In the previous chapter, we looked at TINA’s Implementing sector; communicating your plan to your people in order that stuff gets done. If you don’t get the right parts of your plan to the right people within your business, then the great ideas that you’ve had will remain locked in your head and little, if anything, will be achieved. The route to business success is implementing (doing what you planned to do) and if you don’t, then your business won’t survive long enough for you to see what success looks like.
In this chapter, we’ll look at TINA’s Numbering sector. Numbering is a catch—all term for the monitoring and measurement activities that you do in your business. You can find specific definitions of these two words in various publications, but for our purposes here we’re going to define monitoring as keeping an eye on and measurement as assigning a number or value to. For the most part, I’m going to use ‘numbering’ and ‘measuring’ interchangeably for the rest of this chapter.
Numbering is important as it takes your achievements and quantifies them (applies a number to them), so that you have unambiguous, objective data regarding the performance of your business. Just as you turn unit sales into monetary values, you must turn achievements into data. Why? Well, without a quantity that can be compared against your expectations (the targets in your plans, see previous chapters), how do you know how well, or otherwise, your business is doing?
So, what counts as an achievement? Well, that’s up to you, but as a general rule, an achievement is anything that moves your business forward. And by forward, I mean in a direction that takes it away from the failure abyss. Admittedly, you can be measuring your falling sales as your business goes to the wall, but the plan here is to ensure that you are measuring what you should be measuring, with the expectation of success. Given the above definition of achievement, just about anything fits the bill, but a reasonable test would be, can it be celebrated?
Celebration of your achievements is important as it helps to motivate you and your team, and provides welcome relief from the constant battle to survive. This means that things like landing your first sale, hiring your new office manager, getting through the day without anybody losing any fingers, etc. are all good celebration fodder. On the other hand, it means that closing a shop, dropping a product, making people redundant, etc. are not things to celebrate. I don’t care if you call it ‘consolidating our resources to focus on core product delivery’, it’s just a way to save money and, apart from the shareholders, no—one else thinks that the necessity for such is a demonstration of great management. They are more likely to ask, ‘Which idiot got us into this position?’
So, what should you be measuring (numbering)? You can assign numbers to two broad categories within your business: your processes and your goods and services (your products; what it is that you sell). Included in the process category are measurements like your enquiry to sales conversion ratio, your rate of production against personnel required, your wastage, etc. Included in the goods and services category are measurements like variation in the length/mass/volume/colour/longevity of your product, the level of concordance between your product and customer requirements, your ‘pass’ to ‘reject’ ratio (that could be wastage, again), etc. There are all sorts that you could measure, but resources are limited, so you have to decide what you absolutely must measure, what would be nice to measure and what you can really do without.
| MEASUREMENT | WHY KNOWING THIS MIGHT BE IMPORTANT |
| No. of enquiries | If no one is aware of your goods and services, and asking you about them, then your business won’t last long. |
| No. of sales | If no one buy’s your goods and services, then your business isn’t destined to last for very long. |
| Rate of conversation of enquiries to sales | If it takes 1,000 enquiries to achieve one sale, then each sale better be worth a lot to you. |
| Cost of sales | If it costs more to produce than you receive when it’s sold, then your business will fail. |
| Rate of production | You must be able to make it at least as fast as your customers want it, unless you have customers who are willing to join a waiting list. |
| Failure/re—work rate | Nobody likes having to do the same job again, and the failure and/or—rework rate represents how often you have to repeat something. When this number is low your costs stay down and your team’s morale stays up. |
| Wastage | Every process produces waste of some kind and waste is the equivalent of burning money. Do it sparingly. |
| Customer satisfaction | Satisfied customers tend to come back for more. More importantly, they’ll use social media to tell all their friends about you, driving your sales up. |
| Customer complaints | Dissatisfied customers tend to go elsewhere. More importantly, they’ll use social media to tell all their friends about you, driving your sales down. |
| Cash flow | If the rate of money going out of your business is greater than the rate that it is coming in, then you’d better make sure that you have deep pockets. |
| Cash at the bank | Every month there are bills to pay. Ensure that you can meet your commitments by not overstretching your finances. |
Table 5.1: The potential importance of some business measurements
Table 5.1 lists some common businesses measurements and why they might be important to you. These measurements are predominantly business process measurements because, whilst every business has a cash flow and produces waste, the goods and services tend to be much more specific. Obviously, you’ll be able to think of many more business process measurements that could be in Table 5.1, but this list will do as an example. Why the lack of product—specific measures? Well, these tend to be tied to the product, so whilst a value like mass (or weight) would be important in the construction industry, it’s of less importance in tailoring. Whilst colour is important to a printer, it’s less important to an energy generator, and so on. For these reasons, I’ll leave you to determine what product measurements you require.
