How I Build and Use a Metrics Tree in My Work

If your company has been established for a long time and has well tuned business processes, this doesn’t mean that Data Driven tools like unit economics, metrics, hypotheses, and so on are irrelevant to you. Today, I want to share my approach to using a metrics tree in the companies I consult, explain how I create it, and why I do it this way.

Metrics Tree

Let’s start with the basics. Many of you have likely heard about metrics and how they can be grouped into pyramids or trees. Nevertheless, I’ll provide my own interpretation of this tool. 

A metrics tree is a visual representation of business parameters and their interconnections, designed to aid in making effective management decisions. The key takeaway about a metrics tree is that it’s a tool that helps answer business questions. 

I always start with the premise that the primary business question is about generating profit from operations. Everything else is either secondary or an intermediate goal.  

Therefore, a metrics tree should demonstrate how that profit is achieved. At the core of our tree is the key metric — profit. Through connections and other metrics, we must show how this profit is generated. I believe this process is familiar and clear to most, so I’ll only highlight some aspects of creating a metrics tree. 

Creating a Metrics Tree 

Creating a metrics tree begins with placing metrics on a canvas. I prefer using simple rectangles labeled with short metric names, typically abbreviations (UA, LTV, AOV, etc.).