Ep. 133 – If You Can’t Measure It, You Can’t Manage It
Welcome to the Becoming Your Best podcast leadership series wherever you are in the world today. This is Steve Shallenberger and I love the fact that leadership is something that is pivotal and is transformational in our lives regardless of whether it’s applied at an individual level, in our relationships or with our profession and organizations. So this is about everybody. We have listeners from every walk of life and I wish I could be face to face with you today because this an exciting subject that we’re going to talk about.
I’d like to really introduce it through a quote from Peter Drucker who was considered by many the founder of modern management. Here is the quote, “If you can’t measure it, you can’t manage it.” Now let me just say that one more time. “If you can’t measure it, you can’t manage it.” Well that is just so powerful and it’s interesting that this one is vital to our success whatever phase of life that you’re talking about but particularly organizationally.
Now, I have actually seen entire articles written about the counterpoint to this. If you can’t measure it, you can’t manage it. That’s a myth, that’s false. Well, that is the other side which is kind of saying well there are things that you can’t manage that still have a compelling impact for success in our lives. Well, that’s true but I’ve got to tell you today, and the focus I’m going to make on is this particular aspect of what Peter Drucker was talking about is entirely relevant to our success.
And so I’m going to talk about the side that applies to our capacity to make a difference as a leader. I might add, this is exactly why the perspective of all 12 of the principles of highly successful leaders is so important. Each one of the principles is important but alone insufficient. So, for those people that ride on the counterpoint that say, listen there’s more to it than just measuring it, well they’re exactly right. I fully agree with that. There’s a whole other side to this, but there is this side that Peter Drucker was pointing to that is equally essential to our success. And so it’s each of these 12 principles that allows us to bring these things together to maximize the success of any organization.
So let’s be clear about the focus today. It is to understand that one vital aspect of business. Yes, it’s likely that it would mean that the difference of success or failure for the individual organization or enterprise and that is to understand how you are going to do on a timely basis and what you’re doing and what contributes to your success so that you can exercise leadership and management to produce a healthy, viable entity that is good for all associates with it, including the customers, society, the warehouse men or person, the sales rep, the admin team, the technicians, students, coaches, teacher, etc.
So it’s the whole package. This just happens to be one very vital part that we’re going to focus on today. It just so happens that measuring your KPIs, that is your key performance indicators, is vital, as is managing your resources to accomplish and surpass your KPIs as if the intangibles of relationships and bringing the best out of every employee and associate within an organization is also vital. So we’re going to talk about this one aspect realizing that we are a whole house here, but if we don’t get this one down, we are really at great risk. And so one of the biggest dangers of modern business is being and thinking in silos. In other words, we are in this together organically more so than we are in this individually with our individual responsibilities. So it’s how we blend our efforts with others that creates a magic of excellence.
So as we today focus on principle three, manage with a plan, one of the 12 principles, this means that we are going to do it with a perspective, a vision. We’ve had that, that’s clear in sight. In other words, what direction are we moving forward to with purpose? And that you have already formulated, clearly written articulate goals of where we are headed to achieve the vision and our strategic direction. After you have really crafted, and that’s really principle number two, lead with a vision, we move to principle three, manage with a plan which starts with clearly written, SMART, inspirational and motivational goals through the lens of your roles which is another key part of this manage with a plan. Once we have that done, now we are on our way to success. We have a clear direction that’s inspiring, we have specific goals that we’re working on that are what matter most for our organization and us individually.
Well then our next part, along with manage with a plan, is the process to measure your performance in a timely manner so that you can manage to realize the goals. In fact, achievement means that you are always adapting as needed to accomplish your goals. Just think of the sports world for example. They definitely know their statistics and they use these statistics or KPIs to improve. Think about baseball. In other words, number of innings, what the score is, the number of runs, bases hit, home runs, the ERA, the batting averages.
