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Berkonomics

Use metrics and a dashboard. ACT upon variances.

                 Have you ever driven a car that had no speedometer?  I had that thrill when a student at the Richard Petty Stockcar School of Driving recently at a motor speedway in California.  With a wide track, angled aggressively at the curves, and being told to hug the wall on the straightaways, there was little reference available to a novice driver as to speed.  I followed my instructor’s car closely, but still could not tell anything about my speed, so that I could either compensate for lags behind the leader or a test my comfort zone at various points that matched the expectation of my instructor and my own increasing capabilities as a driver.  Upon conclusion of eight laps of this, after pulling into the alley and climbing through the window on the driver side (there are no doors in these cars), I was handed a sheet with my timings for each of the eight laps.  Only then, after when the information might have been useful, could I see how well I did.

                That’s how you would feel if you ran your company without a dashboard containing relevant metrics that drive your company.  If you cannot relate to this, then you probably have been driving without a speedometer from the start and need to pay particular attention. 

                [Email readers continue here…] Metrics should be created by you and your managers to measure near real time progress for your enterprise.  A number of these deemed critical to you and your managers should be combined into a single page on your desktop screen or in printed form and available or circulated as often as daily.  These measures of progress must be fresh and meaningful.  Yesterday’s sales and returns compared to same day last week and last year for retail businesses;  Units produced and units shipped compared to plan and same period last month for manufacturers;  Yesterday’s overtime hours by department;  Ratio of hours worked to units produced;  Backorders unshipped;  Customer service calls in cue or unresolved.

                You can think of numerous critical measures for your business that must not be ignored, but often are neglected by senior management. It is not bad to manage by walking around, a term that became popular as a result of another of the many business advice books of the ‘90’s.  But that method, although good for employee morale, is imprecise as a tool of measurement and should be relegated to a supporting role.  Financial information for last month compared to plan and same month last year is certainly relevant, but not part of a dashboard, since there is nothing you can do to fix a problem when numbers are as old as a week, let alone the typical several weeks required to prepare financial statements for review.

                Finally, what good is the information contained in a great dashboard if you ignore it?  Show that you value the information by acting immediately upon variances, even if only to question the numbers.  Everyone down the line will become aware of your attention to their work, your interest in the outcomes and care for their success.  And you will drive revenue and better control costs and the customer experience with quick reaction to the variances within critical metrics the best describe your immediate situation.

  • As usual David Berkus is right on point and asture. I heard something many years ago that is somewhat parallel—always have SMART goals and SMART plans. S: Sustainable in terms of effort if the goal will take more than a brief flash, M: measureable so you know where you are and whether what you are doing is working, A:achievable in terms of having a goal that has a chance of being achieved, R: rewarding in the sense that the sacrifices to achieve the goal are rewarding to the person achieving and the persons close to that person, and T: together in the sense that the goal has united the team such that it is not just one person.

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