As a start-up or small business enterprise, one of the first things that you must master is your data components; and how to interpret the organization’s numbers. The leadership must then dumb those numbers down to the point where every department and/or individual has a single imperative but reasonable number that guides their day-to-day work initiatives. This set of numbers enables the founders and/or leadership to create a dashboard of clarity, accountability and responsibility throughout the organization. One can then track performance down to a granular level and a single person responsible for output and performance.
In that we practice what we advise, within Smith Gruppe “Every Department And Individuals Has A Number”. Whether it be the underwriting department turning around a LOI (Letter Of Intent) for funding within 48-72 hours, or working capital cash flow department disbursing within 48 hours; we all have a number.
Here Are 8 Reasons To Measure!
1. Numbers Communicate Clearly
When an owner ask the question of how the month is going to a sales manager, the response is usually “Great, and we should do well this month as we have a lot of great opportunities right now.”
In a numbers based culture that measures consistently, the answer is crystal clear. We have 6 deals closed against our monthly goal of 10, and we have 2 weeks remaining in the month. If the answer is 2, and the goal is 10 with only 2 weeks left in the month; then the lagging sales issue needs to be addressed. Better to address the issue now, rather than at the end of the month when you are way short of the goal.
Numbers are not just for that sales manager. It is a communication tool between the founder/leadership, the sales manager and the sales team, and the entire company creating the basis for comparison, unemotional dialogue, and most importantly constructive coaching to increase results.
2. Numbers Create Accountability
When a number is set and properly communicated, the expectations are clear. Accountability starts with clear expectations, and nothing is clearer than a specific number. Take our previous sales example, if in the entire sales department the team expectations are “increased sales,” that is ambiguous and unclear. However, if the sales team is to produce 10 closed transactions, $7,000 in fees per minimum transaction, or total new sales volume of $70,000, that is a clear expectation. The sales team and each salesperson know exactly what their target is.
3. Accountable Leaders Respect Numbers
The right butts in the right seats take great pride in the fact that they can be held accountable for the success of the business. This level of leadership within your business loves clarity. Knowing the numbers they need to hit, they enjoy being recognized as producers.
One of my mentors quoted, “people will work 10 times harder for recognition, than they will ever work for money.” Always recognize your producers and leaders as well as praising progress for the up and comers.
Accountable leaders within your business creates an esprit de corps and embrace an organizational culture where everyone is held accountable. This leads to overall business success because the right people want to be successful; whereas the wrong butts in the wrong seats will resist accountability because they are not producing.
4. Numbers Create Commitment
There is a major difference between commitment and compliance. Compliant team members will do just enough to comply or get by and not get fired, and you are likely to pay them enough for their nominal production that they will not quit – Bad Move!
Committed team members are clear on their numbers and have agreed that they can meet and/or exceed that number, this is commitment. There are no gray areas.
A great way to secure company-wide commitment is to post a Vision Board in the Conference Room or most frequently visited or visible place in the company. Share the sales goals and other key initiatives and/or quarterly themes with everyone, and tie their number to incentives.
This results in everyone knowing how their number and/or role contributes to the overall success of the company, and just how important their numbers are in the grand scheme of things.
5. Numbers Create Healthy Competition
Healthy internal competition and a little pressure is a good thing. As noted in Point #4, making the target numbers of all teams public knowledge and known to all teams creates competition.
Departments can then challenge each other to meet and/or exceed their number against other departments.
This is a healthy practice across multiple departments within the business because although each employee and department are in pursuit of their own number, they are aware that they are interdependently accountable for the overall company number; which lends to greater incentives and success for all. – It creates greater camaraderie between departments in that it illustrates how each role and responsibility supports a greater role and responsibility.
6. Numbers Produce Re$ults
Similar to the way Steve Jobs helped turn Apple around, knowing your number can create amazing results. If the sales department’s expectation is to up sell one existing client a month in order to increase the CLV (Customere Lifetime Value), by hitting this number, the ultimate result is increased customer retention and customer loyalty.
However, if your nPS (Net Promoter Score) process is to identify opportunities to warm transfer MQL’s (Marketing Qualified Leads) so that you increase your lead-to-conversion rate; and they know that 20% of your MQL’s result in a minimum of $3,000 in ancillary sales. You will typically meet and/or exceed your sales goals than if you don’t set a number. What gets watched also gets improved.
7. Teamwork Makes The Dream Work – Numbers Create Teamwork
When your entire business team has the right butts in the right seats, and they uniformly agree on a number to hit; they ask themselves “how can WE hit the number,” creating greater camaraderie and peer pressure.
When a team of top producers and leaders are challenged to produce at levels previously unattained, they will generally pull together and figure out a way to collectively meet and/or exceed the number. – This can b an excellent way of separating the creme from the milk, as it often results in those that aren’t pulling their weight or hitting their number being called out by the other team members that are performing to task.
8. Faster Problem-Solving Capabilities
When your business case is results oriented, it is often important to conduct an ABC (Activity Based Cost) Analysis. If your data indicates an increase in costs, and an activity-based number is out of line; identifying the number associated with bringing that cost back in line is tantamount to your survival. You can then take a proactive approach to attacking the issue in order to solve the problem.
Being proactive will allow for you to deal with the issue sooner, rather than later when it may be too late to adjust the number and have an impact on the end-result. Hard data allows you to cut through the noise of subjective and emotionally attached opinions.
In a small business enterprise, time is always of the essence and decisions have to be made quickly.
If you’re still stuck, Smith Gruppe offers training on understanding how to identify the 5-15 high-level weekly numbers that you should be looking at.
We do this through our tools and training on how to draft and create fACE (Functional Accountability Charts) and pACE (Process Accountability Charts). These charts allow for you to keep your finger on the pulse of the important numbers, as well as giving you the ability to predict the impact of adjusting the necessary numbers to drive revenue and increase the profitability and success of your business. Call us today at 980-221-9377 or e-mail us at info@SmithGruppe.com and request a FREE consultation on measuring the right “NUMBERS”.