There is an old saying in business: “What gets measured gets done.” It is easy for us to focus on traditional key indicators in our business—such as revenues, gross profit, or operating budgets. But how do we measure those not in management positions? The following are some ideas for getting everyone involved in improving the business by measuring staff by numbers they can impact at their level.
For outside salespeople, consider number of quotes, average calls per day, orders per sales call, number of quotes that become orders, number of new accounts, sales credits as a percentage of total sales, and travel expenses as a percentage of sales.
For inside salespeople, consider sales volume, number of total transactions, average lines per ticket, number of one-line tickets, special order sales, margin on special order sales, gross margin on total sales, number of errors, and sales credits as a percentage of total sales.
For buyers, consider gross profit margin on lines purchased, number of new product lines, success level (dollar sales) of new lines purchased, frequency of out of stocks, inventory turnover, and extended terms from suppliers.
For the credit manager, consider average collection days, bad debt as a percentage of sales, turnaround time on credit applications, dollar sales per aging period, percentage of bad checks collected, percentage of customers who discount, dollars collected by the tenth of the month, past due dollars collected less dollars that just became past due, timely filing of liens, and adherence to “cut-off” policy.
For those of you who deliver, consider delivered sales per truck or delivery, equipment maintenance expense vs. budget, employee attendance and turnover, inventory shrinkage, number of total deliveries, average number of stops per day (week or month), accuracy level of loads pulled and loads delivered, and safety record.
If you want to know if what is being measured is fair, easy to collect and tabulate, or is actually going to improve performance, then include those being measured in the design and implementation of the measurement tool. They know what will work for them and what won’t. The key is to keep it simple, link it to performance and compensation, and make sure that what is being measured can actually be improved by the person being measured. It is difficult to measure a sales person by gross profit when he or she has no control over the purchase or selling price. But salespeople can be measured by add-on sales or number of sales calls.
Regardless how many of these approaches you choose, measurements are important, especially in a turbulent economy. If you’re worried about unfinished business, or about missed opportunities, remember that “what gets measured gets done.”
Jim Kress teaches business classes at COCC while also working with local businesses improve their productivity and profitability. He can be reached at 383-7712.