Performance Management

Track the past and predict the future

Bob Fetterman How do you know if your business is successful? Most businesses look at typical performance indicators, such as profits and sales figures. But looking at those figures, which analyze the past, is like captaining a ship by looking only in the rearview mirror, says Robert Fetterman, President and CEO of iDashes, Inc., Pittsford, N.Y., which provides Web-based, performance-measurement software.

Good performance management tracks both lagging indicators and leading indicators - non-financial metrics such as new products, service levels, customer satisfaction and new orders, Fetterman says. Once you start tracking those numbers, you can make better decisions to improve your performance. If your processes are well defined, you're more likely to stay on track toward your goals.

1. Clarify your strategy. Small businesses tend not to worry about strategy and long-term planning, but every business needs a plan. "It's the old saying: If you don't know where you're going, any road will get there," says Fetterman.

Write a strategy that separates you from the competition. The plan must be specific to your organization and customer focused. Why are you unique in your market? Why do people choose your company over your competitors'?

For example, one of Fetterman's clients, a local specialty furniture company, has research that shows that customers shop there because the staff knows a lot about furniture. People aren't buying sofas from them; they're buying knowledge and service. Because those are the real measures of that company's success, the store should focus on hiring and training people who know a lot about furniture.

2. Plan key indicators. Zero in on a few important indicators. What needs to be accomplished to keep you on track with your strategy? Then quantify those indicators. "If you're not measuring it, you're probably not focusing on it," Fetterman says. Don't assume anything. You may say your shop has the best service or the best products, but how do you know?

3. Track your progress. The right information should be available at the right time to the right people.

This is the most challenging step for many organizations. All the information in your company is in different formats and different departments. Your human resources information is probably kept differently than your accounts receivable. It's up to you to keep this data organized so you can focus on managing the business and not just chasing numbers.

You can track this information with software, spreadsheets or just pencil and paper. But you have to make sure it's organized so you can get it to the right departments when it's needed. If you don't know whether or not you're on track in every aspect of your company, how will you fix any problems?

4. Align staff, solve problems. Getting performance-management techniques to work requires staff accountability. Make sure your incentives are aligned with the key performance indicators. At Enron, for example, the only incentive was the stock price. Everything focused on getting the stock price up, even if it wasn't good business sense, Fetterman says. How can you get your employees to perform while staying true to your strategy?

Have a process in place that gets to the root causes of problems. Ask why something failed, instead of punishing people for not getting it right.

Also have a process for taking corrective action. Once you find out why something went wrong, you should be able to prevent it from happening again. In the end, Fetterman says, performance management is not easy to do and can create tension. Top management must be supportive, and your measurements must be reliable.

Writer: Amy Carlton

TEC Online Resources: "Success Checks: Are You Tracking the Right Performance Measures?" www.teconline.com