Would you be interested in a Business Planning tool that would ensure your company is operating just the way you want?
What about readily available indicators which could make sure your personnel are performing optimally?
Michelle’s Company Had A Problem
Her problem was that her company was going awry.
Michelle was an entrepreneurial single mother of two in her mid-40’s who owned an X-ray equipment repair and maintenance company.
Michelle was very skilled technically; but she had a hard time with leadership and managing people.
She had difficulty determining the proper amount of autonomy she should grant to each of her field service personnel.
Initially, she started out micro-managing everything they did and “running up their backs.” This caused a number of them to quit.
Then she gave them so much latitude that they ended up doing the work for customers any way they saw fit. This resulted in customer complaints, her personnel regularly disregarding her instructions, then they even began stealing company supplies and doing work on the side.
She began to regain control of her company when she was introduced to the concept of Metrics, how to implement them, and properly hold people accountable to them.
In a short time, she was able to utilize Metrics to manage the work being performed, and appropriately reward her employees for their part in achieving various company goals.
Is Your Business Wrestling With These Issues?
You may be dealing your competition upping their game and improving operations while your company struggles to keep up.
Perhaps you are facing staffing shortages but need to obtain greater production from your personnel.
You may want to take your business to the next level, but the output from your current systems cannot take you there.
Understanding how to effectively utilize Metrics may be the answer for you.
The following Business Planning 10 actions will enable you to use Metrics to take your organization to the next level.
1. What Is a Metric?
Metrics are scores and internal measurements of how a company is performing, and they can be invaluable to company.
They are equally applicable to small businesses, and medium, and large organizations.
Ratios and Percentages are external measurement tools, whereas Metrics are used for the internal measurement of a business’ performance.
2. What Is a Metric Measuring?
Metrics are used to measure and evaluate a company’s systems and processes.
Each business has its own systems and processes, which means an enterprise’s internal Metrics are unique to that specific company and they supply crucial information regarding a company’s operations.
In the below diagram from my upcoming book, Work Less, Make More and Have Fun in Your Business, reading from the bottom up you can see your Metrics relate to measuring your Systems, and the Personnel that are operating those systems.
Metrics are tools and indicators that can be used to quantify the target or expected results from your systems and processes. Comparing your operating Metrics to their target values will enable you to evaluate the production you are achieving from the organization structure and resources you are employing.
Looking at the above diagram, it is important to note that Metrics apply to all six areas of a business:
- Vision & Leadership
- Marketing & Sales
- Production
- Finance & Administration
- Human Assets
- Information Technology
3. Why Are Metrics Worth a Pot of Gold?
Measurements are crucial because:
- What gets measured gets managed and improved
- You cannot improve what you do not measure
- Ultimately, what you measure is what you get
Let us examine these three statements a little more thoroughly.
4. What Gets Measured Gets Managed And Improved
If you do not measure something, there is no way to determine how well you are managing it. Without an ongoing measurement, it would be like a person wanting to lose weight, but never stepping on a scale to see how he/she is doing.
5. You Cannot Improve What You Do Not Measure
You cannot determine if your actions to improve a process or an area of your business are successful unless you monitor them through an effective indicator (a Metric).
6. In The End, What You Measure Is What You Get
If measurements are the key to ascertaining if your actions improve your operations and if you correctly use these measurements to continue to improve your processes, then you can infer that what you measure ends up determining what you get from your company.
7. Utilize Metrics That Provide The Best Yardstick
To determine your Metrics, you want to closely examine the process that you are trying to measure and ask yourself, “What is the key measurement that indicates whether the process is operating correctly, and the desired outcome is being achieved?” If more than one measurement could be used as an indicator for a process, choose the measurement that is the most comprehensive gauge of the process.
8. The Two Flavors of Metrics
Metrics fall into two categories—financial and non-financial. Financial Metrics are obtained directly from your business’s accounting system—daily collections from your Accounts Receivable, daily sales amounts, or gross profit on each sale, for example.
Non-financial Metrics must be obtained from some other source such as customer surveys, direct mail response rate, defect rates from product inspections, employee turnover statistics, or the number of customer service calls regarding product quality issues.
9. Historical and Predictive Metrics
Metrics can either be historical or predictive. Historical Metrics reveal past performance—how your business did today or this week or last month.
Predictive Metrics predict future performance—how your business should do next week or next month or later this year – for instance, the amount of your unfilled sales orders, the number of prospects in your sales funnel or government forecasts for your industry.
While historical Metrics are of great value, you want to obtain as many predictive Metrics as possible so that you can plan for the future.
10. Look Before You Leap in Choosing A Metric
As you choose your Metric, keep in mind how easy it will be to obtain the Metric and how reliable it will be.
This means that, if at all possible, you want to select a Metric that is a consistent indicator and cost efficient to collect.
Where To Start
To effectively employ Business Planning Metrics, start by determining what are your critical systems, then move to your key systems, and lastly focus the remaining systems in your company.
Once you have identified the systems or processes you are trying to measure, then determine the best measurement of how the function is performing.
If more than one measurement can be used, choose the measurement that is the most comprehensive gauge of the process.
As you choose your Metric, keep in mind how easy it is to obtain the Metric and how reliable it is. This means that, if at all possible, you want to select a Metric that is a consistent indicator and that it is not cost prohibitive to collect.
To establish the initial target value of the Metric that you will measure your ongoing operations against, start by reviewing your organizations records for the past historical results of the system. For example, what has been your daily average sales per salesperson?
If you don’t find any historical records, then search for anecdotal evidence of what should be the starting target Metric. For instance, from talking to Department Managers, determine the percentage of late customer deliveries.
Next, examine industry norms and standards for the system and then adjust it for your particular situation.
Then, on an ongoing basis, compare your operating Metrics to their target values to determine if you are obtaining the desired outcome from your processes.
By putting in place and then monitoring the Metrics necessary to ensure that both your company’s systems and related personnel are functioning properly, you will be able to ensure your systems will enable you to achieve your organization’s operational targets on a consistent basis.
If you could use assistance with effectively using Metrics within your company, please contact us using the information below so we can be a resource to you in this key area.
Fountainhead Consulting Group, Inc. is an Innovation and Business Planning firm. During the past 21, years we have shown over 1,200 companies how to achieve their goals by using our unique, comprehensive, and systematic FastTrak Innovation Program™, Innovation Academy™, and Structure of Success™ methodologies. Using the components in these methodologies, each month we examine an aspect of how to transform your business or organization into a true 21st Century enterprise.
Office: (770) 642-4220
George.Horrigan@FountainheadConsultingGroup.com
Tags: Business Planning, entrepreneur, front end of innovation, innovation, invention, small business consulting, small business planning, start a business
