Focus on the Right Drivers

What are the key operational metrics that really define your business?

That is one of early things that I ask people when I talk to them about their organization. I want to understand how they think about what is driving it. Are they thinking about the levers that influence their business performance? Or are they just focused on sales and profits?

Focusing on the right operational metrics should influence how the organize acts. If they are the right drivers, it should lead to:

• Growth
• Increased Effectiveness
• Improved Efficiency

Every employee should be aware of what the key drivers are for their organization. They also need to know how they change over time and what causes them to change. Employees should know how their job effects them directly or indirectly. It should ultimately affect their behaviors in how they go about their work.

Conversely focusing on the wrong drivers can lead to behaviors that do not support improved performance. In some cases, they could be detrimental to performance. Thought must be given to avoid metrics that could cause negative behaviors such as churning of accounts or poor customer experience.

There is no set of metrics that are universal. Each industry and sometimes each organization will have their own unique metrics. When I worked in financial services, the key metrics that we measured were client assets and their flows in and out of the firm. For professional services it might be number of customers, number of service requests, and the time to close them. A distributor might use the number of units sold and inventory turnover.

The goal of operational metrics is to change employee behavior in positive ways that improves your organization’s performance. This should lead to increased revenues, improved profitability, and even more satisfied customers. They should also be utilized in planning, forecasting, and even your compensation plans.

Financial Performance Consulting can help you identify what your key operational metrics are for your organization. We can also help incorporate them into your reporting and profitability to help improve your financial performance.