“If you can’t measure it, you can’t mange it.” – Peter Drucker
Management consultant, educator and author Peter Drucker, who is often associated with this quote, means you can’t know whether or not you are successful unless success is defined and tracked.
Without clear metrics for success, you’ll never quantify progress and be able to adjust your process to reach your goal. You’ll always be guessing.
How do you get there?
Here are 7 straightforward steps to measure and manage success with plenty of examples.
1. DEFINE WHAT SUCCESS LOOKS LIKE: Success is the achievement of an action within a specified period of time by a specified parameter. Begin with the end in mind. Success looks different based on the type of business and vision of its leadership, but it can’t measured if it can’t be articulated. Here are some examples.
- Find new customers and get a larger market share than competitors
- Improve closing ratio from 30 percent to 45 percent
- Convert 10% of prospect into customers within a year
- Reduce employee turnover by 25%
- Earn a substantial return on investment for shareholders who risked their capital in the venture
- Do ordinary things extraordinary well – Jim Rohn
- Doing it for yourself and motivating others to work with you in bringing it about – Richard Branson
2. DECIDE WHAT TO MEASURE: “What gets measured gets done” is attributed to Peter Drucker, Tom Peters, Edwards Deming, Lord Kelvin and others. Somebody believes deciding what to measure achieve results. To decide, choose activities and services at the core of what you do and your biggest costs of doing business Think about how they will make your business successful or how they could be improved. Some examples of what to measure are:
- Number of new leads, sign ups or subscriptions
- Conversions of leads to sales
- Sales from returning customers
- Number of customer complaints
- Number of returned items
- Time it takes to fill an order
- Percentage of incoming calls answered within 30 seconds
3. GET ON TOP OF FINANCIAL MEASURES: In order to achieve success, you need to know how it has to be understood financially. Cash flow is of fundamental importance and can be a particular concern for growing businesses. Most businesses target profits as the key financial metric. It’s important to know how to measure profitability. Key profitability measures to know are:
- GROSS PROFIT MARGIN: How much money is made after direct costs of sales have been taken into account.
- OPERATING MARGIN: How much does it cost for the business to run. Overheads are taken into account, but interest and tax payments are not. For this reason, it is also known as the EBIT (earnings before interest and taxes) margin.
- NET PROFIT MARGIN: When all costs are taken into account, not just direct ones. So all overheads, as well as interest and tax payments, are included in the profit calculation.
4. SELECT KPIs: Key Performance Indicators (KPIs) are business metrics tied to targets. They are used to evaluate factors that are critical to success. KPIs are the actionable scorecard that keeps business strategy on track. KPIs are applicable to your growth cycle and identity your target audience considering their point of view. They are the measurements that matter. Some examples are:
- Number of new accounts over a specific time period compared to past performance
- New revenue measured against the money investing in new marketing campaigns
- Sell-off of investory in a given year
- Customer acquisition cost
- Customer lifetime value
- Sales by region
- Employee turnover rate
5. LISTEN TO CUSTOMERS: Measurements are based on your needs but, if your needs include your customers, you won’t achieve success unless you listen to their needs. Consider their individuals need, what they think of your brand, your competition and what their future needs are. Some examples of measurements that show you’re listening to customers are:
- Customer acquisition cost
- Churn Rate
- Net Promoter Score
- Number of customer complaint
- Time to resolution
- Customer engagement
- Annual customer value
- Lifetime customer value
6. ASSESS EMPLOYEE PERFORMANCE: A company is only as good as the talent behind it. Consistently and accurately evaluating employee performance is essential not only to individual success, but to the overall success of an organization.
- Employee turnover rate
- Percentage of responses to open position
- Employee satisfaction
- Qualtity of work
- Employee efficiency
- Revenue from new ideas and innovation from employees
7. COMPARE AGAINST OTHER BUSINESSES: One of the best ways to keep your business operating successfully is by continually measuring and comparing its performance against competitor averages. Some basic but important measure of comparison include:
- Sales
- Market share
- Channels of distribution
- New products and/or product improvements
- Website visits
- Employee satisfaction
Are these steps straightforward enough for you? Is there anything else you would include? Does your business need help measuring and managing success.
