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To Avoid Knowing Too Late
In a training business, decision makers were evaluating whether an end of year revenue target had been met. No it hadn't, and they had lots of excuses, like how the market was changing and their competitors faced similar revenue downturns. If they'd had this conversation more frequently throughout the year, perhaps they would have had time to better understand what was happening in their market and find new avenues of revenue generation.
Annual evaluation is too late to give us choices about changing our course. Measuring frequently, even daily or weekly, can provide early warning signs about whether what we are doing is making the difference it's supposed to, so we have enough time to modify our approach if positive results aren't materialising.
To Avoid Knowing Too Little
My friend works in a wholesale technology company that employs about 25 people and has around 50 product lines. The Directors only measure typical balance sheet items. Staff members complain incessantly about product returns, warranty service workload and availability of spare parts. Do they measure any of these non-financial things? No. Management believe they don't need to, because they think they can see what's going on by walking around. Despite this, the same simple problems plaguing the business six years ago still plague it today.
Even the most efficient business owner can't be everywhere at once, and our physical senses (sight, hearing, touch, etc...) can't absorb or even detect everything that is taking place. A small suite of performance measures help us know far more about what’s going on with our business processes than our own eyes and ears ever could detect, with any reasonable amount of reliability.
To Know The Right Things
A manager in the rail freight industry faced a typical problem for that industry: they were running out of capacity to move all their customers' product. The traditional solution was to buy more rolling stock but this costs millions of dollars. So instead the manager measured and studied the way the system worked until he discovered that it wasn't how many wagons you had, but how quickly you could cycle those wagons through, that impacted capacity. So he didn't buy new wagons because he found a way to cycle the wagons through the system much faster, ending up with even more capacity than they actually needed.
How in touch with what is working and what is not are the decision makers in your business? Without constant measurement and feedback, perhaps you are not fully controlling the destiny of your business.
Source: Stacey Barr www.staceybarr.com
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