Recently I came across a nice little tool called the QPM or Quarterly Priority Management. It is essentially a simple table that can be used to effectively manage progress against your top five strategic objectives.
The QPM tool itself comes from Kraig Kramers in his book CEO Tools: The Nuts-N-Bolts for Every Manager’s Success (Book & CD)
Over the last couple of weeks I have posted a few articles on measuring key business indicators, How Do You Measure Success, and formatting a report for these indicators, What is a 12 Month Rolling Trend, so that you can look for important trends in your business.
One aspect of watching for business trends is to look at the general state of the economy so that you can ensure that your business is prepared for potential marketplace shifts. One of the best tools I have seen for doing this is from Peter Navarro and his book Always a Winner: Finding Your Competitive Advantage in an Up and Down Economy
. In this book he lays out and defines the following formula;
GDP = C + I + (X – M) + G
Where;
In my blog post How Do You Measure Success, I wrote about the need to pick key business indicators that show important elements of the state of your organization. Once these key indicators are selected, the next question that needs to be answered is; “How will we report and view this key indicator?” A really good answer to this question is a Rolling 12 Month Trend report.
A Rolling 12 Month Trend report does not sound too exciting but it is a valuable tool for any organization to use to track its progress and to show trends. Essentially, it is a report that uses the running total of the values of last 12 months of an indicator. Each month, the indicator that is 13 months old is dropped from the total and the new month’s indicator value is added.
Why use this trend report rather than looking at the actual values? Well, the actual values are important for many reasons but they do not show any trends that can point to growth, flattening or decline.
Take the following chart for an example. This chart shows actual monthly indicator values over the last 8 years (the example shows revenue but it could be for any data type). Although you can see the data is choppy, it is hard to pick out any trends in where the data is going.
What is the most important indicator of success in your business or organization? What is the most important indicator that your business or organization is in trouble? Are there single indicators or multiple indicators that need to be monitored? Do you know the answers to these questions? Are the indicators clear to you and clear to everyone in the organization?
Every organization needs to have key health indicators defined clearly with specific goals and strategies set around them. Without this clarity your business or organization is like a person running a race blindfolded. The runner might be running hard but they don’t know where they are going, they can’t see what is in front of them, where the finish line is or what obstacles they may have to avoid or overcome to win the race. It would be a futile situation without any hope of success. Yet this is exactly the situation your organization is in when it does not have clearly defined indicators that illustrate where it currently is, where it is going and what it may need to overcome to be successful.
There are many standard business measurements that every business should be monitoring. Things like; employee safety, revenue, cost, gross profit, SG&A, operating profit, cash flow, long term debt, cost of debt, DPO, DSO, ITO, etc. Monitoring and controlling indicators like these are critical to ensuring that your organization stays healthy. However, I am not necessarily referring to these indicators. I am referring to the indicators that differentiate your organization in the marketplace.
For example,
