If healthy revenue and profit margins are your goals, you must determine the critical factors that lead to success.
In essence, business is war in commerce. In order to win, you must know how, why and when to attack.
That comes only if you know your strengths and weaknesses as well as those of your competitors.
The right assumptions and methodologies will produce the desired results.
In addition to measuring your business performance, you must know to measure your drivers along with your outcomes.
If you don’t measure your drivers, measuring outcomes is futile. You will be more successful in achieving your stated goals.
But the question often arises about how to properly measure.
Practicality is important. You should be focused on first things first. Measure only the drivers and outcomes on which you’re going to be improving.
Many businesspeople often make the mistake of working in their business – not working on it. Laser-like focus on what matters is important.
The process of standard performance measurements should be ongoing. Why? Nothing stays the same. Your marketplace and internal challenges are constantly changing. So go with the flow. Measure what you can control and what you can influence.
Your culture plays a vital role. Understand your culture for optimal feedback, learning and continuous improvement.
Because people are different, data is open to subjective interpretation and implementation. Encourage your team members to think and speak up.
In this way, you’ll stimulate interpretations with better communication and leadership.
Use discretion. Be careful in your filtering – don’t unnecessarily add costs and time over extraneous information. That leads to inertia.
There are five major factors that will determine your success:
1. Effective sponsorship and assigning the right resources
2. Development of the right metrics
3. Designing the appropriate infrastructure for management of processes and data collection
4. Planning for management of organizational change
5. Reviewing the analysis of your strategic plan – your goals, priorities and outcomes.
Various metrics include:
— Outcome metrics need to explain the benefits of your work.
— Input metrics are the tools you use to generate the outcomes.
— Output metrics explain the results.
— Efficiency metrics generally impart the costs.
— Service-quality metrics gauge the success levels such as accuracy, customer satisfaction and timeliness.
In order to win, you must know how, why and when to attack.
It’s a challenge to define the meaning of metrics. How do you define a customer? What components are included in the measurement of costs?
The number of metrics can vary as there are many factors. You want an adequate number while guarding against having too many. The tendency often is to be too ambitious.
Prioritization is important.
Effective analysis of the process complexity with a manageable number is important so it doesn’t lead to chaos. Again, continual evaluation is needed to eliminate outdated or irrelevance in metrics.
Checklist for measurement and better performance:
1. Know who and what you are to define goals
After you assess your situation, determine achievable but challenging goals. Whether it’s increasing market share or improving customer satisfaction, be specific in your goals.
Assemble the factors that are important in your sector.
Marketing might include advertising budgets, sales growth, market share, delivery times and customer loyalty.
Production involves age of equipment, location of plants, plant capacities, workforce, materials and vendors.
Management factors include experience and effectiveness of supervisors, communication, compensation, and strategic planning skills.
Technology factors are the ages of your research and development facilities, engineering capabilities, R&D budget and development.
2. Develop methodologies
Watch for trends. Agree on your process for monitoring and reporting of relevant data.
3. Monitor competition
Mystery shop your competitors. Review their annual reports. Surf the net and set up Google alerts using your competitors’ names as keywords.
Participate in your trade associations and study trade publications. Subscribe to press releases.
Study government data and other available research-sources of information.
4. Research your target audience qualitatively and quantitatively
Qualitative research explains the behaviors of your prospects and customers. Quantitative research gives you the raw numbers.
5. Continually evaluate your company vis-à-vis competitors
Develop metrics to rate your standing. You’ll see to enhance your competitive advantages.
6. Zero in on customer loyalty
In many large markets, it costs an average $300 to attract a first-time customer. Retention is critical. You’ll enjoy long-term sustainability with loyal, repeat customers.
This indicates the need for product quality and stellar customer service. Employee attitudes and delivering on marketing promises should be a priority.
Don’t forget accurate product information, return policies and tools to get referrals.
That’s not to say you want every prospect as a customer. About 18 percent of people only buy products and services if they’re the lowest-price — without any consideration for value. Ignore them.
7. Evaluate your marketing
Sales results are important. So is store and Web traffic, and the number and reasons for customer complaints and perceptions.
8. Evaluate your human resources
Recruitment of top workers is paramount and so is retention of them.
9. Employ the data
Make use of your business and competitive intelligence. Analyze the data, make conclusions and plan strategically.
From the Coach’s Corner, here are related resources:
Big Data, Though a Trite Term, Helps in 6 Types of Analytics — To understand, forecast, and improve business performance, you need to know how to use data in analytics. Based on the most-popular Biz Coach articles since 2009 and the myriad of issues that cause CEOs to sleep at night, it’s worth noting top-performing companies have six significant ways to make use of big data in analytics.
HR Strategies to Drive Engagement, Productivity and Quality — For performance-measurement in human-resource administration, the key is to design measurement systems to drive engagement, productivity and quality. Here’s how.
Best Practices to Capitalize on Business Intelligence — In the majority of situations BI isn’t effectively used to identify and create opportunities for sustainable growth, according to Forrester Research. Here are the best practices in BI.
Hottest Tactics to Beat Your Competitors — Effective uses of competitive intelligence are the hottest tactics to beat your competitors. A leading consultant and author, Seena Sharp, explains how.
Critical HR Recruiting Strategies for Business Profit — By developing strategic recruiting plans, human resources professionals will make significant contributions to the bottom-line profit goals of their employers. So, it’s imperative to innovate in your recruiting processes and market your strategies to senior management and hiring managers.
“An ounce of performance is worth pounds of promises.”