Factors: Function, dissatisfied Customers, Quality, Speed, Flexibility, Costs, Reliability, Evaluate, Feedback, Good & Bad Measures, #1 most important, Creating, Continuous Improvements.
Traditionally we should always measure something, following the results, then compare those results with specific targets and make decisions about the future steps. In such a way, we are measuring Business performances. This is the only way to increase our knowledge about questions like:
- Is our Leadership good or bad?
- Is it Successful or not?
- Do we need to make corrections on our actions or not…
When you are an Entrepreneur, measuring becomes one of the most critical tasks. You need to know the performance of your business. You need to know areas where you can implement improvement. Also, you need to know why you made progress and why you did not make progress. Let’s look at one possible process that you can use for the more strategic & systematic implementation of the measuring.
What is Business Performance?
The word performance is one of the most used words in the business world. It is an act of performing an activity or task. For example, we have 90 extremely satisfied customers from a total of 100. Or today we have served 300 clients. These are all the performances of individuals or organizations. You already see that we can have an individual & organizational performance. When it comes to performing the work and the results of an individual’s work, it is an individual performance. If the work is performed by a group, department, or company, we are talking about organizational performance.
What is our Performance?
1) Why is Performance Important? Performance results from your activity, (ie, what you have achieved with a specific action?). Simply put, performance shows what you have done, what you have achieved, & what are the I from your achievement. For the marketing department, the performance can be the number of potential customers generated in the company’s sales funnel. When it comes to operations in a company, the success or failure of the business will depend on the performance of different individuals or groups.
2) Operational Function creates the result that goes into the customers’ hands, who pay money for that. With that money, the company finances its operations. For these reasons, monitoring & measuring performance becomes one of the most critical activities for your business. Questions such as: 1) How much value you deliver to your customers or 2) how many quality products per specific time we produce become crucial in securing a competitive advantage. But this is important only if we know the answers and continuously take positive steps to improve them.
3) Dealing with dissatisfied Customers. Suppose you know that your customer is dissatisfied with your product or service. Also, you know the level & reasons for dissatisfaction. In that case, you will certainly try to resolve them. It is already a system of continuous improvement. If you improve the input elements, and the process itself, the process results will lead to a constant increase of competitive advantage.
5 top Business Performance Goals
Managing operations daily requires much more specific goals. Five primary performance goals can be applied to any small business operation, whether a manufacturing or service company. The best way to explain these goals is to go through examples. Assume you’re a Manager. What are the things you will want to achieve to satisfy your customers to help your company become more competitive in the market?
You will want to deliver highest Quality. This means that you will: 1) need to provide fast & easy product delivery – without any operators’ mistakes, 2) to provide the highest quality services to your customers, & 3) as a production manager, you will want to produce the highest quality without errors. Quality is consistent customer satisfaction through meeting their needs & expectations.
You will want to get things done Quickly. As a store manager, you will want to reduce the time the customer spends from entering the store to leaving satisfied with the product or service received. If you are a hospital manager, you will want to increase the number of patients you will process over a specific time. As a production manager, you will want to speed up the production process to decrease the price and increase the product’s sell-ability on the market. Speed is the time it takes from an order from a customer to delivering a product or service.
Allow you to change to meet changing situations – to meet your customer’s wants & needs. As a store manager, you will want to meet customers’ different expectations. All customers don’t have the same expectations from your company. As a hospital manager, you can quickly apply new treatments. As a production manager, you can produce additional products or variations of your existing products – in your production facilities. Flexibility is the degree to which processes can change what, how, & when they do it.
You will always want to lower your Costs. As a store manager, you want to create & deliver exceptional products or service at no extra cost for the company. If you are a hospital manager, you want to treat more patients at no extra cost successfully. Also, as a production manager, you want to keep production costs at a minimal– to open more markets. Costs are the price of what you are doing.
You will want to be Consistent & Reliable. As a store manager, you will want to get things done on time and repeatedly deliver outstanding products or service. If you are a hospital manager, you will want your patients to rely on your expertise. As a production manager, you will want to produce the high quality products on time so that the delivery takes place without interruption. Reliability is a continuous delivery of the same value you promise to deliver.
These Performance Goals are the essence of providing a competitive advantage to your company. It is so because the quality reduces costs & increases reliability. On the other side, speed reduces inventory, and in such a way, the risk for the company. Being flexiblity accelerates response, saves time, and maintains reliability when it comes to flexibility. Lower costs provide more sales. Reliability saves time, money and gives stability to your company.
A. Measuring & Tracking your Business Performances
As you already see, performance is the key to securing a competitive advantage. Companies that provide high-quality value delivered to customers with the lowest possible costs will always have an advantage over the competition. Therefore, measuring business performance is the basis for improving operations – thus getting a more significant competitive advantage.
