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.
1) For a restaurant owner, a key indicator could be the number of customers served in a particular period of time or perhaps the dollar value sold per table during a particular meal period. Perhaps you want to measure which menu items are the most popular and which are rarely ordered. Fast food establishments are interested in how quickly they move customers through their line ups. Maybe it is dollars of revenue per square foot of restaurant space.
2) Oil companies are concerned about the cost of production. What does it cost to produce a barrel of oil or a cubic meter of gas? What does it cost to transport these products to market? What is the operational efficiency and uptime for their production facilities? What differential can they get between production cost and raw or finished product sales?
3) An engineering service company might be interested in measuring things like utilization of staff, staff turnover, average revenue generated per employee, average profit generated per employee, percent of repeat business, monthly run rate of project work (in hours, revenue, etc.), total dollar value of sales pursuits currently in the funnel and projected revenue run rate for the next 12 months based on projects already in house.
4) Project managers care about things like cost performance, schedule performance, project cash flow, project or task percent complete, etc.
This advice applies not only to businesses but to charities, community centers, NGOs and other organizations. All types of organizations need to understand what is critical to their survival and growth and then they need to build systems, tools and processes to capture and monitor this data.
For example, a charity that I am involved with produces products that will be sold in a peer to peer sales fashion in third world countries. The product fills a critical need in third world countries but also provides employment through manufacturing and peer to peer sales. Although this charity is just getting established, there are already clearly identified key metrics that are critical to its success. Things like production cost per unit, shipping costs per unit, donations raised per employee, etc. are important.
So what are the key indicators of success for your organization? What should you be monitoring and then controlling in order to be differentiated and to thrive and grow?