The dangers of vanity metrics for client-focused firms and what to measure instead

My Post - 2020-02-11T151140.469.pngWhen Lehman Brothers filed for bankruptcy in September 2008, the firm had $639 billion in assets, making it the largest bankruptcy filing in US history. Up until that point, the firm had been painting a picture of healthy finances even in the midst of increasing signs that they were headed downhill.

Using an accounting loophole known as ‘Repo 105,’ Lehman Brothers presented a positive balance sheet to gain confidence from its clients and investors. This is an extreme example of how vanity metrics can belie reality, and why relying on these kinds of artificial metrics––even when done unintentionally––can create problems for businesses.

Vanity metrics are all too easy to fall for because they look good on paper, leading firms and agencies to believe they’re doing well, when in fact they fail to accurately depict their true status. Vanity metrics don’t measure anything substantial for businesses and can’t be translated into actionable steps to help them grow.

Sometimes struggling firms become more vulnerable to relying on vanity metrics as they may be under pressure to present positive outcomes to both internal and external parties.

Yet in order to grow a business in a healthy way, the focus should shift from vanity metrics to actionable metrics.

What are some examples of vanity metrics?

Sometimes businesses measure metrics without realizing they don’t actually help them grow. They may sound good in a meeting, but with further study they aren’t actually contributing to business growth. Below are some examples of these metrics.

Number of clients

At first glance, this seems like a fairly straightforward equation. More clients equal more money. Client churn is something firms work hard to avoid.

But serving all of your clients is often a tricky act. Too many clients and you may struggle for resources to service clients properly. Too few and you may not generate enough profit to stay afloat. So while it’s important to track your number of clients, that number alone doesn’t give you any idea about how well you’re actually doing.

If you have 10 clients bringing in $1,000 on average, that’s better than having 20 clients bringing you $500 on average. In both cases, you earn $10,000, but in the latter case, you’re doing double the work. Yet that doesn’t give you the whole view either. If every single one of those 10 clients is incredibly difficult to work with and the 20 clients are much easier to manage, it’s valid and important to measure that strain as well.

So when it comes to clients, it’s far better to focus on who they are rather than how long your client list is. Here are some alternative metrics to track:

  • Client retention
  • Average value per client
  • Hours billed per client
  • Referrals brought in per client

If you’re not sure where to begin, here are some ideas on how to define a good client.

Billable hours

Another tricky metric is billable hours. While it’s useful to track, billable hours aren’t something you should base your performance on. That’s because billable hours alone don’t measure your firm’s work quality or client happiness.

A high number of billable hours suggests more work and higher revenue. But if you don’t focus more on project outcomes or client satisfaction you could ultimately end up with clients disputing bills or leaving your firm because they aren’t happy with your services.

Instead, consider metrics like cases or pitches won, client satisfaction, client referrals, and other types of feedback that let you know whether those billable hours are fueling more business.

Total assets

History is full of bankrupt companies with billion-dollar assets, like Washington Mutual with $328 billion in 2008 or General Motors with $82 billion when it went bust in 2009. But total assets can be a less than meaningful metric for measuring your true financial health because it doesn’t take into account underlying liabilities.

A better way to gauge financial health and business value is to track net assets.

Net assets = Total assets – liability

This is important because by including those liabilities in the equation, you can stop operating under an inflated figure which will inevitably lead to poor business decisions.

Other metrics that can help businesses escape the ‘total assets’ trap include:

  • Working capital: Calculating your working capital––exactly how much cash you have on hand to invest and cover expenses––can help you lower the risk of falling short in cash.
  • Overhead ratio: What you’re spending on organizational expenses such as administrative costs, utility bills, etc. divided by total expenses. A good rule of thumb is not to exceed 35% in overhead costs.
  • Accounts receivable: Rather than relying on projections that take into account outstanding invoices, be more conservative in estimating future payments that aren’t 100% guaranteed.

