Ask Andi: How do we track business metrics? This is a critical year for us. I need to ensure accountability. Deliver what’s expected. Spot trouble spots early enough to do something about it. Get the right people to work on solutions.
Thoughts of the Day: Track business metrics. Business owners tend to hold control of their companies close to the vest. When it comes to stock, that’s a good thing. They have 51% of shares or more. That gives them the ability to decide what does/doesn’t get done. They can take a long view of things. And build something for the future, while working to make a profit. What gets reported on is what gets managed. Manage business metrics that will get you where you want to go.
Track business metrics
When it comes to reporting on results, owners of privately held businesses may keep their cards too close to the vest. It’s better to widely distribute data so people can engage, spot problems, correct what’s wrong and build on successes. Get everyone in the company on board by publicizing results.
It makes sense to put someone in finance in charge of gathering information and distributing reports. Finance is the most familiar with numbers. And they are often the most agile when it comes to compiling data. Here are a few questions to ask, to get started with what to track:
- What are the company’s major goals this year?
- What has to happen to ensure the company hits its targets this year?
- Are the goals consistent across departments, with no conflicting priorities?
Align sales, marketing, finance
Set up targets to track by thinking functionally. Consider the following measures. Let me know if you’ve found some of your own that are especially helpful. If you’re struggling to get a scorecard set up, give me a call or send me an email – will be glad to help you out.
- Sales
- # of sales – total, by person, by the customer, and by product category
- Average days to sell – from lead coming in to close and implement
- Closing ratio – % won and % lost – track by category and overall
- Monthly and annual actual vs. goal, and vs. previous year
- Number of new, lost, expanding, and declining customers
- Prospects and $ volume in the pipeline, close value of the pipeline
- Marketing
- The goal for total leads vs. actual leads produced
- Productivity of specific marketing initiatives – performance vs. goal
- Budget for marketing vs. actual expenses
- The ratio of marketing spend to revenue and gross profit – moving target should be declining as marketing productivity increases revenue
- Status of new product launches, new prospect searches
- Ratios for new products / old customers and old products / new customers
- Finance
- Profit – gross and net, $ and %’s
- Profit/product
- Overhead budget vs. actual $ – total and by category: General & Administrative, Marketing & Sales, Overhead Salaries and Benefits
- Amount of reserves and weekly contribution to reserves
- Total loans outstanding, % of credit line outstanding
- Accounts Receivable/Revenue, $/% at 30, 60, 90, over 90 days outstanding
Develop a strategy to reach goals
- Operations
- COGS –overall, then break out labor and materials, compare various categories to revenue by product and overall
- Measures for Quality, On-time delivery, Customer satisfaction
- Average days to produce – overall and by-product
- Inventory: days on hand, budget vs. actual, turns
- Production hours: planned vs. used
- Amounts: booked, shipped, in backlog
- Equipment online / offline, planned for replacement
- Human Resources
- Training budget vs. spend
- Programs on time/delayed
- Employees reviewed, pending
- # of employees at, above, below standard
- Open positions, positions on warning
- Backlog of candidates/position
- Amount of raises due
- Budget vs. actual for salaries and benefits
- Status of new benefit initiatives, benefits under review
Recap results weekly. Track stats over time, by the department. Supplement with detail in cases where things are off. Distribute reports widely to get everyone involved. Meet weekly to review reports and ask people to react when results are below target.
Looking for a good book?
The Org: The Underlying Logic of the Office by Ray Fisman and Tim Sullivan.
