongoing performance. They should be prioritized in metric monitoring.

Which Metrics Matter?

When choosing metrics, focus on those that are measurable, actionable and timely. Here are a few to consider.

Financial Metrics

COOs must determine how their department impacts finances. Ideally, operations will lead to better products that improve customer service and boost loyalty, increasing revenue. Metrics to consider include:

• Gross Profit Margin: The income the company earns before overhead and taxes.
• Net Profit Margin: The revenue the company generates after expenses.
• ROI: COOs must consider how assets and equity contribute to income.
• Operating Expense Revenue: The cost of operations, including salaries, technology, administration, and utility.

Operational Efficiency

A COO’s main responsibility is ensuring the operations department runs efficiently. The following metrics will help them determine if they are reaching their goals.

• Inventory Turnover: How much inventory is sold and replaced over a period of time. High inventory turnover means efficient stock management while low turnover can indicate bottlenecks and overproduction.
• Supply Chain Efficiency: The organization’s ability to deliver products at minimal cost, optimal speed, and with consistent quality.
• On-Time Delivery Rate: A positive metric typically aligns with high levels of customer satisfaction and increase efficiency.

Quality & Compliance

It is up to the COO to ensure operations and the products they oversee align with compliance and quality standards. Here are some relevant metrics to consider.

• Quality Control Index: Quality control can be measured through defect rates, rework percentages, and customer returns.
• Environmental Sustainability Metrics: The COO can ensure operations align with sustainability standards by measuring energy consumption per output unit, waste recycling rate, CO2 emissions, and supplier sustainability records.

Workforce Management

COOs must oversee their teams to ensure they have everything they need to meet productivity and performance standards. Relevant metrics include:

• Employee Productivity: This metric is typically measured based on the revenue generated by each employee or the value added per labor hour.
• Employee Training Costs: COOs can calculate this metric by dividing the total training expense by the number of employees trained. It should than be compared to performance metrics to ensure it is contributing to capability.
• Absenteeism Rates: Companies with high absenteeism rates are often dealing with bigger problems like burnout, disengagement or health challenges. COOs should get to the heart of these issues by considering improvements in the company culture and by offering wellness programs.
• Safety Incident Rate: Safety issues can indicate poor training and lead to bigger problems such as reputational damage, legal expenses, and injuries. Companies with high safety incident rates should investigate how to develop a safer work environment.

How to Act on Metrics

Metrics don’t mean much if you don’t act on them. Here are some useful tips:

• Determine the Why: When anomalies occur, you need to ask yourself why they happened. This approach will help you improve systems moving forward.
• Experimentation: You may not have a full-proof solution for improving metrics. Experimentation may be necessary until you learn the best way to move forward.
• Continued Improvement: Continue checking on metrics to ensure your company is following the recommended trajectory.

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