“A useful metric is both accurate (in that it measures what it says it measures) and aligned with your goals. Making your numbers go up…is pointless if the numbers aren’t related to why you went to work this morning”
– Seth Godin, author
Metrics, numbers, measurements – we all talk about them. Especially as accountants. We prepare financials with some benchmark data for clients. We do some variance analysis when numbers are compared. We compare historical information to show how our firm is growing. But, do we take the time, look at our own business…to learn the actual drivers and determine how we can access information to measure and monitor those? As Jim Peters says “you can only improve what you measure”
A key part of EOS (Entrepreneurial Operating System) is developing a scorecard of the key 5-15 metrics that you will run your business on. EOS defines a scorecard as “forward looking, activity based numbers, with weekly goals, which lead to desired outcomes”. Let’s break that down:
Forward Looking – as accountants we are used to looking in the rear-view mirror, as we prepare financials, file taxes, do variance reporting, etc. These are all necessary for consumers of that information (banks, investors, consultants) to understand what is going on at the company. But as the operators, we need to peak into the future because things will not remain as they are. For example, Sales numbers show you how you did. Activity measures show what the pipeline might look like in six months.
Activity-based – To achieve a desired outcome, someone on your team must take action. This action in concert with other actions define a process that ultimately will lead to success. So, less focus on outcomes (budget vs actual) and more on what it takes to achieve those outcomes.
Desired Outcomes – Initially, much thought must be given to the desired outcome focusing on the behaviors you want to incent. Again, these become the activities that you measure.
In Gino Wickman’s blog Seven Truths, he outlines seven truths that will make your scorecard work. I encourage you to read the blog, but in summary, these truths are:
- Truth #1: What gets measured gets done.
- Truth #2: Managing metrics saves time.
- Truth #3: A Scorecard gives you a pulse and the ability to predict.
- Truth #4: You must inspect what you expect.
- Truth #5: You can have accountability in a culture that is high trust and healthy
- Truth #6: A Scorecard requires hard work, discipline, and consistency to manage, but it’s worth it.
- Truth #7: One person must own it.
Interested in a quick recap of our “Seven Steps” blog?
In the next post, I will talk about Step 4 – People. In the meantime, please feel free to reach out to me I can assist you in any way as you build your client transformation practice.