Strategic Planning Tip: How do you measure success?

If you are like most business leaders, you are focused on the dollars and cents. More and more CEO’s get paid based on how well the company performs against expectations–whether it is stock price, revenue growth or valuation. While that may be a viable way to reward and compensate, it does nothing to increase the odds of strong performance. At least not in the short term.

Look at it this way. By the time a dollar figure is recorded as a sale, the sale is over. You can’t make the sale bigger. You can probably sell them something else but that opportunity is closed. Wouldn’t it be more helpful to track variables that will help ensure the sale is as big as possible and the organization sells to as many as possible? Then you could impact the outcome.

I call the metrics that help you track results diagnostic measures or dashboards. Just like driving a car, you can assess how you are doing, what is working and what is not, and what it will take to get to the destination you seek. They can further be put into three categories.

Outcome measures are the end results you are looking for. Why not gauge how far you are getting along the way like tracking how many miles you have left on your GPS? These usually include revenue and profit. For a non-profit it may be number served.

Internal measures are those things you completely control as an organization–skills you need, new product sales as a % of total, training, succession plans, productivity improvements to name only a few.

External measures require a response, most often from your customers, to achieve a result. It might be customer satisfaction, referrals, average order size, new customer sales, or related measures.

If you are looking for a 10% increase in sales and you are relying on offering a new product to get it, what would you want to track to make sure at the end of the year you will get the results you are looking for?

If you are hoping to see a modest increase based primarily on price increases with flat volume, what do you need to track to ensure you are on target?

Having diagnostic measures lets you adjust throughout the course of the year, changing marketing, sales allocations, inventory levels and budgets. Even if you fail to meet your numbers, you will have minimized the damage along the way, and have identified the error in your assumption. Don’t get caught with a hockey stick forecast again. Establish your dashboard to increase your odds of getting where you want to go.


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