Ever feel like you were caught by surprise with a sudden increase or decrease in business? Maybe you knew at a high level that it was coming, but you were surprised by the magnitude of impact the change had on different areas of your business.
Years ago I had a client who was a service business with about 30 employees. Their team had made impressive investments in analytics and reporting. They had an automated system that sent the leadership team automated reports on previous period’s results. They felt like they had all the data they needed to get a pulse on the business. In fact, they felt they had too much information!
I’ll never forget our Focus Day Session—the first full-day session in the EOS Process. The owner came into the meeting with a stressed look on his face and asked his team, “Did everyone see the report this morning?” They all had. He said, “Then who can tell me why we had a $17,000 loss last month?” The team all stared blankly, like deer in the headlights. The owner was about to blow a gasket and the tension was at an all-time high.
What did we do?
Lagging Indicators Vs. Leading Indicators
After asking the team a few questions, we quickly discovered that they were only measuring results, or lagging indicators. This isn’t a bad thing—you’ve absolutely got to know how you did. The issue was that they were missing activity-based numbers, or leading indicators. As we began to put together the company scorecard, we began to uncover the need to track activities such as sales leads, sales calls, sales meetings, and sent proposals.
Through quick high-level math, the team discovered why they had a loss the previous month. Although they felt busy throughout the month, this simple exercise revealed that their level of activity was nowhere near enough to generate the results they were anticipating. They needed to ramp up their sales pipeline in a hurry.
Over the past two years since this team started tracking these key activity-based measurables on their weekly company scorecard, it has made them more accountable to the right level of activity they need to generate the results they want.
Have they always hit their desired results? No, but now with this tool in place they’re in a position to quickly adjust the pace of their activity. As a result they’ve doubled the size of their business in just two years.
Make 2016 a More Profitable Year
As you’re closing your books on 2015, take a moment and reflect on how the year turned out. Was it as you expected? Any surprises in the Sales, Operations, or Finance areas of your company? Put together a company scorecard today to get 2016 started on the right foot. In my next post, I’ll share some sure-fire tips on creating and rolling out scorecards to your employees. Stay tuned!