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Important ways to guide your business and improve performance
If you are an owner of a small business, do you know how to make your company more successful? One way is through a consistent application of performance measures. Performance measures are a technical term for a very basic question. What key procedures or operations needs to be performed well to make my business successful and what needs to be measured regularly to ensure that these operations are being done?
Corporations such as Wal-Mart are a good example. Wal-Mart determined that to be competitive they had to streamline their purchasing, keep their cost low and still give Number One Customer Service. Wal-Mart used technology through satellite transmission to purchase directly from suppliers which reduced purchasing costs and allowed them to maintain only just enough inventories to serve their customers. They also instituted Customer Service personnel to greet their customers when they walked into their store. For Wal-Mart it worked. Their key processes were purchasing and customer service.
What processes do you have that are critical to your success? Do you know what areas of your company are at highest risk if these areas are not successful? The New Year is always a great time to start new practices and improvements. This New Year, why not take a break from your business to assess where your business could be improved. Business improvement starts with an assessment of where your business is right now. Often, the business owner may be too close to the business to be objective and accurate to see both its’ strengths and its weaknesses. Employees and customers are often a good source to give you an independent assessment of your company.
Once you have an accurate measure of the success of your company, if you do not already have a clear vision of the direction of your company—you will need one. What does your company do and how? Do you want a company that will give you a good living until retirement or do you want a company that can be passed on to your children? How will it operate, what will make it different from others? Most business managers have an understanding of the direction of the company but many never take the time to write that understanding down. The act of documenting the vision of the company accomplishes many things. It clarifies exactly what the business is and it communicates this vision to employees and customers alike. Good company visions can be explained in a sentence and can be communicated to all concerned.
These two steps are an essential prerequisite to establishment of what processes of your operations should be monitored. Knowing the gaps between your company as it is right now and your Vision will help you determine what actions must be done to close the gaps. Focus on the key process areas. It may be sales or improvements in production. Only then can you establish what you need to monitor to close the gaps. Some examples of performance measures are daily sales need to break even, number of units that need to produced to achieve profit goals, or number of new sales per day. It could be the number of satisfied customers or the satisfaction level of the employees working at the job. For 3M Corporation one of their key performance measures is the number of new products introduced each year. All successful companies use performance measurers to keep their company moving in the right direction. Do you know what key areas you need to measure your company’s success?
For more information on how to establish your company’s performance measures contact Joyce Smith, C.G.A. and C.F.P.
Joyce Smith is president of JA Smith & Associates Inc. Certified General Accountants and Certified Financial Planners. The firm offers financial and tax planning advice for both individuals and business.
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