Measuring The Right Things In Your Business?| The Melting Pot Newsletter | Issue #84
ARE YOU MEASURING THE RIGHT THINGS IN YOUR BUSINESS?
Concerned about the future? You’re most certainly not alone. It seems inconceivable that a few short weeks could turn the world upside down, bringing businesses to the brink of financial collapse. Here we are staring into the abyss of a deep and long-lasting recession. It’s likely to have far-reaching consequences for all of us.
Now, more than ever, businesses need to tighten up the way they operate. When times are good and revenue is flowing, you can get away with a looser management style. However, tough times call for laser focus on the things that really matter. I always think of Peter Drucker’s famous quote – ‘What gets measured gets managed’. The only way to bring that laser focus is to identify critical metrics that will help your business survive and, eventually, thrive. And keep measuring them in a regular cadence.
I’m not saying that most businesses don’t measure stuff – they do. But often it isn’t the right stuff. Ever heard the story of the drunken man searching for his keys? He scrabbles around on the ground around a street-light, until a policeman stops to help him. After a few minutes, the policeman asks whether he definitely dropped them there. The drunk replies, ‘No, but the light’s better here’. That’s a great analogy. When I go into businesses for the first time, they’re often measuring loads of things. Things that are easy to measure or they have always measured. They will spout statistics proudly but many of them are meaningless.
This is the time to re-evaluate what you do and re-educate your team. In a recession, some things are worth measuring more than others. Focus on what matters. Business is like a team sport – you need all your players to know what you’re trying to achieve, the rules, the white lines and the score in real-time. Metrics are part of knowing the score. Without them, you’re playing blind.
There are only four critical things that you should be measuring in a recession. Let’s go through them one by one.
SURVIVING A BLACK SWAN WITH JACK STACK
Struggling to see how your business is going to survive the current Black Swan? Then you should listen to Jack Stack, CEO of SRC Holdings Corp, the oldest employee-owned remanufacturer to original equipment manufacturers (OEMs) in North America, and author of the best-selling ‘The Great Game of Business’.
Jack is currently in his 5th Black Swan event. That’s right. His 5th. And each one has been a significant catalyst for further growth for the company. In fact, after each recession, the business has doubled in the next five years.
“When we do our business plans, we say, okay, we know there’s something out there we can’t even figure out, so let’s set money aside for the most catastrophic event you can imagine. So in ‘09, we actually put together a long term plan to raise $100 million in cash for the next Black Swan.”
In today’s conversation, Dom and Jack discuss how open-book management is a way of running your business by making your financial instruments personal, giving people a stake in your business and getting people to own elements of the income statement and the P&L.
They also discuss how other companies might follow in Jack’s footsteps and run their employee bonus programmes based on the weaknesses of financial statements, rather than a profit share or based on revenue goals.
Recommended Podcasts
MAKING SENSE
The new future of work. Sam Harris talks to Matt Mullenweg, founder and CEO of Automattic, the makers of WordPress which runs 35% of websites on the internet. They have 1170 dispersed employees. In this episode they discuss the evolution of distributed work. This includes the benefits of working from home, the new norms of knowledge work, relevant tools and security concerns, the challenges for managers, the importance of written communication, the necessity of innovating in response to the Covid-19 pandemic, delivery networks as critical infrastructure, economic recovery, and other topics.
Recommended Articles
HOW TO PROJECT CASH FLOW TO FORECAST THE IMPACT OF COVID-19
As uncertainty swirls around how long the COVID-19 crisis is going to last, many businesses are temporarily shuttered. The definition of “temporarily” is yet another unknown. Without knowing how long the crisis will continue, it’s critical to get a handle on your company’s funding needs. We spoke with Greg Crabtree, chair of EO@Wharton Executive Education program, to gain insights on how to plan during these uncertain times.
NEWLY REMOTE WORKERS NEED PEER COACHING
With the COVID-19 pandemic shuttering offices across the U.S. and around the world, millions of people are suddenly working from home. And for many, that’s a new experience. Until recently, few U.S. workers spent entire days working from home. While there are tremendous benefits to remote work, there are also challenges — particularly for those who count on the routine and social atmosphere of an office or work site. As Susan Ashford, professor of management and organizations at the University of Michigan’s Ross School of Business, and her coauthors stated in their literature review of nonstandard work, many scholars and researchers “have documented the feelings of isolation experienced by teleworkers” and have found that the experience can lead to “significantly more negative emotions such as loneliness, irritability, worry, and guilt.”
SPARK AND SUSTAIN GROWTH BY FOCUSING ON COMPANY CULTURE
As companies all over the world reel from the effects of the novel coronavirus, a multitude of challenges, including slower growth, seem inevitable. Although taking care of employees and customers is paramount, prudent leaders must also pull themselves out of crisis mode and think about the future. Focusing on culture should be a priority, because a company’s culture can either support or potentially derail its progress. By identifying the critical behaviours that must be embedded in your organisation to bring that growth-enhancing culture to life, you can help your company weather these turbulent times and come out of them even stronger than before.
Recommended Reads
SCALING YOUR TECH BUSINESS BY DOMINIC MONKHOUSE
Calling all CEOs, Founders and Managing Partners! Learn valuable scale-up strategies in a brand new book by the UK’s top tech industry business coach, Dominic Monkhouse. Dom has a track record of scaling-up award-winning technology businesses, including two UK based companies from zero revenue to £30 million within five years. Now he is sharing the secrets behind his success in a new book, FREE to all Melting Pot subscribers. The download will be available very soon. Watch out for your copy!
REBEL IDEAS – THE POWER OF DIVERSE THINKING BY MATTHEW SYED
Matthew Syed’s phenomenal bestseller will change the way you think about success – forever. Rebel Ideas examines the power of ‘cognitive diversity’ – the ability to think differently about the world around us. It explains how to harness our unique perspectives, pool our collective intelligence and tackle the greatest challenges of our age – from climate change to terrorism. It draws on a dazzling range of case studies, including the catastrophic failings of the CIA before 9/11, a fatal communication breakdown on top of Mount Everest and a moving tale of de-radicalisation in America’s Deep South.
MEANINGFUL ACTION FOR MONDAY
Have you found that life in lockdown has resulted in you losing space in your day for your own personal development? It’s vital to try and maintain this third space between work and home life. Having lost your commute, you need to find an alternative time to listen to podcasts, audio books or keep up-to-date with the latest business thinking. And when you finally get back to the office, this important time is going to be even more at peril due to the backlog of issues to solve. So carve out a new routine now and stick to it.