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This article first appeared in the PB November 2003 issue of Pro Builder.
For the past five months, we've discussed metrics and their place in your business. We began with an overview of this tool's value. We broke it down by department, and we showed how to share and use this tool in a practical manner. This month, I'll summarize the entire system to give you a road map for using this powerful tool.

The system breaks down into five steps:

1. Determine the company's vision and write it as a series of goals.
2. Develop a company plan that supports the vision and goals, and develop departmental plans that support the company plan.
3. Measure the vital factors that drive the plans.
4. Meet and share the results with those who affect them.
5. Act! Hold people accountable, celebrate success, and make changes as needed in personnel, resources or goals.

Seems simple, but many companies understand the system and its value yet fall short on making it happen. They generally fail on one of the five steps.

Step 1: Determine the vision

This process starts with the company's purpose. The owner, partners or controlling entity must determine the company's mission. Is it to make money? Provide opportunity? Is the company a nonprofit designed to provide a service? This is in contrast to the company's vision, or short- and long-term direction, which also is entirely up to ownership.

The vision is written and stated in terms of goals. This is what the company intends to do and should not be confused with the mission, which is the why.

For an example, let's say ABC Co.'s vision is to grow during the next three years from $75 million to $100 million in revenue with a 5% net profit.


Step 2: Develop the plans

The company plan should support and provide a road map for ownership's vision. This is how the company will do the what. How will the company get there?

The planning process should include:

  • A SWOT (strengths, weaknesses, opportunities and threats) analysis of the company. What will help us get there or keep us from getting there?
  • Discussion of the measurements necessary to track success. If growth is a goal, the company must track yearly and monthly revenue and revenue growth. It also must determine what each department needs to track and accomplish.

Once the company decides how each department will contribute to the firm's success, the company plan is ready for departmental discussion. Each department must agree that the goals are realistic and attainable, and each must develop a departmental plan that its people believe they can accomplish.

To use our ABC example again: Growth to $100 million from $75 million will require:

  • Marketing to generate more leads.
  • Sales to close more deals.
  • Estimating to run more estimates.
  • Production to install more construction.
  • Administration to administer more contracts, deal with more cash flow, etc.

How will they do that? Determine if any department needs more resources.

The company and each department must come up with measurements that will show progress, or a lack thereof, toward the goals. The vital factors that the company needs to reach its goals determine what to measure.


Step 3: Measure

Make it simple. Break each goal into yearly and then monthly goals.

ABC wants to grow by $25 million in revenue in three years. Should it grow by a certain percentage each year? By a certain dollar amount each year? Whatever management decides becomes the goal.

Each department has a hand in this, so not only revenue will be measured monthly, but also departmental metrics such as leads, closes, etc.

Don't measure things that do not affect the goal. That confuses people and wastes time. Don't be fooled though: Something as important as customer satisfaction can affect marketing, sales, cash flow (if accounts receivable is an issue) and other important subgoals.

Try to support two or three visionary goals (in ABC's case, revenue growth and profit) with two or three departmental goals and measurements. Build a spreadsheet and track progress toward those goals.

Step 4: Meet and share

Establish monthly meetings for upper management and departmental management (and even, as we suggested in one column, the entire staff) to share the goals, measurements and results.

Break it down to the lowest level to give every individual responsibility for goals that support the next level up, which ultimately ends with the company vision.

Ah, but what's in it for your employees? Why would they take the time and make the effort to do this? The truth is, superstars want to show how well they perform, and weak players don't. So it's important that you don't ignore the final step.

Step 5: Act!

Admitting failure to meet agreed-upon goals can be painful and often results in behavioral change, but consistent failure requires action. What's the ultimate accountability action? Probably firing someone.

On the flip side, if the metrics prove that your superstars continually meet their milestones, celebrate that. Celebration can be as simple as recognition, a powerful and underrated tool. Reward is not always necessary.

Sometimes goals cannot be met. Modifying a goal isn't the best option, but if you and your team agree a goal is unattainable, lower the bar a bit so the goal remains admirable but not outrageous. That's better than keeping the bar unreachable and having your team give up halfway through.

So there you have your road map. The next step, implementation, is up to you.