“You can’t manage what you can’t measure.”
“What gets measured, gets done.”
Those are two complimentary management axioms, and they both happen to be true.
Take the first, “You can’t manage what you can’t measure.” It’s pretty hard to argue with that. For instance, how could we manage our receivables without a measurement of some kind. We couldn’t. So we manage them by “days outstanding” . . . 30, 45, 60 days, or whatever the standard for your company is. You can’t manage to a specific result unless the result is specific and measurable. Or consider how you manage your payroll. You might have a target for how much overtime will be allowed for any given pay period. Or you might want to keep your total payroll below a certain percentage of sales. Again, there must be a specific, measurable goal.
Then take a look at the second axiom, “What gets measured gets done.” Without specific measurements, goals become fuzzy and lack commitment. Let’s say, for instance, you announce that you want the company to grow next year. That’s great, but without a specific target, that could mean anything. Are we trying to grow by one dollar? By a million dollars? By 20%? And obviously, the goal has to be tracked and communicated regularly. If you aren’t telling your people where you are against the goal you have set, they will assume that you’re not tracking the goal, that you’re not paying attention, or that the goal just isn’t all that important. Besides, if they aren’t being told regularly how they’re doing against the goal, how can they possibly help you achieve it?
Some goals can be tracked straight off your standard financial reports. Others may require a more creative approach. This is where Key Performance Indicators (KPIs) can be very useful. For example, if you’re a service company, you might want to track the number of complaints you receive per $1000 of revenue as a quality control measure.
The point is, if something is important enough to be set out as a goal or objective, then it is important enough to carry specific measurements of success, and important enough to regularly communicate those measurements to your people. Otherwise, what you’ve got is not a goal at all . . . it’s just a wish.
If you’re “not a numbers guy” and you don’t have effective measurements in place to help you run your business, call me. We should talk.