As a small company, every employee is vital to the organization. Each employee’s contribution contributes directly to the bottom line, and each employee knows the result of his or her contribution to the company.
But as a company grows, the personal touch often is lost. Employees start to lose perspective about how their efforts contribute to the company’s success, and executives start to feel disconnected from the day-to-day operation.
It’s at that point—usually before companies reach about 100 employees—that it is no longer effective to take the pulse of the company simply by watching and asking. No longer can stakeholders understand the direct relationship of an employee or a division to net profits. No longer is it easy to spot low-performing marketing campaigns.
To continue growing effectively, it’s time to pinpoint the exact key business indicators your specific company needs to measure on a daily, weekly, quarterly or yearly basis. By doing so, you’ll know what’s doing well, what needs shoring up, and what needs to be changed.
Of course, you’ll want to monitor the standard indicators like year-over-year revenue net profit and cash flow. But depending on your industry, the number of locations and other factors, other important indicators could include net income per employee or office, growth in same store sales, or other market-specific indicators.
“Try to get numbers on a meaningful basis split up on any demographic that’s meaningful for you, whether it’s by location or industry, or even at the department or employee level,” said Esther Friedberg Karp of 180 Systems Ltd., an IT consulting firm based in Toronto.
Even mundane metrics like training expenditures and employee turnover can be very illuminating.
“Let’s say your number of employees grow every year by 5%. On the surface that looks really good, but if you’re losing 20% of your employees every year and have to rehire now 25% you are incurring incredible expenses having to do with administration, retraining and separation,” Karp said.
If you don’t have the in-house expertise to determine the best business indicators to monitor, there are many consultants available who can, for a few thousand dollars, help develop those indicators.
Once you have determined your key business indicators, it’s most effective to put some structure around how you monitor them.
If you’re just starting out or are at the smaller end of the spectrum, you can even do it manually or with very little technology, said Frederick Hansen, president of Hemingway Group Inc., a consulting firm in Rochester Hills, Mich.
“It doesn’t have to be high-tech. You can use a white board or an Excel spreadsheet,: he said.
But to evaluate indicators most effectively, many experts recommend a more automated approach in the form of a web-based dashboard that provides up-to-the-minute information on business indicators the company specifies.
These dashboards, from companies like NetSuite, CorVu and Sage Software, can be customized to permit specific employees to analyze specific business indicators, also allows for comparison of reports from different time periods, and provides information in a variety of graphs and charts. They can even link to a company’s ecommerce site, monitoring, for example, the number of web hits in response to a particular promotion.
The last piece of the puzzle is making specific employees accountable for specific performance indicators. Without that, success will be elusive, Hansen said.
