You may have watched some football in the last few months or maybe you can’t wait until March Madness starts.
Whether you prefer either or both sports, would the game be as interesting if we didn’t keep score? Would we care about the game if there was no winner? Would you even watch?
The goal in most sports is to score more points than the other team. While points are the ultimate metric, there are many other measures that give us an interim status of the game. Think about how a football team tracks its progress towards scoring a touchdown.
- Which down is it now?
- How many yards to the next 1st down?
- How much time is left on the play clock?
- Which quarter is it and how much time do we have left in the game?
While they certainly make the game more interesting for spectators, these interim metrics aren’t just for entertainment purposes. They very clearly give each team the status of their current performance relative to an intermediate goal. This, in turn, helps them manage the game so they can achieve the ultimate goal of winning the game.
If the team with the ball didn’t know how many yards to the next first down, how would they decide which play to call next? If they didn’t know how much time was left on the play clock, how would they know when to hike the ball? Would they have a sense of urgency if they didn’t know they had scored less points than the other team and there were only 2 minutes left in the game?
When a team understands how it is progressing towards the goal, it can adjust its strategy to compensate for current performance and adapt to changing conditions.
Let’s apply this to your business:
We know the ultimate metric for your business is profit and, hopefully, you already have a profit goal for this year. The question is how well do you communicate your progress towards that goal?
In a previous article, Stop Counting the Square Feet You Produce (Slippery Rock Gazette, April 2021), we detailed a method for calculating and tracking profit on a daily basis. Taking your 2022 profit goal and breaking it down into monthly, weekly, and daily targets is a great first step. However, to really improve the performance of your business, it needs to be taken even further.
A football team driving down field needs to know how many yards to the next first down, time left on the play clock, and time left in the game so it can adjust its play-calling to win the game. Similarly, a business not only needs to know the current score (profit performance against its goals), but it also needs to know how well it is playing the game. It needs to know how well the different business processes are impacting progress towards the goal. This means tracking other factors that impact the final score.
- Is showroom traffic increasing or decreasing?
- Are website and social media stats improving or not?
- Are we hitting our goals for outside sales calls?
- How is our quote volume trending?
- Are we on track to achieve our Throughput Dollar goal for the month?
- How many days of our capacity are already booked?
- Are our remakes and callbacks getting better or worse?
As a business owner, you may already track these stats on a spreadsheet or in your head or you may go to your company software and run a report, but none of these impacts the entire team like seeing the score displayed for all to see.
Displaying current company performance in real time for everyone to see helps improve overall performance. Strong metrics can be celebrated. Weak metrics are easily identified, and teams can immediately begin to correct that performance.
Here are some guidelines that can help implementation:
- Understandably, some owners don’t like to publish the profitability of their business to employees. Setting a Throughput Dollar goal and tracking performance against it can be a very effective substitute. Be sure the Throughput Dollar goal not only covers Operating Expense but also includes your profit goal as well as additional money to reinvest in the business.
- Real time feedback is a very important factor in improving process performance. Just like a football team gets real time feedback on the results of the last play, your team needs real time feedback so it can improve its performance. We all know that a monthly review of financial performance is limited by our inaccurate memory of what really happened during the previous month. The same is true for a weekly performance review. Making sure the data is updated every day is critical. Live data is even better.
- Have several displays for key parts of the business to see. All displays should show performance against the ultimate profit or Throughput Dollar goal. However, each display should then show only the key metrics that apply to that area. The sales display would show stats on showroom traffic, web traffic, quotes, sales calls, etc. The shop would show template-to-install lead time, remakes, callbacks, successful installs, etc. Keep it simple – too much data can cloud the focus needed in specific areas.
- Trend the data. We know our goal for showroom traffic is 20 people per day and yesterday we only had 12 visits. Is this part of an improving trend or a downward trend? Maybe we had been trending at 8 people per day for the last week or two and we decided to change our Facebook ad. Now we are seeing an increase to 12 people per day – that’s a good thing! Showing how the current statistic relates to recent history as well as how it relates to the goal can make the difference between useful information and useless data.
- Ask your employees for feedback on how well this display is helping them. Are we showing the right metrics? Do they know what to do differently if the metrics are unsatisfactory? Should we change how the data is displayed? It is easy for owners and managers to feel like they have all the right answers but asking employees for input on something like this can do wonders to improve its effectiveness.
Keeping the score of a football game on a piece of paper that only the coaches could see limits the ability of the team to be involved and motivated to affect the outcome of the game. It’s the same if only the owner or key managers of a business have access to key performance data. If you want your team to focus on the performance of the business, then POST THE SCORES that help them understand the current status of the business and their role in improving that performance.
Ed Young is a seasoned manufacturing manager and business coach who has helped hundreds of companies of all sizes. If you would like a free assessment on how well you are using your metrics to achieve your goals, contact Ed at Ed@FabricatorsCoach.com or 864-328-6231.
As a fab shop owner, you deserve to have a business that makes you money and also allows you the time to enjoy it.