Recent Articles

Mar 29David Buslee

Rickie Don’t Lose That Number

Mar 29David Buslee

The line from the 70’s song is one that plays in my head every time I work with a client company.

Winning companies have fully engaged employees who know why their employer exists and how each employee’s performance contributes to the overall success of the company. How do these winning companies do this?

  1. Establish key metrics for the company – I was the CFO of an aerospace component repair company which grew at an extraordinary rate in the late 1990’s and early 2000’s. We did this by looking at only three numbers –
    1. The number of inbound repair opportunities
    2. The recovery rate
    3. The Turn Time.

Notice that none of these numbers are inherently financial, but each affected key financial results. We shared these numbers daily with employees, along with a set level that was a “win/lose” metric – over the metric, we were winning; under the metric, we were losing.

  1. Give every employee a number – every employee should have at least one number, some measurement that tells them if they have contributed to the success of the company – maybe its quotes sent, or boxes opened, or parts packaged – some number that they can daily gage their performance. Each of these employee directed numbers should be a breakdown of the key drivers for the company e.g. quotes issued affects the number of inbound repair opportunities; parts packaged affects Turn Time, etc. The employee number should be something that their job description directly affects every day.
  2. Evaluate the numbers quarterly – make sure that the numbers are still relevant. If your strategy has a change in product mix, be sure that the controlling numbers reflect that change. For example, if you historically have made engine components and now you are making engines, your unit volume will drop – you were making high volumes of low dollar parts and now you are making low volumes of high dollar parts. But if your key number is unit volume, people may start acting in ways that are counter to the long term viability of the company, such as lowering price to increase unit volume.
  3. What is your velocity? – Numbers have a way of putting us in a trance. If the number is “acceptable” we tend to move on to other factors. But frankly, isn’t growth what it is all about? At B2B CFO® we have a saying “First Direction, Then Velocity”. Simply having a winning number isn’t sufficient. The “winning number” should be increasing every day/month/year – an upward sloping line.  And while velocity is important, physics tells us that Acceleration is a change in velocity and direction. As managers, we should be accelerating the performance of our companies. Internally this means that everyone should be looking for ways to streamline and improve their performance – this is the essence of LEAN. Doubling sales does not mean double the inventory or employees or infrastructure – it means doing things better and faster.

So, Rickie don’t lose that number. Keep your number top of mind.  Know what key numbers affect your business.  Have employees know what number they need to meet to “win” each and every day.  Review your numbers quarterly – nobody is helped by measuring to irrelevant numbers.  Finally, establish a measure of velocity and a measure of how your company is accelerating its performance.

If you need help in developing the strategy, the numbers and the controls to monitor and move your company’s velocity and acceleration, contact me a dbuslee@b2bcfo.com or 262.271.2522.

B2B CFO®

Free Discovery AnalysisTM

Fill out the form to receive your
Free Discovery AnalysisTM (a $1600 value)