Dan Schneider

Business Performance: What Should I Be Checking?
February 14, 2008

Business Performance, one of ten interdependent factors associated with succession success, usually measures what took place within a given time frame. Often, these measures are compared to industry benchmarks used to give the owner some assurance that they are performing below, as well, or ahead of the competition within their specific industry. Sometimes, in addition to industry standards, owners also use month over month or year over year comparisons as barometers of their current level of success. However, these measures  don’t really tell you how much value is being built into the business.   

Unfortunately many good businesses struggle with reaching their potential because ownership and management don’t know what to measure. As a consequence, they get caught up in being better than the competition rather than continuously moving toward goals that stretch them beyond their comfort zone. They don’t aim too high and miss. They aim too low and hit.

Here’s an example: One of our clients determines the success of their customer service department as being ten percentage points above the industry average. So, if the industry average falls, they can allow their own scores to fall as well. And, as long as they stay 10 points above the average, they can claim success. In effect, they can find themselves having the best of the worst. That doesn’t seem like much of a commitment to anything beyond mediocrity. Mediocrity doesn’t build value.

To build value that insures multi-generational transfers of your business, base your definition of successful business performance on a growing and stretching set of expectations that have roots in owner motivation and perspective, strategic business plans, and other interdependent succession success factors. Measure your progress in building value by taking a close look at business barometers such as:

Once you’ve used the planning process to set your own goals for each of these business value barometers, build your compensation and reward systems around how well those goals are met and/or exceeded by the management team. You build value by letting people know what’s important and recognizing them for getting results in areas focused on succession success.

Posted by Dan Schneider on February 14, 2008 | Comments (0)