Measure the right things

There’s an old cliche in management speak “What’s measured is managed” but like most cliche’s there a grain (or more) of truth within.

I’ve seen businesses at every extreme, from those that measure and try to control absolutely the finest details, to those that barely measure anything.

One client ran a substantial manufacturing business with a weekly management report consisting of two lines on a graph, sales and cost of sales. If the lines started to converge, he needed to take action, if the gap was widening and the lines trending up the business was doing well.

Another business that I worked in had a monthly management report pack of over 50 pages. Nobody (other than the finance team who slaved to put it all together) read all the pages.

In the first case, the methodology was simplistic, but focused on the overall success of the business, and it worked. In the second case, the various departmental managers wanted their own key metrics so they could brag about how well they were doing. No one was focused on driving the overall business success, just their own little piece of the pie.

A current client tells me he is very proud of the fact that his revenue per head and his gross margins are best in class. That has not helped with his most recent year, where a few big projects were delayed and the business lost a lot of money.

He’s not measuring all the right things – are you?

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