Technology
Measuring Metrics

• Pat Saporito
• January 2019
• 

One of the most frequent areas organizations struggle with in their data and analytics is truly meaningful key performance indicators.

Everyone has dashboards but not all dashboards are equally effective. It all starts by defining the right metrics, or KPIs.

Sometimes dashboards only reflect final KPIs but don't reflect driving or influencing metrics, such as leading indicators. If they did, organizations could better monitor and manage potential final outcomes by taking actions before they are finalized.

The other gap often seen is that KPIs reflect only bottom-level operational metrics, such as number of leads, policies issued and claims processed. They don't have top-to-bottom metrics that link, from corporate strategic to line of business management to operational metrics.

Recently, I reviewed a report on an initiative called the Embankment Project for Inclusive Capitalism. The purpose of the EPIC initiative, which was created by the not-for-profit Coalition for Inclusive Capitalism and led by EY, was to define components of long-term value.

The project title isn't easy to remember or catchy, but the initial report is quite impressive.

I'm going out on a limb to project that the report will become a classic study of and guideline to metrics.

The intent was to identify and standardize metrics to compare companies. While we already have plenty of metrics used in regulatory filings and SEC filings for public companies, the EPIC report presents additional meaningful metrics.

The initiative defines what is called a “long-term value framework.” Metrics in the framework are organized into four key areas: talent, innovation and consumer trends, society and environmental, and corporate governance.

Two groups of metrics are very relevant to the insurance industry: human capital management and innovation. While artificial intelligence will likely replace rote tasks, skilled people are still very much needed and in short supply in the industry.

Innovation is one of the key goals of digitalization, and being able to more effectively measure it is sorely needed.

Human capital management and innovation have both defined KPIs into categories or dimensions with analytics questions for how to apply these metrics and recommended “good” practices.

Human capital management dimensions included workforce cost; attraction, recruitment and turnover; workforce composition and diversity; training, learning and development; and engagement and well-being.

Innovation has defined KPIs by key innovation phases.

As we move into the new year, organizations would be well-served by reviewing the report and framework and comparing them to their current KPIs and metrics.

To test effectiveness, they should review the context of their metrics, how they are used, underlying data and calculations, and any assumptions and limitations. Remember, what gets measured gets managed.