Episode E.009 Measurement Skeleton
Business Metrics are “standards of measurement” by which marketing, sales, service, production, people, and financial performance are assessed. The critical elements of any measurement system is to identify and separate cause from effect. Measuring “effect” is a macro view of the company based on a collection of “causes” or micro views.
What are Dashboards and Scorecards?
Dashboards and Scorecards are labels attached to the level of measurement being used. Scorecards represent micro measures (causes) such as average sales price while Dashboards (effects) bring Scorecards together to provide a picture of reality. An example of a Dashboard for Sales (based on average sales price) is margin per sale.
What is a Balanced Scorecard?Publicly traded companies have been managed quarterly for centuries with the focus on share price. This measurement might keep shareholders happy but it did nothing for running the business. By the 1990’s business executives and owners looked for different methods of measuring financial performance. The reason - Financial Performance is the effect, not the cause of profit. You cannot fix profitability by focusing on profitability, you must treat the underlying causes which are not measured.
So let’s start our journey at the beginning, what are the causes of great financial performance? Today most business measurement systems use some version of the following formula:
C + P + T = $
Customers demanding Production built by Talent creates Financial Performance
We propose the following generic Dashboards and Scorecards to analyze how you are driving financial results. Use these suggestions to trigger more accurate measures for your industry.
Customers (Customer Enthusiasm) + Production (Lowest Cost Producer) +
Talent (Discretionary Performance) = Financial Results
Working with our generic Dashboard, let’s begin where it should start - Customers. To help you make immediate application of the materials, take a few minutes and jot down what are the company’s current measures for Marketing, Sales, and Service. If non-existent or unknown – leave it blank.
Leave a Reply.
new choice for BUSINESS SEARCH