“To reach a port, we must sail—Sail, not tie at anchor—Sail, not drift.” ~ Franklin Roosevelt
Where is your business? Are you at anchor, adrift, or sailing? If you’re sailing, do you have a port in mind? How you will recognize it when you get there? Does your “crew” know where they’re headed? Do they understand their role in sailing the ship? Are you so focused on the crisis of the day on your ship that you are often surprised at where you end up?
Using Cascading Metrics™, a strength builder tool of Mackey Advisors, Prosperity INC™ service, you can go from being surprised at your destination to delighted to be on course and on goal.
Cascading Metrics involves 3 steps. 1. Choosing your port by setting targets for your annual business wealth objectives. 2. Identifying key departmental and individual activities that contribute to your targets. 3. Establishing measuring and monitoring processes for your company goals, departmental and individual activities. They cascade through the company, starting from the top, moving down into your departments and finally into metrics for each employee in the company.
Once you select your port of call, you then identify the key metrics that tell you if you are on course to get there. These measurements should be measured using a trailing 12-month rolling chart and reviewed by your management team each month to allow for timely course changes!
To avoid unnecessary detours, or poor sailing conditions, you’ll need metrics in 5 areas:
1. Financial strength, important balance sheet milestones
2. Financial results, key net income and cost control targets
3. Sales or gross margin, sales and gross margin goals
4. Customers, growth, retention, type
5. Key Initiatives, areas where you must change to make your goals
Financial strength focuses on balance sheet targets that assure the company’s financial health, such as cash, accounts receivables days, and debt-to-equity. Financial results focus on income statement measures like net profit and the key expenses that can sink your ship if they’re not well controlled. Sales or gross margin provide a look into the primary income generating activities.
The “customers” measurement must happen with clients to reach your goals. For example, you may measure the total number of customers, new customers or customer retention. Key initiatives are areas that could take the wind out of your sails and could set you adrift. Examples include transitioning from outdated to updated technology or taking steps to streamline a key process. Ask, what activities must shift to improve business results today?
Setting measurements in these five areas provide a broad-spectrum view of your business and tell you quickly whether or not you are headed in the right direction. Trending this data tells you what course you are on as well as a sense of your future direction.
The next tier of the Cascading Metrics™ tool, Departmental tracking, begins to tap into the steam that is driving your ship.
Departmental tracking is measured weekly and focuses on activities within a department that drive the results you seek. For each department, ask, what activities are the responsibility of this department in achieving the targets we set? Examples include number of packages shipped, revenue per hour, customer complaints, scrap, and so on. Weekly measurements of department “wind speed” lets you know where you may need to trim sails or perhaps add a motor!
Finally, the last tier of the Cascading Metrics™ tool looks to the individual employee. Ask, what does each person do that contributes to the departmental targets? Generally you will find four to seven activities for each employee. Now each person in your company understands what the company goals are and how they contribute to achieving the overall company goals and targets. They are clear on what is expected of them and are less likely to find themselves busy and adrift on urgent but not important activities.
Setting goals, measuring results, and measuring activities will provide you with your port-of-call, your compass, and your crew assignments. You will stay on track and get to where you intend to go.
To receive your free copy of the Cascading Metrics™ tool, contact Grace Mohr at firstname.lastname@example.org. Happy sailing!