Until you measure it…

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June 19, 2014- ISSN# 1545-2646




   Until you measure it…..

Some days I wish I had a dime for every time a business owner gives me their opinion about how their business is doing that is based on their gut level instinct and not based on real data.  I might not get rich but it sure would pay for lots of little perks.

In today’s business world we have access to such levels of technology that there is no reasonable excuse for a business to not know the real status of their business performance on various measurement points.  The simple fact is business leadership gets lazy and doesn’t track their business on an ongoing basis.  When everything is going good and sales are graciously exceeding expenses the sins of the company are disguised or hidden.  It is when times begin to get tough that measurements start to become real.

All of a sudden the expenses get a real focus.  Where can this or that expense be cut?  The problems is the decision making process on expenses it not based on any real measurement of what the expense returned or did not return to the business.

Businesses have accounting systems but for the  most part they track history or what happened.  They are necessary and contribute in their own way to the management of a business.  If those are the only tools being used to run the business then you are always days, weeks or possibly months behind in your data picture and can’t take corrective action in a timely manner.

Your business needs a series of key metrics that it manages to on a daily, weekly, monthly, quarterly and annual basis.  They will be unique to the industry or market segment your business work in but they need to be identified, understood and criterion established to measure.

For example, if a key metric is that scrap raw material from a manufacturing process should not exceed 5% on a per run basis and you don’t measure that value then many aspects of your business have gone out of alignment. If your estimate to produce the product was based on that value and your waste is 10% then your profit on that job went down. If the waste is at 10% and the standard is 5% what is causing this additional 5% loss?  Is it training?  Is it the quality of the raw materials? Is it…..

If you are not measuring what is going on your are guessing at best. Yes, in horseshoes and hand grenades you can approximate result and still potentially have success.  If your business is willing to leave 5% on the table for each and every job you touch then maybe that dime I spoke about in line one should be a $1,000 bill.  That would surely start to get your attention.

This week take a look around at the key performance indicators (KPI) in your business.  Are they truly “KEY” or just measurement points easy to track?  If you don’t have KPI’s then you should make it a goal to get them in place and start measuring.

KPI’s something new to you and your colleagues? Give JKL Associates a call at (313) 527-7945.

Questions or comments – email us at partners@jklassociates.com or call our Office at (313) 527-7945

Copyright – JKL Associates 2014

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JKL Associates
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