Is your business growing or is it losing momentum? What actions are being taken by your management team based on your answer to that question? As an owner, if you’re unable to immediately answer both questions with confidence, you aren’t tracking the right information inside your company.
Proper tracking of key performance indicators and sales/financial/operational metrics provide the insight for you to take proactive steps toward the success of your business.
What Gets Measured Gets Done
This is a common expression that, when properly followed, could have a significant impact on the achievement of your organization’s goals and objectives. Everyone in your company will notice what you emphasize (or don’t pay attention to) and modify their behavior accordingly. More importantly, effective communication of your goals and timely reporting of outcomes and your progress toward reaching them can be an effective tool in motivating and rewarding your team. Ultimately, you want to utilize historical reporting to form the basis of a prospective results program that will leverage what you’ve been able to successfully achieve.
Here are some tips in applying “What Gets Measured Gets Done.”
- Don’t measure too many things. Determine a handful of metrics that cohesively address the organization’s goals to be shared with the entire company. You don’t want to create confusion by measuring and sharing so many items that your team loses focus. As the business owner, you can always have a more comprehensive list for your personal use, but don’t overwhelm employees with too much information.
- Measure the right things. Every business is different and has its own unique metrics that apply to its day-to-day activities. Create a list that reflects the sales, marketing, operations and financials areas of the company. One item critical to all businesses, no matter how large or small, is tracking cash. Every business must have a cash forecasting tool in place. Failure to track cash will one day have disastrous results for your company – guaranteed. Last but not least, measure employee satisfaction and retention. Take regular steps to ensure everyone in the company feels valued and is rewarded. Follow this path to ensure you retain the most precious asset a business can have – its workforce.
- Provide regular feedback. Measurement of what gets done is only effective if regular feedback is provided to everyone in the company. They will appreciate hearing how well (or not so well) progress is being made toward achieving metrics that are shared. Even better, the results can be used to motivate and reward those that directly impact the attainment of company goals and objectives.
A variety of tools are available to track what is measured. One of the most effective tools is using a trailing 12-month chart. This applies to nearly all measurement indicators in your company. It provides a view of both historical and prospective activity.
It is easily adaptable by taking the past 12 months activity on any data point and plotting it on a graph. Maintaining three years of data on a given chart allows you to track the past two years of activity along with the current year. Tracking data in this fashion levels the playing field and takes the seasonality out of traditional charts since you’re always looking at 12 months of data. If the trendline on your graph isn’t going up, there is a problem that needs attention. This is where the prospective value of the trailing 12-month chart comes into play and allows you to be proactive instead of reactive to a problem.
What are you doing to track the success of your company?