Measurement

June 20, 2008 - Are You Measuring What You Need to Manage?

Main Idea

What do you measure in your business?  Do you measure things that you have to manage?  How often do you measure and manage parts of your business?  You probably know sales numbers and cash balances.  Do you know what your customer retention is?  What about employee engagement?  What is the average ticket price? 

Expansion of Idea

This is a critical area for all businesses.  The business needs to know the score. Each department and team member need to know their respective scores.  Are we moving forward or backwards?  It is hard to manage something without any measurements.  Why do people hate performance appraisals and evaluations?  They have not set clear goals and then do not measure performance through out the year.  At year end, it becomes a huge problem and nobody enjoys the process.  It is critical that you decide what is important and then set up a system to measure that.  The main thing that you need to consider is that what you measure is what you will get.  The act of measuring will change behaviors and could change the focus of the organization.  So, these measurements need to be closely aligned with the overall goals of the organization. 

Areas to Look At

  1. Priorities and goals of the business

  2. Customer profitability analysis

  3. Customer acquisition and retention

  4. Product and vendor profitability

  5. Average sales per ticket or customer

  6. Employee turnover and engagement

  7. Key overall ratios and breakeven analysis

  8. Feedback and accountability