You must determine which measurements are important to you. If you don’t have your finger on the pulse of your business (your systems set up to collect the appropriate data), then you will not be able to analyse those data to determine how your business is doing at any one point in time. So, how do you embed numbering into your day—to—day activities? Well, we’ll cover this in some detail in the next section when we look at your dashboard, but what is important is that you have someone recording what has been done, when, using which equipment and materials, in which location, how long it took, etc.
Some organisations use timesheets and the pay for the individual doing the work is calculated based on the times recorded on the timesheet. That system is probably unsuitable for a start—up business, but the principle is sound enough. If you don’t know what your people are doing, how do you know that they are doing the right things? How do you know how many worker—hours it takes to produce your goods and deliver your services, if you don’t record it? How do you know what capacity you have in your system, if you don’t have these numbers? As your business grows, how do you calculate how many people you need if you are only guessing at how much work one person can do? You get the idea.
Your dashboard helps you to steer your business away from the failure abyss
When establishing these measurement systems, don’t forget to talk to your people and ask them what they think would be the most efficient method of measuring achievements. Remember, that you have to identify your most important achievements, ensure that they have a number allocated to them and then get those numbers onto your dashboard, so that you can decide how to steer your business. This is crucial to your survival and if you can’t explain why sticking numbers on your achievements is important, then you certainly should be able to by the time that you’ve finished reading this course. Agree with the people who are to make the measurements how it is to be done and then work with them to establish working practices that ensure collection of those numbers in a way that doesn’t interfere with their daily work.
A word of warning: you will get some people who complain that recoding what they are doing interferes with them actually doing their jobs. This is perfectly true, it does. Every time that they stop doing what they are supposed to be doing to record what they have just been doing, they are no longer doing the ‘what’ for which they are being paid. This is a mind—set that you must change. Recording what they are doing must be part of the job, not an adjunct to it. Yes, assigning numbers to achievements takes resources, but saying that you don’t have time to do it is the equivalent of arguing that it takes too much effort to look at the dashboard when you are driving, so you’re not going to bother. Everything within your business requires resources. Your job is to ensure that the resources dedicated to getting the numbers onto your dashboard is given sufficient weight.
It is not the role of your people to do the job the way that they see it. Discuss it with them by all means, but their role is to do the job as you see it and that includes providing you with measurements of their performance. If someone said that to complete a journey, they simply jump in their car and drive as fast as they can to get from point A to point B without once looking at their dashboard, you would think that person was tired of living. And yet that is their argument; I’m too busy driving as fast as I can to bother with things like looking at the speedometer, or the fuel gauge, or the road conditions, or the speed limit etc. Simply bizarre.
The principle function of management is to make informed decisions and in order to do that you must put some effort into thinking. The fuel for thinking is information, which as we’ll see from the next chapter comes from the analysis of data. The data (your numbers) are the output from your monitoring and measurements activities (numbering). In short, the assignment of a number or value to an achievement.
The numbers that you collect in your business form your dashboard; the set of readouts or displays that you use to steer your business in the same manner that you steer your car. Without a dashboard, you have to estimate, or guess wildly, what speed you are doing, how much fuel you have left, etc. The equivalent in business is; are you achieving your plan and driving your business forward, or are you sliding backwards, blissfully unaware of how close you are to the failure abyss? So, given that your dashboard is so important, let’s have a look at how you set one up.