DO YOU MEASURE UP?

by Deb Weidenhamer

Last month we looked at the importance of measuring your own performance.  This month we want to take a look at what to do with those measurements.  Business metrics or measures are a great way to see if your current method of approach is effective or needs some adjustment.

A common metric usage is lots per hour which measures the speed of an auctioneer.  However a more effective metric could be sales per hour which allows you to see profitability of an auctioneer.  Good business metrics include number of lots processed by the inventory team per hour, advertising dollar to sales volume to measure for effectiveness of media coverage and payroll dollar to sales volume to measure for personnel effectiveness.

There are many metrics for your business that may make better sense then the ones mentioned.  The idea of a metric is to make your business operation as efficient and profitable as possible.  Using metrics on a monthly basis allows for better planning and more strategic business decisions.  Tracking profitability of a certain type of an auction allows you to make an informed decision about accepting such an auction in the future or actively looking for a very profitable type of auction.

In our company we use twenty-three different metrics to measure our performance, including website, bidder, seller, sales, profit, advertising dollar, payroll, benefits, sales staff, marketing and overhead statistics.  These metrics allow for us to plan for our future and quickly correct negative trends or push our positive trends.

Metrics are quantifiable ways of measuring performance, what it less deliberate are the soft touches of a business.  For example what have you done in the past year to provide learning and growth opportunities for your employees?  What do your buyers and sellers say about you when you aren’t listening?  What is the overall reputation of your company?  Are you a trusted member of your business community?  All of these questions are true measures of the success of your company as well.

W.E. Deming, the great economist once said “You can only control what you can measure.”  Wise words indeed because if you aren’t measuring your business you know not whether you are moving forward or backward.  Often times as business people we are caught up with the idea that profitability is the only measure of success.  If this is true than why did so many profitably fastener companies go out of business when Velcro was introduced?  Not measuring a company by its many variables give you a false idea of the business structure.

So if you aren’t using metrics begin today, possibly only measuring three different areas of your operation.  Metrics will make sure that in this new year, you measure up.