When Jeff Gordon steps behind the wheel of his high
performance race car, do you think he knows first-hand how much oil is in the
engine or how much fuel is in the tank or even how many pounds of pressure the
tires are under? Of course he doesn’t. There isn’t time between breaks for him
to follow his crew and check to ensure they’ve done their jobs. Nor should he,
he’s hired the best, put the latest technology on the road, and knows from
experience what to expect. He has the gut instinct that has delivered him many
championships and a dashboard that offers instant feedback of what’s happening
“under the hood.”
As an entrepreneur, your gut instinct can help you avoid
pitfalls, but when it comes to operating your business and attaining maximum
profitability, you most likely rely on a “dashboard” that provides information
on how well your business “vehicle” is performing.
A car has a temperature gauge, a fuel indicator; even a
rotation per minute (RPM) readout that measures how “hard” the engine is
working. Your business dashboard is very similar. Daily customer calls, sales
and other performance measures offer critical feedback at a glance. However,
unlike a car, a business dashboard must be customized for your business model.
Are you operating
like a Model T or a Ferrari?
Many companies manage in a blind fog, relying on financial
statements that are 30-90 days old to make important business decisions. In
short, they are relying on a dashboard that belongs in a company that operated
20 years ago. These “Model T” dashboards from yesteryear offer little more than
historical recordkeeping capabilities. Today, we call these performance
measurements lagging indicators because they lag in time from when data
is collected to when it is actually available for analysis. Imagine what Mario
would say if he had to wait until after he had lost the race, to see
that there was a problem with the car that could/should have been fixed in an
earlier pit stop!
Just like with cars, business performance demands have
increased too. Today, technology creates both the opportunity and competitive
environment that demands that you operate with a better dashboard. The
model needed today is more like a Ferrari – an optimum, high-performance
machine that offers maximum output. An effective dashboard can free you of
day-to-day operational duties so you can focus on managing, and possibly
growing, your business. What’s even more exciting is that there’s now a proven
way for you to know at a glance how well your business is performing
and what areas need attention. This state-of-the-art tool utilizes leading
indicators. These feedback mechanisms provide real-time information about
all areas of your company’s performance so you can “shift on the fly” and make
needed strategic adjustments to your business strategy.
What You Can Measure, You Can Manage
So how do you build a better dashboard? It boils down to
looking at the areas within your business that can be measured and, as a result
of proper measurement, managed more effectively. Measurement and Feedback
systems are the tools for the 21st century entrepreneur. These tools
build your company’s customized dashboard. Businesses are typically organized
into four to six performance areas, which include:
All activities relating to the financial aspects of the business including
accounts receivable, accounts payable, payroll, reporting, etc.
All activities relating to the development, production and delivery of a
product or service including manufacturing processes, inventory
management, quality control, order processing, service delivery, shipping
and receiving, etc.
All activities relating to the acquisition and retention of customers
including marketing, sales, customer service, etc.
All activities relating to hiring, training, managing, growing and
Once you identify your business’s performance areas,
you then establish critical success factors (CSF) related to each
area. This is the foundation of your feedback system. CSFs are specific goals
that are designed to overcome weaknesses, exploit opportunities and/or
stimulate performance in a given area. The goals are strategic in nature and
fit within your company’s broader vision, mission and core values.
After you have pinpointed performance areas and
developed goals (critical success factors) for these areas, then it’s time to
develop a way to measure how well your team is doing in each area. Your
measurement tool is called a Key Performance Indicator (KPI). KPIs
measure outcomes and often are expressed in ratios or indexes made up from
multiple activity measures. KPIs provide feedback to the team and managers
about how they are performing in reference to the CSFs established in their
given performance area. In essence, your team will have a way to look at their
own personal business dashboard. They can “add more fuel” if they see that they
are lagging in an area. Or, they might see how they can make an adjustment that
affects the whole process and improves overall productivity.
Your Goals, Your Team’s Goals
You’ve heard the line, “Build it and they will come,” right?
Well, this is ultimately true about your business dashboard. You have a winning
formula when you build a dashboard that your employees can understand how it
hits your bottom line as well as their bottom line. A business dashboard
will make it easy for them to see how their efforts affect the company’s
performance. Once your team knows what the company’s overall goals are, they
can then be told what is expected of them and what part they play in realizing
those goals. By implementing a performance measurement system, you can abide by
the adage, “What is inspected is respected.” You will find that goals come to
life when there is a measurement system in place. Ultimately, people perform
best when the “rules of play” are explicit, and the scoring method is clear.
business dashboard allows you to effectively manage your company’s performance
and to share this performance with your employees so that your goals become their
goals. Building a better dashboard
is key to increased profitability and a smooth running operation.