Your business back on track in one year. No rush, no pause.

One of my previous articles was about ways to steer your business well. One of the ways I reflected on was about´Regular Performance Monitoring´.

Before I started guiding and assisting business owners, management teams and department teams in Spain, I thought that Performance Monitoring was a theme that needed little attention, since it is a common theme that I have seen well implemented in many companies.

But I was wrong.

Having conducted numerous business scans for owners, investors, and managers of medium-sized SME businesses over the years, my experience has led me to strongly recommend to put performance measurement on the agenda in case it is not there. The objective is to identify operational and financial areas for improvement and ensure effective monitoring and evaluation.

Take a moment to reflect and ask yourself, "Is there room for improvement in the way we track our progress towards our business goals?" If the answer is yes, I strongly recommend to prioritize it and discuss it in your upcoming management team meeting. To provide your with a concise summary, I would define performance monitoring as follows:

"Performance monitoring is like having a set of tools that help you keep an eye on how well you are achieving the goals that you have set for yourself and for your business."

It is thereby important to choose specific indicators called Key Performance Indicators (KPIs), that really matter for what you want to achieve. This could be things like the ´Quantity of customers´, or ´How much money you make with a certain product´, or a ´Rating of how satisfied your customers are´. These are all examples of relevant KPIs for your business.

I recently shared my take-aways from the #ctosummit in #Valencia. One of these take-aways was from Ezequiel Cura, VP of Technology at Capchase: He also stresses the importance of KPIs while building his company, indicators such as ´Number of automatic deploys per week´ and ´Tech investment € per month per supported customer´.

By looking at these indicators consistently, and regularly analyzing them, you can see how well your business is doing and how your performance is developing. You can find out what is working and what needs improvement.

More importantly even, you can take the necessary actions to fix things and get your business back on track. It is like having a control panel that helps you maintain control and make better decisions for the success of your business.

The power of KPIs for a small factory.

Let me illustrate performance measurement by sharing a case study about harnessing the power of KPIs for a small factory.

This business case is about the exploration and the transformative journey of a small factory, led by the owner (for privacy reasons I call him John) who recognized the importance of implementing well-defined KPIs. By using KPIs, he aimed to steer the factory towards growth, operational efficiency, and sustainable success. 

The small factory faced challenges such as a lack of direction, unclear goals, and an inability to effectively measure how well things were really going within the factory and for the company as a whole. This hindered the identification of areas for improvement and to make informed decisions. At a certain point John recognized that starting to work with specific KPIs could address these challenges and set the factory back on track towards success.

The objectives of implementing the KPIs were summarized as follows. In the first 3 to 6 months the goal was to establish clear and measurable goals aligned with the factory's vision, to monitor factory performance against targets, and to uplift the operational efficiency by allocation the adequate employees to the right tasks.

For the next 6 months up to a full year the objectives John had in mind were to reaffirm and realign the company culture of accountability, engagement, and innovation which is still at the core of the company. Additional objectives were to improve customer satisfaction, and to increase profitability and sustainable growth.

The implementation process

First, the owner identified the problem at hand: the lack of a structured performance management system. Without clear goals and performance monitoring, the factory was running blind, unable to identify areas for improvement or measure its true potential. John realized that establishing well-defined KPIs was the solution. He set clear objectives for his factory, that became the guide for the KPI implementation plan, which included improving operational efficiency, enhancing employee accountability, and driving continuous improvement.

Next, John carefully selected a set of relevant KPIs that aligned with the goals. These KPIs included critical areas such as production efficiency, employee productivity, defect rates, customer satisfaction, on-time delivery, and turnover rate of stock. Each KPI had a purpose: to measure success and provide actionable insights. With these KPIs in hand, John established the current performance and set realistic targets for improvement.

Easily accessible information for analysis.

John knew that data collection and reporting about these indicators was crucial, so he implemented a system to gather the necessary information for each KPI. Utilizing existing software and advanced Excel features, and together with the IT manager supported by an external programmer, they streamlined the process of aggregating and visualizing the data, making it easily accessible for analysis.

John knew that successful implementation required more than just data collection and monitoring: he recognised the importance of internal communication and training and therefore plannen various meetings with his team and shared and discussed the KPIs, the targets, and the rationale behind them. He wanted everyone to understand how their roles contributed to the factory's success. Training sessions were held to ensure that all employees knew how to collect and understand the relevant data. This open communication and clear understanding signifantly helped to empower them to actively participate in achieving the desired outcomes.

Remarkable changes in the factory

Soon after starting this process, we saw remarkable changes in the factory. The visibility into how well the business performanced improved, giving them the insights needed to make the relevant decisions that they could not make before. The team acted much more aligned, clearly working towards the common goals. Operational efficiency significantly increased since the most impactful bottlenecks were identified and addressed. The clear communication and recognition of employees led to an engagement by the team where individuals took ownership of their roles and felt empowered to contribute to the business´success.

Next, performance review meetings were periodically planned. These meetings became an opportunity for reflection and improvement. They analyzed trends, and identified areas for further development, and for the first time in many years they celebrated successes again. They embraced a culture of continuous improvement and innovation, using the KPIs as a compass to navigate towards sustainable growth, increased performance and profitability, improved customer satisfaction, and a growing reputation for excellence, both internally as well as externally.

Back on track within one year!

With KPIs driving their actions, the factory was now back on track and ready to start defining even more ambiciuos goals for the short-term and long-term future. John's insights, vision, and strategic approach led to these significant improvements. All of this within one year!

This case study highlights the transformative power of KPIs and serves as a testament to the ability to steer a business towards sustained success. One metric at a time.

Conclusion

In conclusion, implementing a well-defined KPI plan is a crucial step to regain control and ensure the success of your business. Take the time to define and implement the Performance Measurement plan that works for your business, and ensure that it becomes an integral part of your daily operations and that it is embraced by your entire team.

You can expect to see tangible results in a relatively short period of time. And remember, there is no need to rush, but there is no time to pause. Good luck.

Joris van der Heijden runs Controller-for-a-day. His business is improving your business with lasting effect. With 20 years of business experience in Latin America and Europe. He provides business optimizations in the field of Business Control and Financial Control, using proven methods and relevant technological solutions for European businesses in Spain and The Netherlands.

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