Archive | May 2013

Strategy without metrics is no strategy at all

If you’re a regular reader of this blog, you’ll know that using KPIs to drive real improvements in business outcomes is a passion of mine. Metrics have always been important to me.

However, in the last few years in particular, I’ve been investigating how various organisations use KPIs (and when they don’t). I’ve also studied the behaviours and cultures around KPI usage, and strategies for their implementation. And I’ve seen some ineffective strategies around.

Looking at the entire sales chain

Quite often, I’ve seen businesses use metrics to measure targets, such as profitability, stock return rates and staff retention, without considering the metrics that might drive those outcomes.

To me, this shows a lack of understanding about how to develop effective business strategies—strategies that have structure and forethought likely to produce the intended income as opposed to just a measure of the result.

For example, the process of measuring sales outcomes is quite well defined. Yes, everybody looks at sales revenue and net profit. However, we analyse the entire sales chain.

Savvy managers also look at metrics such as the number of leads generated, conversion rates, time to close etc. By using this well-defined business process, professionals have learned to measure the metrics that drive the outcome, not just the outcome itself.

Unfortunately, I don’t always see this type of methodology used elsewhere.

How metrics drive your stock returns

Let’s look at another example—stock returns. Anyone who sells merchandise knows there’s a high cost associated with returned stock. In some industries, a single returned item might cost the organisation the equivalent margin of 10 or more sales!

So let’s think about the types of metrics that might drive a particular stock return level.

Perhaps:

  • the wrong products are being shipped
  • the addresses are incorrect
  • the products have a higher-than-expected failure rate
  • the products aren’t meeting the customer’s expectations.

Depending on the product, dozens of factors could be driving a high or low return rate. Yet many organisations don’t monitor these metrics effectively enough to determine the core causes or, just as importantly, help them drive change.

Another example is staff retention rates. However, I’ve saved this one for next week’s article, so keep an eye out for it.

What’s your strategy?

If you want to improve your organisation’s performance, you need to start developing a strategy to improve it and, of course, measure it. Because any strategy without metrics is usually ineffective.

Just a few things for you to think about…

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Undergoing change? How do you keep on top of things?

Problems of time and money

One major problem with most methods of business reporting is that they take time and money to set up. And these two resources aren’t always in ready supply.

For example, take an organisation that’s undergoing either significant growth or a merger/acquisition. In these situations, it’s common for the normal business processes and systems to become overwhelmed. Suddenly, your accounting system is insufficient or maybe you end up with multiple financial systems. Or, worse still, management must contend with getting data from multiple systems.

Yes, the ideal solution is to migrate to a more capable, unifying platform but, again, this takes time and money. Sometimes it never happens.

While these problems are being sorted out, leadership tends to run blind. Even if leaders facing these issues have some idea of what’s going on, they’re certainly not fully informed.

Where Bizeo comes in

There are several reasons why this situation is perfect for Bizeo:

  1. Bizeo is quick and inexpensive to deploy. You can set up connections with new systems in minutes and it doesn’t require IT intervention.
  2. Bizeo is designed to handle  data from many physical locations at once. Just install a drone and away you go.
  3. Bizeo is easy to use, so managers don’t have the learning curve usually associated with using, say, a new business dashboard.

And even if your business has bigger plans, and the resources and budget to produce the ultimate management information tool, nothing beats Bizeo in these scenarios.

And who knows—you just might find that management never wants to let it go!

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