More exact measurements
- 31 March, 1999 13:05
Is that exercise machine you received last Christmas getting a little dusty? Have you let too much time slip by since you last weighed yourself? If you answered yes to either question, you know it's that time of year when New Year's resolutions are a distant memory.
Remember those year-end business-planning sessions, when your team took a hard look at the 1999 budget and laid out a plan to beat the new year's financial targets? Have your early-year reports reflected progress against those goals? None of us wants to forget our 1999 business resolutions, but it's easy to get mired in day-to-day challenges and "administrivia".
One way to remain committed to those resolutions is to embrace a four-step management strategy that goes like this: plan, act, measure and reflect. Although each step is equally important in ensuring a positive outcome, I'm going to concentrate on the "measure" step and elaborate on its relevance to solutions integrators.
Without meaningful ways to measure organisational performance, you can end up focusing on financial performance only. Even worse, you can mistakenly focus on past performance rather than future indicators.
Measuring financial performance is a lot like measuring your weight. Although there is a strong correlation between an ideal weight and a long and healthy life, many other factors that aren't related to weight are important, too. In the business world, no firm can ignore financial performance. But there are many other factors that impact solutions integrators' well-being.
In this business, the most important interest groups (outside shareholders) are customers and employees. Can profits tell you how well you're serving your customers? I don't think so.
Suppose you increase profits by aggressively negotiating every contract and service-level agreement. It's a good business practice, to be sure, but if taken too far it can give you the reputation of being difficult to work with. Near-term profits might look good, but the backlog of business may shrink as customers choose service providers that are more accommodating.
So backlog is an important measure and a good indicator of challenges ahead. It is not specific enough, however, to measure why customers choose you again - or why they don't.
The way to truly measure what customers think is simple - you ask them. But you also need to ask those who chose not to be your customers again, too. If your routine measures don't include direct customer and prospect feedback, you need to change that and conduct regular surveys.
In terms of staffing, the typical way to measure performance is to look at employee turnover. For the average US-based solutions integrator, employee turnover rates range from 20 to 25 per cent. Why do so many people leave? Is it inadequate compensation, a poor work environment, uninspiring career challenges, or something you haven't thought of yet? Again, knowing the turnover rate alone is not enough -- you need to ask your employees why they leave.
Besides customers and employees, there is another source of meaningful performance information - operations. To effectively measure operations, you need to decide on a standard set of core processes worth evaluating. For solutions integrators, this might include sales, delivery, hiring and training, and marketing.
Don't get me wrong - financial measures are crucial. They will clearly tell you if you have problems. But they can't tell you what's causing the problems.
In this fast-paced marketplace, you can't afford to realise there's a problem only when it shows up on your financials. Rather than trying to forget your annual resolutions, acting on the above leading indicators will give you something to celebrate when the next new year rolls around.