Keeping Score: Leverage Business Metrics

Your team practices for weeks. On the day of the big game, the offensive line holds off the opposition while your quarterback throws a perfect pass. The team drives the ball down the field into the end zone and you breathe a sigh of relief. At halftime, you congratulate the team and begin thinking about next week’s game.

No, wait. That’s not how football works. There’s no congratulations at halftime. Instead, the coach evaluates what’s working, what’s not, and whether the strategy and game plays need to be reevaluated.

The same is true for business. You’ve probably heard the adage, “If you can’t measure it, you can’t manage it.” Think about it. At any given moment do you know precisely how your company is performing? I’m not talking about general, “Oh sure, things are great” responses. What I’m describing are the 5-15 key business metrics, provided to management on a regular basis, that tell you at a quick glance where your company stands. These numbers are different from your profit and loss statement; in fact, these numbers will predict your profit and loss statement.

If you don’t collect these types of numbers yet, don’t worry. It’s a fairly simple process to create them. The key is to collect the right metrics. According to Gino Wickman, author of the book “Traction,” there’s a trick for knowing what information you need. Imagine that you’re on a desert island. You need to keep your company successful and profitable, but you can’t be on-site. The only communication you have is a set of specific numbers provided to you each week. What are the key metrics that would allow you to immediately understand the state of your company?

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You’ll also need to determine who has responsibility over each metric collected. This doesn’t mean who will provide you the numbers, but the member of your management team who is ultimately responsible for them.

Once you have your metrics in hand and know who is responsible for them, collect the data weekly for several months and see if these are the correct numbers for your use. Feel free to change and adjust however you feel is necessary, but make sure that by the end of those three months you are confident that the data you’re collecting is the information that will help you make informed decisions about your business.

The purpose of this exercise is simple. You don’t want to wait until the end of each quarter or year to make adjustments to your strategy. Just like you need to know the score of the football game at half-time in order to make adjustments to your strategy for the second half, you need to know your business’ key metrics, be it payroll, revenue, proposals, closed business and the like. If the weekly metrics show your company is on course, by all means proceed. But if you need a course correction, these metrics will help you be proactive and make changes before you veer completely off course.

Now that you have the numbers you need to manage your business, give each of your employees a number. Make the metric applicable to their jobs, of course, but give them a metric to which they should be accountable. If an employee makes widgets, tell them the number of widgets they should produce each week. If an employee does business development, spell out the sales number you expect to see each week or each quarter. You may be asking yourself, why do I need to give everyone a metric?

There are multiple reasons. Numbers provide clarity. Instead of hearing, “I’ve had some great networking meetings,” wouldn’t you prefer to hear, “I’ve given five qualified leads to my business development leader?” Numbers create employee accountability, and hopefully, competition to elevate one another. If each member of your sales team is expected to close $X of business each quarter, but some team members are falling short, a goal number can motivate a team to pull together to achieve the goal. And when metrics aren’t being achieved as expected, the numbers can alert members of your management team of a needed change in strategy.

As a CEO, you need to be able to check the pulse of your business at any given moment. Since you may not be involved in the day-to-day operations, you need a way to get pertinent and timely information. After all, you don’t want to learn that sales are down by 50 percent six months after they began declining. While it may take a little work upfront, think about the key numbers you need to know on a weekly basis and who will ultimately be accountable for those metrics. As the numbers arrive weekly, you should be able to tell at a quick glance if the business is moving in the right direction or if there are problems that jump out at you.

It’s easier to adjust your strategy when things have just begun to veer off course than to attempt a comeback when you’re down six touchdowns. Right, coach?


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