Even though I had done it six or seven times over the years, there was no certainty that I could do it again. Seven years had passed since the last time, and it doesn’t get easier as you get older. It wasn’t that the burden was getting too much to bear – I’d been carrying most of it for at least a couple of years – simply that I was getting squeezed all around. My clothes really didn’t fit: proof that you can’t get eleven pounds of flour in a ten-pound sack. I needed to lose weight.
So, in mid-April, I dusted off my 35-year-old calorie counter, found the old pad of graph paper, set up the X and Y axes of the bar graph, and posted it on the back of the bathroom door. I was committed – to counting each day the total calories in (eaten) and out (exercised off) and to graphing the net result.
The formula had always worked – limiting the net input to 1,000 calories a day results in my weight loss of two pounds a week. Eat what you want; just monitor the numbers. My daily workout is heavy on aerobics – jumping rope, and watching the calorie count click up on the exercise bike or the treadmill – and is usually good for a 400-500 calorie burn. On my “off” days, I always try to find time for 45 minutes of power walking around the neighborhood, earning me a 300-calorie credit.
For the flip side, the numbers are available everywhere, and everything is a trade-off: a sugar cookie for 70 vs. a small bag of pretzels for 100; a can of V-8 for 70 vs. Pepsi for 150; a Lean Cuisine dinner for 320 vs. a steak and a baked potato for at least twice that, even without the sour cream. (Okay, Lean Cuisine is getting pretty basic – you gotta be eating alone to do that – but it’s enough to fill the void.)
So what’s the bottom line here? Nineteen pounds gone, from 183 to 164, between mid-April and mid-June. A wardrobe of clothes that I hadn’t worn for several years, rediscovered (the standard blue blazer is never out of style). Recognition from the kids that it was time for someone else to look pregnant, since I had lost my big belly. (Daughter Katie promptly complied and is due to deliver her second child in February.)
Cause and effect: it was totally driven by the numbers.
Imagine being able to achieve that in your business. Imagine having control of all of the key variables and knowing that if you can meet your goals in each area, you will produce your targeted bottom line.
My newest client company, which sells a range of home exterior renovation products and services directly to end users, has tracked its own performance for more than five years. A marketing-driven company, their detail includes the number of leads generated from each marketing source, the cost per lead, the lead-to-sale conversion rate (by product, by geography, by sales rep, by lead source), and the actual margin vs. standard margin. They know, for example, that their best salespeople produce twice as much revenue per lead as does the rest of the team.
In the operations area, they have a firm handle on the average number of elapsed days between lead generation and follow-up, between order and shipment dates, between shipment and installation. They have an accurate record of order cancellations at every step of the process. Their data indicate clearly that their most efficient installers are consistently 50% faster than their least efficient.
This company also subscribes to trade association information that allows them to compare themselves to their peers in the industry, in terms of staffing levels, marketing efficiency, marketing data, and profitability. They’re doing well, but they’re not at the top. Others bring more to the bottom line.
My new client is metrics-oriented, but not metrics-driven.
To be metrics-driven is to be part of a culture in which everyone from the president to the shipping clerk knows not only the results that they’re expected to produce each period, but how those results factor into the company’s goals. In short, they understand the economic model, and they understand how they contribute to the team.
But establishing appropriate measurements and educating employees about them is only part of the battle. The greater challenge comes in holding people accountable. Most often the dilemma comes because managers get so wrapped up in solving immediate problems and fighting fires that they tend to lose track of the larger picture.
Breaking the cycle of mediocre performance despite good intentions usually benefits from an uninvolved perspective. Occasionally it’s the president who asks the tough questions – Why? Or why not? More often than not, however, it’s the CFO, the keeper of the metrics, who is able to home in on the critical issues:
- “Why are revenues from Product A continuing to fall short, while B, C, and D are all meeting expectations or better?”
- “On-time delivery for Customers 1, 2, and 3 is significantly higher than for all of the others. What happened to the goal of 95% or better for everyone?”
- “Revenue per production hour was down by 10% last month. What happened?”
- “Three proposals went out last week – the target was six. Why?”
Like my diet and exercise program, fine-tuning the corporate body requires discipline, familiarity with the key inputs and outputs, constant feedback, and full commitment to the goal. Running the numbers as part of your regular routine will lead to positive trends in your financial statements – you may even feel compelled to post them in a bar graph on the bathroom door!
Alligator Bites
“In the days of Jack Welch’s leadership, General Electric was well-known for their ’20-70-10′ human resources practice in which annual employee evaluations earned the top 20% of performers a path to management and the bottom 10% a pink slip or re-assignment. Does the theory apply to professional sales teams, that the involuntary separation of some portion of your team on a regular basis is a healthy exercise?
“Aberdeen asked survey respondents to define the ideal turnover rate, and the resulting 9.5% average was eerily close to the GE paradigm. Yet the actual sales turnover averaged 20.6% across the board, more than twice the supposedly perfect level. Consider the actual costs of this differential based on the SPM [Sales Performance Management] research results [copy available here , free through 10/31/10]:
- 38% of new sales reps achieve their adjusted first-year quota, vs. 45% of sales reps overall
- The average estimated cost of replacing a sales rep was $30,420
- The average time-to-hire (1.78 months) plus time-to-productivity (3.6 months) means almost a half-year of effort to replace a producing sales rep
“The first of these points speaks to the potential productivity losses suffered by companies with double the ideal turnover rates: if new reps are 18% less effective, and a company employs twice as many of them as they should, how can they mitigate the damage? [Figure 9, page 21 of the Report] combines process, performance data and technology adoption to indicate how Best-in-Class companies are attempting to minimize these efficiency losses.”
Source: Aberdeen Group , October, 2010
Draining the Swamp
“He isn’t a doctor or a senator, but Steve Burd [CEO of Safeway] played a crucial role in the recent health-care debate. The ordinarily low-profile exec, 60, appeared repeatedly on Capitol Hill to describe the health and financial benefits of the grocery chain’s unconventional wellness program, which includes lower insurance premiums for nonunion employees who maintain healthy blood-pressure and cholesterol levels and don’t smoke. Burd insists that the company’s health-care costs rose just 2% from 2005 to 2009 compared to a nearly 40% increase for most companies. ‘The Safeway amendment’ – a provision that increases the incentives companies can pay healthy employees – is now law. Fresh off the victory, Burd launched Safeway Health, a subsidiary that designs similar wellness plans for other companies.”
Source: FastCompany.com, June 2010