Tuesday 22 September 2015

Measuring Your Business

Not everything that counts can be measured and not everything that can be measured counts.

Most of us (I hope) wouldn’t drive a car with no working speedometer, fuel gauge, engine temperature gauge or rear-view mirrors.  Many, however, take this attitude with running their business.

Good business owners know how much they’ve made so far and how much more they need to make to cover this month’s costs.  This is like saying that you know how fast your car is going based on the speed of those around you.  You know you aren’t driving too slowly or too fast, and you know that you're headed in the same direction as the others.

Modern cars measure all sorts of things.  My last one measured average speed, average miles/gallon, current miles/gallon, total trip distance so far, average speed for journey, distance to drive on current fuel, outside temperature, miles to next service, fuel level, engine revolutions, current speed, engine temperature.  Lights warned that a headlight bulb wasn’t functioning, I was low on fuel, my battery was malfunctioning, and other information.

What did I actually monitor?  Speed, fuel, distance left based on current fuel consumption and engine temperature occasionally.  The rest was  only relevant from time to time, depending on circumstances.

Continuing the car analogy, when I get into my car, the first thing that I do is perform a quick exterior check to see that all tyres look normal, that there are no unsightly marks and that the car looks “normal”.

I then need to know whether I have enough fuel to complete my journey.  This is usually available when I turn the key part of the way to the “ignition” position.

Then I turn the key fully to “ignition” and all my warning lights come on for a second or two (hopefully) as the car does a self-check.  If all go out, I know I can continue.  If one stays on, I decide whether it’s important. 

As my journey continues, I check speed or fuel levels depending how far I’m going or where I am on a long journey.

Just as in driving a car, businesses need to know certain information all the time, but other information depending on the situation.  The key is to identify:
  • What information is needed;
  • What level of detail is needed;
  • When it is needed;
  • Who needs it;
  • How often it is needed;
  • How quickly it is needed;
  • What action will be taken as a result and by whom.
When people say that they need a report or such and such information, ask “What do you do with it?” or “How do you use it?”  If they say “File it”, then ask whether that report is necessary or whether that information “counts”.  Producing information that noone uses or is too difficult to understand is a waste of time, money and resources.

At times, I help clients decide what information counts and how it can be obtained with minimal effort.  Quality information should be easy to:
  • Obtain so that it can be delivered in a timely manner;
  • Understand;
  • Act on quickly;
  • Trust.
The final point is crucial.  If people doubt the validity of information, they won't use it.  I remember episodes at one of my employers where managers constantly said that the data contained in a report wasn’t valid and that therefore it couldn’t be used to assess the performance of their team/their function or business.

In Formula 1 races, the cars send a stream of data back to monitoring centres to tell the support team how the car is performing.  The information concerns every aspect of the car and is highly detailed.  They relay this to the Team Manager at the trackside, who decides whether the driver needs to take action.  The driver can only monitor a few indicators at a time, so his support team look after the rest.

Businesses need to consider whether they need “Formula 1” levels of detail,  “just the basics” or a mix depending on circumstances.  They then need to decide how to gather it and present it in a timely manner to the right person in a way that tells them immediately what action they need to take.



I have spent more than half my life delivering change in different world markets from the most developed to “emerging” economies. With more than 20 years in international financial services around the world  running different operations and lending businesses, I started my own Consultancy to offer solutions for improving performance, productivity and risk management.  I work with individuals, small businesses, charities, quoted companies and academic institutions across the world. An international speaker, trainer, author and fund-raiser, I can be contacted by email . My website provides a full picture of my portfolio of services.  For strategic questions that you should be asking yourself, follow me at @wkm610.

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posted by William Martin @ 09:05

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