Putting the right information at everyone's fingertips
/So much of our decision-making time is spent seeking the information we need in order to decide. Too often, we give up and act in a vacuum.
If decision making is the new literacy, here's a way to place the right information at everyone's fingertips.
Businesses often grow their catalog of reports in an ad hoc manner, resulting in many versions of the truth.
Too many numbers just confuse. Simple is best—here's how to measure your business with just a handful of numbers.
Primaries
We make decisions about how we can influence the future (which we can't see) by looking at the past (which we can) and applying our judgment on what to do next (that's the art).
The obvious examples are revenue and margin, numbers that everyone uses to record how they did—in the past tense.
Less obvious are the leading indicators, the numbers that could portend the future. Customer sat and innovation, and their impact on revenue over time, for instance. Depending on your industry, you may have other measures, but please note:
No business needs more than 6 primary metrics
Primaries measure outcomes, the results of other factors. These are the numbers that should define your performance to plan. Check them every week, month and quarter.
Diagnostics
So what happens if a primary goes the wrong way? You' find the answer by looking at the contributing factors, the causes that affect each primary.
Margin, for instance, may be a factor of COGS, inventory levels, and unforeseen expenses. If margin is on plan, you don't need to worry about these factors (although you could make some changes to do even better).
A dip in Customer Sat could arise from long wait times in the call centre, delays in shipping, or quality problems. You can make decisions on actions to address any of these, then watch Customer Sat climb back up.
Each Primary will have a few diagnostics, but pick the few that have 90% of the influence.
Why does this work?
Three reasons:
Primary metrics measure the outcomes that your business plan requires.
Secondaries connect these outcomes to actions and decisions.
Employees, customers and suppliers all sing from the same songbook.
Your version of the truth
To measure your business from the top down:
List all the numbers that demonstrate the performance of your business over the last year.
Add the numbers that will influence your next year.
From this list, write the 3-6 metrics that you should track every week along the top of the page.
List contributing factors under each of your shortlisted numbers.
Bingo! There you have the blueprint to measure your business.
Trusting Technology is a book about forming ideas, exploring opportunities with customers and colleagues, and building your future together. Order you copy here . This article is also available in hardcopy as part of my 10-minute Reflections series of exercises—order volume 1 here and volume 2 here.