Social media and website page views

Marketing has many potential metrics you could track, but not all metrics are made equal in terms of actionability. In social media, public-facing numbers like the number of followers, likes, and retweets are nice-to-haves that don’t always translate to real results.

They aren’t actionable because you can’t form a game plan based on how many likes you’ve received on a given tweet. By contrast, measuring engagement and clickthrough rates give you a far better idea of how you’re performing with your audience.

Having 10,000 followers but little engagement is less effective than an account with 1,000 followers whose posts are getting consistent likes and shares. In the second case, people are actually interacting with your content, whereas the first case might as well consist of follower accounts that are inactive or bots.

Similarly, having a website with a high number of page views might make you feel good that people have visited your website. But beyond that, there’s no useful information that can help you get to your goal––attract more clients.

An example of more actionable website metrics would be form completion rate, which would measure how many of your website visitors actually contacted you after visiting. If that number is low, you could try featuring the form or contact information more upfront and visible to increase engagement. – Read more

How to improve cloud provider security: 4 tips

My Post - 2020-02-04T141549.250.pngMany IT pros remain concerned with the risk of data loss and leakage in the cloud, according to a new survey from AlgoSec.

Many companies are increasingly looking to the cloud as a more effective and efficient way to manage their applications and other business assets. Ideally, a cloud environment can offer the agility, flexibility, and scalability that a company may not be able to achieve internally. However, the cloud carries its own set of concerns and challenges, several of which were highlighted in a Tuesday report released by security provider AlgoSec.

 

In a survey commissioned by AlgoSec and conducted by the Cloud Security Alliance, security was the top worry among the 700 IT professionals polled. A full 81% expressed significant concerns about security when moving data to a public cloud platform. The risk of sensitive customer or personal data being lost or leaked was cited as the biggest security fear.

Respondents pointed to specific security concerns when running applications in the public cloud. Those concerns included unauthorized access to cloud-based data, infiltration of more sensitive areas of the network (either in the cloud or on premises), data corruption, outages due to Denial of Service attacks, and the abuse of resources (e.g., cryptomining).

algosec-cloud-concerns
AlgoSec

Ideally, using a cloud provider should alleviate some of the internal effort involved in managing applications and other assets. But IT pros still need to manage security in the public cloud, and that task carries its own challenges. Proactively detecting misconfiguration and security risks with public cloud vendors was the top obstacle cited in this area.

Respondents also pointed to other public cloud security challenges, including a lack of visibility into the entire cloud estate, compliance and preparation for audits, managing both cloud and on premises environments, managing a multi-cloud environment, and a lack of expertise in cloud-native security.

The survey also posed questions about multi-cloud environments. Yes, using multiple providers reduces the reliance on a single provider. But a multi-cloud environment adds certain challenges as well.

Among the respondents, 66% said they rely on several cloud providers, with 35% reporting that they use three or more providers. To add to the complexity, organizations may use both public and private clouds. A full 55% of those polled said they use a hybrid cloud environment with at least one public and at least one private cloud. Some 35% said they use a combination of a multi-cloud and hybrid cloud environment.

“As companies of all sizes are taking advantage of the value of the cloud with its improved agility and flexibility, they are also facing unique new security concerns, especially when integrating multiple cloud services and platforms into an already complex IT environment,” John Yeoh, global vice president of research for Cloud Security Alliance, said in a press release. “The study findings demonstrate how important it is for enterprises to have holistic cloud visibility and management across their increasingly complex hybrid network environments in order to maintain security, reduce the risk of outages and misconfigurations, and fulfill audit and compliance demands.”

How to improve cloud provider security

To tackle some of the risks and challenges in using cloud providers, AlgoSec served up a few recommendations.

1. Build in security and compliance

Cloud providers now offer tools for managing security and compliance, many of which meet certain industry and government regulations. As such, IT pros should available themselves of these native tools.

– Read more

Channel predictions: Opportunities in AI, hybrid cloud, edge and security

My Post - 2020-01-31T103308.264.pngSome of the great and the good in the industry have shared their predictions for what they expect in 2020