The GAP. The difference between a realized performance and the desired performance is the gap that needs to be filled with improvement. For example, a company may want to process 500 clients daily. Currently, it can process only 300 clients. You can achieve the difference of 200 clients only by improving the performance of the operation, through one of the following activities:
- Improving processes to maintain quality, increase speed, flexibility, & reliability while not increasing operating costs.
- Education & Training of employees to be more efficient and effective. They will be able to process more Customers at the same time.
- New Hires will add additional labor force for processing more Customers.
- Combination of two or more of the above options is also a unique option that can increase the performance of your operations.
The fundamental question you need to answer is what & how to measure when it comes to your performance. Remember that different measures give different results for success & failure. Relying on one measure can lead to failure on another measure. Here is what you can do to implement a systematic approach in measuring and following business performances:
1. Evaluate the Measures you follow.
Do you have a strategic approach when you follow measures about the performance of your small business? You probably follow your sales numbers regardless of whether they are in manual tally or some more complex database. But, the question is about the strategic approach that means you have a process that you follow on a cyclical basis. For example, on Monday morming evening, you will collect each measure to compare them with a previous week – to find answers to why some measure is lower or higher, and then decide for the next week’s actions. When you have a strategic / systematic approach, come to the question of what type of measures you are currently using. Probably you have three, five, or ten measures that you are using, now list them on a piece of paper or some spreadsheet and start asking yourself the following questions:
2. Feedback: What each of those Measures tells you?
This question should show you what the measure is about. For example, if you track the number of visits to a website, why do you track them? You may need to track the number of clicks on the order button to know how many visits you need to receive X number of order clicks. However, the X number of clicks on the order button does not guarantee that there will be a sale. You may need to follow the measure X orders for Y site visits. For example, a restaurant can use the number of Facebook likes on the site. Still, that number says nothing if the management does not know how many people who liked the page came to the restaurant and how much $$$ they spend. The purpose of this question is to introduce you to exactly that reason and review the currently being used measures.
3. What are Good & Bad measures?
The next question is: “Which of these measures are good measures and which of them you don’t need? Because you already know the reason for using each of these measures, you can easily see which ones are critical and which are not needed. So you can drop the un-important measures or replace them with new ones that we came up with within the previous question.
Example: reject the number of visits and use the number of fulfilled orders related to the number of visits. It is much better to use measures that represent the relation. It is either a coefficient from 0 to 1 or a % amount. Those measures are the most valuable.
B. Are there other Measures that you are not using currently and they can be valuable for your Biz in the future?
Are there any other measures that you do not use and can be helpful for the company? It is not just a matter of putting measures that will not be essential to improve operational processes. Remember that monitoring some measures is to constantly improve processes and the company to be better – better in terms of those measures daily. When you complete answering these questions, you can remove measures that are not valuable for you and add additional measures that can bring you more value when you make decisions in your company.
1. Define #1 most important Measure for your Performance
Define the one most crucial measure for your company that will impact the most on your performance. When you have narrowed it down to 3-5 critical measures, you need to choose the one that will tell you the most about your business performance. This measure must be something you can entirely rely on, something that each employee in your business can improve. Or, it can be something you can continuously maintain on the higher possible level that will enable you to be one step ahead of your competition. Do you have such a measure? Think about it now !!!
For example, a business may have the most critical measure like earnings per employee – in terms of gross income. Why will this measure be a key measure for a company? Because it simply reflects the company’s efficiency through the employees who create costs, but also on which the business model’s success largely depends. You can generate this measure at any time. You will base your staff policy on this measure, the sales per month, the cost of material used in preparation, and the product type. On the other hand, this measure can be easily compared daily, weekly, monthly, or any other basis by the manager who monitors it.
2. Create your own Process
At this step, you will need to create a process that will always confirm or reject a specific measure that you are following – regarding your performance. Now, when you know what you measure in your business and the most critical measure for your company’s success, you can start building a process that will enable you to use the measurement in a most useful & productive way for you & your business. Steps:
1) Start with that one most important measure for your small business that you will follow every day.
2) The process’s start can also be other measures, but they will be part of this process on a longer cycle as each week, month, or quarter. Decide according to the importance & priority of the measures you have defined.
3) The third possible starting point of the process is your customers as one of your business’s most important and most influential persons.
4) The next step in the process is to discover how to improve the measure you follow. For example, you will need to define specific Action steps that – when they are implemented – you will improve your measure. Then, your process will continue implementing previously defined Action steps that mean implementing changes in your small business.
5) The next step in the process is to measure the effects of the implemented actions. The output can be positive, which means that everything you have already done improves the measure. The second type of output can be negative, which means that the actions you have already taken aren’t something that improves the measure. You will need to go back to the step when you discover what you need to do to improve the measure for the negative results.
3. Continuously work on Process Improvements.
The last thing you need to remember is that you need to work on continuous improvement of the process, because this process is essential for your business success.
Comments: Do you know of any other ways to Measure your Business Performance?
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