Finding the Right Metrics

Whether measuring the nature of the economy or determining the impact of economic development programs, finding the right indicators and metrics is critical. And a new set of questions is arising for economic development practitioners: Who gets credit for impact when multiple organizations provide services to the same company? When impacts may be long-term, what is the best way to gauge success in the short term? These and other questions will be explored during the conference session on Measuring Impacts: Where We Stand and Where We Need to Go at this year’s annual SSTI conference. The session comes at a time when the Center for Regional Economic Competitiveness (CREC) recently released a white paper on common metrics used by economic development programs and when the World Economic Forum is seeking input on the design of its Global Competitiveness Index.

“Our members and others in the field have called for ideas on measuring outcomes, not simply activities,” Dan Berglund, SSTI president and CEO, said. “It’s a more complicated world and we work in an interconnected system. Finding the right measures to accurately reflect that is important.” Berglund will lead the conference session on November 3.

CREC recently released a white paper on performance indicators, outlining common metrics in use as well as guidance on improving and expanding the slate of indicators. They found that investment and jobs were the dominant indicator types across all programs. Yet, state economic development leaders were dissatisfied with those metrics, noting that those metrics may not fully convey what incentive programs are achieving. There is disparity in how those metrics are measured, as well, leading to further ambiguity.

To make a jobs’ indicator more effective, terms should be clearly defined, baselines should be established, counts should be fully described, and some measure of job quality should also be included, the paper noted. It also acknowledges that an investment metric can be problematic because it includes many different metrics across programs serving different needs. Beyond the two dominant metrics of jobs and investment, business startups, intellectual property generation, projects funded or awards made, and businesses assisted are some of the metrics listed that are being used in entrepreneurship and innovation categories.

When selecting indicators to evaluate programs, the CREC paper’s authors urge careful consideration of three steps: start with the big picture and set a clear goal, align indicators with program goals, and determine data sources and availability

While those working in the innovation economy in different regions may be feeling the need to reassess the metrics they use to measure success, it is an issue that is being felt on the global scale as well. The World Economic Forum is seeking comment on its new methodology in updating the Global Competitiveness Index (GCI) in light of the “fourth industrialization,” taking into account the changing nature of today’s economy, arguing that current statistical tools are outdated, both conceptually and methodologically.