I love the movie Money Ball. It’s all about what are those key performance indicators that create the success. They’ve tried to apply that in recruiting, fascinating. Or think about soccer, you have a first half, you have a second half, there’s 90 minutes, there’s goals, there’s goals saved and so forth. Basketball, four quarters, how much time is left on the clock, what’s the score, shots blocked, turnovers, three point shots, shooting percentage from inside the line, outside the line and your win/loss record.
Well, from these statistics, we can pretty much get a feel for how an organization is doing. This is exactly the same way for you and your organization. Of course, we keep in mind the famous quote from Albert Einstein, “Not everything that can be counted counts and not everything that counts can be counted.” But we do want to keep in mind that the heart matters and that people can change and adapt and grow and that the human element, relationships are an extremely powerful factor of success. Having said this, nonetheless, statistics and KPIs are a key component to your success and to not know what they are, puts you and your organization at great risk and peril.
So how can you set up a system to measure around your KPIs, your key performance indicators? So I’m going to give you today four steps that you can do that helps place you, your team and your organization in the right place, right down the center line of knowing what your KPIs are. So I invite you to write these down if you’re in a position to do so. If you’re driving, it’s going to be a little hard but see if you can memorize these four.
Let me just give them to you and then I’ll go just a little but more in-depth. So number one if first you have to know what the KPIs are. Number two, to create a system to capture and measure the desired performance or goal. Number three, is maintain the dashboard so that all of the key stakeholders can see the right score at the right frequency. Number four, once you know the score, then you can lead and manage to stay on track or exceed what your goals are. So let’s go back now. Those are the four right there.
So let’s start with this first one. First, you really have to know what those few vital KPIs are. What are the few vital factors that determine the sustainability of your organization or business? In other words, that can really propel that success forward. So here are some examples of figures that you might want to have in mind. Virtually all the research that I’ve studied on this is, you really want to identify on those few things that can make a difference. What are those four to five things and really limit them so you can be highly focused on leveraging those and managing around those things, knowing whether you’re on track or not.
Here are a few examples of what maybe some of those maybe four or five things might be. Certainly revenues or sales. By the way, this applies if you’re managing a sales department, you need to know what the sales are, how many calls it takes to produce a sale or how many presentation, what the closing percentage is. If it is a phone service, same thing. How many calls do we need to make a sale? So those are the type of KPIs? How many jobs a technician can do in a day if you’re a service company? Or how about volume sold or installed? The number of widgets. Hamburgers, haircuts, car washes etc. What’s the inventory or supply rate that you have? What’s the churn rate of customers? That’s another one. For some organizations it’s hard to acquire customers so how many customers are you hanging onto? How about the turnover employees? Is that one that’s vital for you? And so forth.
This is assignment number one if you don’t have it already. By the way, this is in line with understanding what your three to four to five key strategic pillars are for your business, for your organization. Once you understand these key pillars, then we want to know, what are the KPIs that allows us to know how we’re doing? What’s our success in implementing our strategy? So once again, this is your first assignment. Say these are the four to five for me that really determine the sustainability and success of our organization. That’s number one.
Number two is to create a system to capture or measure the desired performance for these KPIs. So depending on the size and complexity of your organization, you can either create a system yourself or seek out a software that helps you keep track of the KPIs and there’s some really outstanding software systems that this is their whole design. It really help you crystalize those. So that’s number two.
Number three is then be sure that you maintain a dashboard so that all key stakeholders see the score at the right frequency. We’re going to talk about that one just a bit more. I’ll give a couple of examples of these but who are the people that can make a difference and do they have the information? That is crucial. Number four is now that we have the information, we know what the KPIs are, we’ve set up a system so that we get them on a timely basis, it’s in front of the people that can make a difference and now we apply leadership and management to make the pivots to stay on track and adapt as needed so that we can either meet or exceed our goals and what we have in front of us.
