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22 Apr

Increase Business Focus Through Performance Management

A Simple, Strong Process That Works

Business today is as complex as ever. At Line of Sight, we hear business leaders struggling to make sense of the volume of information they receive daily. In speaking with leaders around the world, one constant thread of discussion is “How can we have better discussions about corporate performance?” The conversation often leads to topics like performance measurement, goals, leading and lagging indicators, and 147039718dashboards. But most business leaders want simple solutions to complex issues – not complicated performance management systems. Performance management quickly becomes difficult, so here is one simple method for adopting a performance management mindset with your team.

Begin With A Story

Performance management lets you tell a narrative about the business, as in “We started at X and made it to Y.” The story is important because it lets you communicate in specific ways how your business is evolving and what is important. Let’s say you run a restaurant and your goal is increase lunchtime revenue by 30% for the year. You know that the weekly specials will drive increased revenue. The narrative you want to tell at the end of the year is how you increased your revenue by selling new, exciting specials.

To create effective performance measures, begin with the narrative. Create a set of performance statements that capture key ideas, each in a single sentence. Statements usually start with action verbs like:

  • Increase
  • Decrease
  • Maintain
  • Close
  • Open
  • Establish
  • Achieve

Example: Increase sales of lunch specials to 50% of total lunch revenue weekly.

Fewer Relevant Measures

Recently I saw a dashboard for a medium sized company. Their dashboard had twenty Power button and status indicator lightitems covering a single area of the business. After a few weeks, several of the items were out of date, and within a month they had abandoned the entire dashboard, saying it was too hard to maintain. We recommended a different approach – fewer, more relevant measures that were easier to update. Consider giving each participant one measure that tells their story. For example the CFO might have “Cash Flow Runway” as her measure – the runway being the amount of cash on hand, plus expected revenue with no new sales. Each member of the team scores red, yellow, green based on specific criteria.

Looking at the restaurant, we want to understand what Green, Yellow and Red really mean. We also want a fast protocol for dealing with yellows and reds. Check out below:

Green = 50% or more of lunchtime revenue comes from specials.

Action to Take: Continue to sell specials, monitor quality and big sellers.

Yellow = 35-50% of lunchtime revenue comes from specials.

Action to Take: Remove under-performing specials, add big sellers, offer free meal to staff who sell the most.

Red = <35% of lunchtime revenue comes from specials.

Action to Take: Conduct pre-lunch meeting with staff, review marketing plan for specials, address any quality concerns, eliminate under-performing specials.

A dashboard with specific accountabilities empowers managers to act quickly and correct problems. Don’t worry too much about leading or lagging indicators if you are new to this. At some point, you will want to put into place some leading indicators that will be able to tell you that your revenue planning is on track. For the restaurant, consider a leading indicator like: # of daily views of the specials page/# of likes on Facebook prior to 11:30AM.

More Frequent Reviews

106572328Often, performance measures are reviewed quarterly or monthly. We recommend more frequent review. Holding a weekly reviews gives the team 52 opportunities to discuss performance. Bi-weekly meetings gives you 26 opportunities – far better than the 12 or 4 that many companies do.

We use simple spreadsheets and templates. By following a simple solution, it enables your team to spend more time on the complexities of the business. A performance management system like this will help your team to quickly focus on the most important aspects of business right away.

Contact us for more discussion on this topic!

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