Leadership

#8: Obsess Over Metrics

From The 30 Best Business Practices of All Time, published by PROFITguide.com: Canada's trusted resource for entrepreneurs and innovative executives

Written by PROFIT staff

“There’s simply no way to know if a business is winning or losing unless management has insisted that everything gets measured,” says Roger Pierce, a Toronto-based serial entrepreneur whose latest enterprise, NewcomerStartup.com, helps new immigrants get companies off the ground.

Pierce echoes the thinking of Peter Drucker, the most influential management writer of the 20th century, who had famously asserted that “What gets measured gets managed.” Yet, it’s one thing to collect and review crucial business metrics; it’s another thing to turn those observations into action. It has been almost 60 years since Drucker advocated “management by objectives” in his landmark book, The Practice of Management, which requires that you measure your key business metrics. But only a minority of firms obsess over these metrics and effectively respond to them.

Drucker had believed that it’s essential to focus on results. To do that, you need to identify the key drivers specific to your business—such as client satisfaction, profit by product line, inventory turnover, customer attrition or product defect rates—and then measure these and act on the results. Figuring out what you should measure and how, and then doing so consistently, are complex enough. But the toughest part is developing a culture in which you and your managers take decisive action if the metrics are heading in the wrong direction.

These days, you can use a sophisticated computer dashboard to show, in real time, where things stand and employ clever metrics to measure things that businesses used to struggle to track, such as Net Promoter Scores to gauge customer satisfaction. (See Tactic 11.) Still, none of this will avail you much if you lack the courage to insist on results—and the guts to be judged by them.

Originally appeared on PROFITguide.com
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