Sometimes where this discipline is most important is in a small organization or a startup type scenario. As a matter of fact, one of our mantras is, nail it then scale it. In other words, it’s not until you understand what it costs to produce a sale, every piece that goes into it or you understand it to the degree that you can replicate the outcome over and over with predictability or what makes your organization get the result it does that you are able to safely scale your business or model and what works for sustainability. In other words, you’re able to manage that over and over and over again and then keep improving on it.
So here are a couple of examples of knowing and putting a good KPI system into place to help you lead and manage to bring a highly successful result. One example is in the fast food restaurant industry. I saw in some of the research that we’ve done, you actually have things that they would want to know is what’s your place, how are you doing on a competitive basis compared to other fast food restaurants within your local area, in the area that you operate on and globally? So you can have this in average units produced by store, sales by store but also brand awareness. So these are different markers that helps you make the right decision.
Now if you think about a fast food restaurant, you really need to know, particularly in today’s world, technology is a competitive advantage. So at a fast food restaurant if you’re opening for breakfast, you’re going to want to know what your units are literally by the minute, by the half hour, by the hour and then when the crowds start changing and start coming in for lunch, what’s the product mix, what’s the revenue per hour? So you really understand your business and then that is what allows you to lead and manage not only for self-improvement within that store on becoming your best as a store, but also in a competitive nature as you’re trying to be the best in the marketplace.
Some of the things that have changed for us in our world today is this huge part of technology. So we want to use this to our advantage and really data mine this by just thinking about it a bit more. Once you have the data that is really when the fun starts. Again, that’s what requires both the leadership and management to get us to a better place. About three or four weeks ago…I’ll use a personal story. I’m fortunate to work with a great company, Synergy Companies, and Dave Clark is one of the best leaders and managers that I’ve met. We met with one of our divisions for Southern California. We met at the Mission Inn in Riverside, California in the Inland Empire.
We had the key leaders for our management team and Dave is the one that really led off. We have an issue where we have secured contracts for the year. It’s a great book of business but we’re running a little bit behind on the implementation. Dave led off and we had each of our income streams. Here is what we’ve done so far and here is what the division needs to do by technician, by sales rep, by product mix to fulfil our contracts with the various entities, customers and clients that we work with who are extraordinary individuals and entities. Many of those are public entities. So it was a masterpiece of what Dave did.
We noticed we were lagging in a couple of big areas and Dave pointed out, now if you do this and you do this, then we, literally by adjusting this product mix, can get into a whole another stream and it puts us right on track within like 30 days we get on the track that we need to be. Well, it was really fun because now there is the mark. The KPI is set up. We understood it by the sales rep what they needed to do each day, the technician what they needed to install. And so we needed to add one or two technicians here, one or two sales rep here and this established the KPI.
We have a system, fortunately, because we’ve been doing this for a while to collect the data daily so we know exactly by each sales rep, by each technician, and there’s a lot of them out there, and product mix, what they’re actually installing, how they’re doing. One of the division managers is fond of saying, “Let the fingers do the thinking.” So by taking a little time and actually going down this list each day of how they did, it allows them now to manage and lead through the KPIs. This is a very good example of it. They know what the key performance indicators are and you could manage daily.
So for example you have some technicians that are in the upper 15 to 20%. Oh my goodness, they are just really killing it. Well then you can examine what their implementation rate is of product mix and help teach the others. By bringing the whole team together, all of the key managers, everybody then can lift the result not only individually but as the organization.
The next thing that Jeff did, this is one of the division managers, is two weeks later he took this plan that Dave helped set up, it’s a team effort, and actually gave a report and said, “Here’s where we are half the month through.” Now with all of that information, the leadership could take pivots and let this run through the whole organization. So this is a good example of doing these four things that we just talked about, knowing what those few, vital KPIs are, creating or having a system to capture or measure the desired performance or goal.
