What is your ‘Teabag Index’ to measure performance improvement?
To measure anything in a meaningful way, you need some sort of baseline.
To say you have a 20% increase in market share sounds impressive, but if your starting point is a 5% share, it is less so. By contrast, if your starting point is 40% in a competitive market, a 20% increase is a great effort.
Setting this baseline from which to measure change can be extremely difficult. Finding a simple measure that captures the impact of a wide range of variables while adequately reflecting the whole story is never as easy as it sounds.
Look at Australia’s published rate of unemployment. Whatever it is on any given date, it is an extrapolated survey that includes a definition of ’employment’ as: 1 hour of paid work a week. Clearly nonsense, but what is the real measure? How do you gather reliable data that offers actionable insights into segments of the population which are subject to a myriad of differing drivers?
Climate scientists faced this problem when setting out to determine the rate at which the decay of vegetable matter, which emits CO2 during the decomposition process, was adding to the store of CO2 in the atmosphere.
This is an enormously complex problem, driven by variations in temperature, humidity, type of vegetation, and the state of vegetation, particularly as it relates to permafrost slowly becoming less permanent.
The measurement solution came to two scientists as they struggled to assemble reliable data from the varied sources, collected in varied ways, around the world. They buried two teabags in the same location. One which decayed quickly at first, then much more slowly, and the other that decayed in the opposite manner.
By establishing the quantitative impact of differing conditions on the two teabags, a reliable measure of the rate of decomposition can be calculated. That calculation holds irrespective of the location, establishing a baseline from which the amount of CO2 being emitted by decaying vegetable matter from that location, can be derived.
Subsequently, they have engaged with interested people around the world using the same two teabag types. By pooling data, they had arrived at a means to calculate with considerable accuracy, how much CO2 was being emitted by the process of decomposition of vegetation globally.
They had The Teabag Index.
Economists use a similar measure of purchasing power of currencies across the world, by converting the local price of a Big Mac into US dollars. This is pretty obviously called the Big Mac Index, and has proved to be a pretty reliable indicator for over 30 years.
Sometimes the best solutions to complex problems lie in being creative about finding a simple solution. This is rarely obvious, but sometimes hiding in plain sight.
What is your teabag index?
It will be those few simple numbers that are a reliable macro indicator of the performance of your business.