By Bill Fotsch
If you have read the three previous posts, you know the importance of a clearly understood, common goal. You have done the homework, involved your employees, managers, financials and customers in determining the right definition of winning for your business right now. So what’s next?
The answer is this: it’s time to drive results, engaging everyone in the organization. A great starting point is to develop a scoreboard and an incentive plan.
The scoreboard should make it clear how the company is doing overall. It should also highlight the key drivers of success that employees can influence. Let’s discuss some examples.
- At AAMCOM, a telecom service company, the winning performance metric is revenue per paid hour. AAMCOM employees forecast revenue and paid hours for the next 2-3 months, so they can see what is coming down the pike. They update their forecast every week for everyone to see, and people learn client by client when revenue is moving up or moving down. Each week they discuss efficiency improvements, new sources of clients, increases in repeat revenue, and so on. Everyone learns each week.
- At Gourmet Events Hawaii, the winning performance metric is gross profit. Employees there realize that they win or lose with each event. So they track every event to see how they are doing and how it contributes to the whole. They look at the profit margins of different events and focus their sales efforts accordingly. And since they just got started, they ask every employee what he or she individually can do to improve gross margin and thus the likelihood of better performance.
- At One Week Bath, a remodeler based in Los Angeles, the winning performance metric is net profit. In this case the scoreboard is more complex. These employees have to track and forecast each job; they also must track backlog and operating expense. They make it manageable by breaking down the responsibilities. The scoreboard lets everyone see how they contribute to the whole. (This company’s progress is particularly satisfying for me, since One Week Bath is one of the few coaching clients I have invested in.)
Once you have defined winning and have created a scoreboard that tracks and forecasts the key numbers, it’s important to share whatever incremental wealth you and your employees generate. I am a big fan of team-based annual incentive plans, plans that get reassessed as part of the yearly planning process. This sets up a natural quarterly progress review, focusing on what is working, what isn’t and what needs to be focused on. If sales are below plan, for example, what are the key reasons? What should we do about that? If margins are higher than expected, why is that—and how can we capitalize on the trend?
Be sure to celebrate wins along the way. Share the losses and discuss what can be learned from them. And if you come across a really powerful insight, please share it with us. That’s how we continue to grow in our understanding, refine our methodology, and win our own game.