By the way, we have a lot of very well established organizations that will be listening to this podcast and you’ll want to go back and just be sure we’re capturing the right things because things are always changing out there for a lot of reasons and then be sure that the dashboard is getting out to all the key stakeholders so that we can make adjustments and exercise our leadership and management to adapt to be sure that we’re hitting the mark.
Well how about a personal application? Well a simple one is that many of us have a fitness goal or even a weight goal. Let’s just take an example. So how can we know what the KPI is? Well, you set your desired weight. Let’s say its 175 pounds, that’s it. Well, what’s the system to check it on an individual basis? One of my friends, David Price, has a little checklist. Every single day he just kind of tracks this, that’s the system. So what you can do is weigh in in the morning, at night and that then produces a baseline. That’s the example of the KPI reporting. That’s actually fairly simple.
Now you’ve set up the dashboard and you go to step four and be sure that you’re exercising leadership and management so that you can hit your desired weight and there’s all kinds of things that come up, there’s parties, there’s vacation, but you’ve got to figure it out, right? This is the system that helps you do it. That together with pre-week planning really reinforces making the right decisions.
So follow these steps and they will help you progressively become the best at what you do and who you are. If you don’t have this process in place, I invite each one of you to put it into place. Write down the four steps, be sure they’re clear and come heck or high water, if they’re not in place, be determined by such and such a date, you will have them in place. If you have them in place, then be sure all the key stakeholders have access to the dashboard so that you can individually and collectively lead and manage to the best results.
So one last review of these four steps. To manage with a plan by tracking KPIs, Here you go. Let’s see if you’ve got them with me. Number one is, know what the KPIs are. What are those few, vital factors that determine the sustainable success of your organization or business? Number two, let’ see if you got it. Create a system to capture or measure the desired performance or goal. In other words, you’re setting up the dashboard. Number three is, maintain the dashboard so that all stakeholders have access to the information so they can make a difference. That leads us to number four which is, once you know the score, you can lead and manage to stay on track or exceed your goals.
Now, what can you do to push this forward in becoming your best, of continuing to improve? Well, one of the action steps that you can take is to invest in becoming your best in your life and your organization. You can do this by investing in a Becoming Your Best book for yourself and your key associates and go through one principle a week, teaching each other. It is amazing when this process happens. There is an absolute chemistry that comes alive that is a game changer as you engage together.
I’d like to share a story about eight brothers that are absolutely amazing. They were introduced to me by David Price, a dear friend and a division manager in one of our companies. He told me about the Danes brothers. Eight brothers, all highly accomplished. They’re doctors, lawyers and professionals. I mean, this is an awesome family. What they have decided to do is they spend, as I understand it, one hour together a month via phone and they decided to study together. To pick out a book and then to discuss it. Well, they chose Becoming Your Best: The 12 Principles of Highly Successful Leaders and decided to work on one principle a month.
Oh my goodness, what a wave that this created within their own lives and their family and professionally and what a light they are to so many other people. They really represent this spirit of becoming your best. It’s just working on this. So way to go to the Danes family. This practice is transformational in and of itself. One of the by-products is that it leads to improvement on every side including the different facets of your organization and your personal life.
Dave Price just shared with me that now the Danes brothers have invested in our next book, TheTransformation Challenge to do their study on. What a fun and inspirational family. I’d like to know them better. I appreciate their example, but they are in for a treat because that’s a way of thinking, the six steps to problem solving and planning and execution of how do you consistently take your good and make it better and your better and make it best.
Well, there’s something that you can do right now. It’s an action item. If you don’t have it already, go invest in Becoming Your Best. Get the book for yourself but also for teammates or family and study it together one principle at a time. Could be one principle a week, one principle a month like the Danes brothers. Well, it has been a delight to visit today about principle number three, manage with a plan. I admire you so much. You wouldn’t be listening to this podcast unless you too are also trying to become your best. So I compliment you. We wish each one of you all of the best as you’re making a difference in the world every single day. It’s a privilege to be able to be together today, this is your host Steve Shallenberger, wishing you all the best.