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I had a friend whose father had recently sold a remarkably successful business in the automotive industry. I asked a bit about why they decided to sell. The response was, “My Dad was an amazing four walls manager, but the business grew beyond that.” I thought I understood but asked for a bit more detail. My friend explained how his father and his uncles had started their after-market supply business out of a garage, and it had grown over the decades. He said his dad had an amazing “feel” for his business. Meaning that he could walk out on the floor, do a quick spin through production, the warehouse, and shipping departments, and have a firm grasp of how things were running.
I suspect that many of you have a similar feel for your business, or at least you used to have a feel.
Here is what happened to my friend’s dad. The business grew, suppliers became more diverse, remote warehouses came into play, and then a few acquisitions spread production across the United States. The business leader who once could “take a quick spin” now had to manage a geographically diverse supply chain. It was beyond his “four walls” and frankly beyond his comfort zone.
As I reflected on this story, I asked myself the following questions:
Before answering the questions above, I want to share a quote.
“Ships in the harbor is safe – but that is not what ships are built for” – John A. Shedd
Most businesses no longer just serve their neighborhood or city. Customers are spread out across the country or even the globe. This inherently increases the complexity of serving a geographically diverse customer base. So, how do we accomplish this? I will return to the questions.
Business owners often credit their instincts for their success with a “feel” for the customer or the “feel” for their business. In reality, while the business may have started based upon some inherent sense of the customer or market, the business only succeeds if the owner can translate that market need into a service or product which is profitably provided to these customers.How do owners deliver profitably? In the early days, most owners do this by working directly in their business, doing whatever is necessary to serve their market. As their business grows, they move on to other tasks yet keep an eye on the “important things.” Identifying these important items and quantifying what constitutes solid performance versus unacceptable performance is the key to helping a business move beyond its four walls. Often referred to as Key Performance Indicators (KPIs), these critical measures are monitored to help any manager or front-line team member understand immediately whether the company is winning or losing in its battle to best serve its customers.Without clear KPIs, determining how your business is running becomes a very subjective assessment. When businesses are run based upon subjective judgment, they limit themselves to being a smaller operation where the person with the best “feel” for the business can only really get that “feel” when they can physically see what is going on inside their four walls.At best, this approach of “gut feel” limits the businesses’ ability to scale and, at worst, turns into a cult of personality where the business simply cannot run without this person managing. In either case, it will diminish the value of the business. Setting clear KPIs for the business as a whole and for each department will increase the entire team’s ability to better serve the customer and, over time, will increase the value of the business.
KPIs that are clear and focused on the primary drivers of success will certainly help. A 2018 Bain and Company article stressed the importance of getting these measures right. Setting KPIs is a topic for another day, but once they are set, the business is ready to help their entire team ensure they are focused on the areas which best measure/impact their long-term success.
How do we keep these KPIs front and center for our team? It all starts with your ERP system and possibly your website if the two are managed separately. These systems contain, or are supposed to contain, the data that feeds our KPI scorecard. From there, find a tool such as Microsoft Power BI or another dashboard-type tool that will help you visualize your KPI metrics. These tools typically connect easily to any cloud-based platform, and with a bit of effort, to your on-premises systems. Now you can create a scorecard for your business and each department. Once your team can see the score of the game each day, everyone can align their actions to improve performance.
It is important to address a common question or response; “we already collect that data.” That may be true, but what do you do with it, and how old is it by the time it is shared?
If your KPI dashboard is not real-time or near real-time, it will not be actionable in a meaningful way. It is like driving your car with the goal of avoiding upcoming hazards but only looking at the rear-view mirror. Your team needs to see what action they can take right now, in the shift they are working, to help address any issues and ensure the company is winning hour by hour. As the old saying goes, “if you watch the pennies, the dollars take care of themselves.”
Most businesses today are required to focus beyond their four walls. Whether it is a global supply chain, staffing issues, or eCommerce, the world has expanded, and the challenges have increased. A quick spin around your building will not get the job done anymore. It is important that your business goals are clear, the levels that impact those goals have been identified, and the tools and training provided to your team support your end game. With rising costs across the board, business owners must use every tool available to them to serve their customers profitably.
Whether you are in the Microsoft Dynamics ecosystem or use some other ERP product, reach out to your partner today to begin a conversation about how they can help your business navigate the challenging waters beyond your four walls.
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