How to Measure the Performance of your Business

AKA What makes a Smart SME Episode 3.

A top performing sports team measures its performance.  In the elite world this goes to the individual performance measures, the errors made by the team, what part of the game was better or worse, the list literally goes on.

If this helps sports teams to measure performance, why not a SME?  This moves well away from the Profit and loss of the business as I am a firm believer that this is a measure of the results, a by-product of the business performance.

I am talking about measuring the key areas of the business.  How well do you know the business is going?  Is the average length of time responding to a referral?  Quality measures of the actual work done, the % of work completed within the promised time frame…. Again a list of simple starting measures is all it will take to begin the journey towards becoming a smart SME.

Mark Graban, Author and Lean guru is passionate about measuring your success.  Without it it is near impossible to know what is really going on in your business and certainly where the efforts to improve are best placed. There is a saying in the Lean world - “measure what you want to improve”.

There are many key reasons why this is important.  First it is all about transparency.  This also supports the key pillar of the Toyota Production System, Respect for People.  By allowing everyone to ‘see’ how the company is performing, to engage the team about what could or should be done to improve the performance is really respecting the skills and knowledge of the people who do the work, the individuals who add value to the business.

This might all sound great, but where can you start all of this measurement stuff? You might get put off because it sounds like collecting a whole lot of numbers that you actually don’t know what to do with.  Besides, you didn’t get into business to become an expert in statistical mathematics!! So how can a small business do this simply and easily ?

Start small.  I have very small businesses that begin with just two measures - quality and DIFOTIS (delivery in full, on time, in specification). The quality measurement can be very simple - were there any mistakes along the whole process of the business, yes or no.  If it is a yes, mark that down as red, a no is a green day.  The goal is to see how many days per month are actually error free. By starting to ‘see’ what is going on can you then make adjustments, improvements within the business.

This can be done by just having a graphic on the wall and colouring it in….. yes those year 2 lessons were useful! This makes the effort visual and visible. DIFOTIS can be a % bar graph again that you colour in each day.  

This way the daily performance is visual, the trends over time can be identified and most importantly, if the image shows lots of red it should prompt a team conversation. This is the key to the whole process.  All of this effort means nothing unless there is a process to debrief on a regular basis (minimum weekly) with the team involved.  Starting an improvement conversation asking each other “how can we improve this ?” Is the ultimate goal of the system.

If you don’t make sure this happens as a leader (remember the leadership expectations) all you have achieved is making more white noise and planking it on the wall.  This is where it really is supported by daily or weekly stand up meetings.  Along with an agenda that is focused around improvement conversations, reviewing improvement actions, monitoring the outcomes and getting factual as well as anecdotal feedback on what is working and what isn’t.

All of this will take about 30 minutes a week.  Critically the return on this time will be much, much more than that.  If this is the only disciplined continuous improvement activity you start and continue in your business, you are looking at least a 15 - 20% improvement in the overall performance of the business.

The hardest part is that the organisations leadership needs to set the expectations of measuring something.  It needs to sign up and commit to the journey, even if it isn’t perfect at the beginning. Measures don’t have to be flash or complex, these can become more scientific and specific later, once you understand the process and become more aware of what the critical measures might be. All it needs is leadership to lead, then support the consistent review of the information and encourage, empower team members to do something that might make a positive effect on the measures.  Don’t worry, some things will not work, that is OK it is all about creating a learning culture across the company.

This is about smart learning and being able to assess the gains and impact made by the whole team. It is about making the process and outcomes visible.  This is where the use of visual team boards can be a huge asset to the team. Simple use of visual numbers and graphs so everyone can see what is going on. It also focuses the team on specific parts of the business they have control over - there is no use stressing about factors outside of their control.

Start small, pick one measure and slap it up on the wall.  Talk about it at the beginning of each week and talk to the team if there is anything they can do to improve it.

If you are stuck at coming up with a starting point, flick me a message and we can discuss specific to your business.


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