Friday, May 25, 2012

Performance Dashboards: Sales & Customer Satisfaction

Performance dashboards are a commonly used management tool to improve corporate performance.  While this sounds good in theory, how can a small business use dashboards to improve customer satisfaction and increase sales? 

Sales and Customer Satisfaction

Another potentially important category of measurements is sales and customer satisfaction.  For your business to succeed, you need sales.  Are you getting enough?  Does your sales pipeline have enough backlog to keep your company running at a satisfactory level?  Does your operational system generate quality products that you customers like?  Do you have one particular customer service rep who constantly makes order entry errors?  Identifying sales measurements is easy for most organizations.  However, identifying key measure of customer satisfaction may be more difficult.  Time spent discussing your operation and identifying how to measure satisfaction, or more importantly dissatisfaction, will pay dividends as you attempt to grow your business.  Potential measurements for this area might be:

Orders by Time of Day
Customer Complaints by Product
Order Errors by Shift
Stock-outs by Product Type
Sales Volume Over Time
Order Backlog
Sales by Region or Department
Marketing Costs Payback
Sales by Category
Sales by Salesman
On-time Order Delivery %
Complaints as a % of Sales Orders
Returns by Product Type
Product Failure Cost
Customer Satisfaction Rate
Product Quality Index

Do you have other sales and customer satisfaction related measures that small business owners should measure?

Leave a comment with your suggestions. If you need help setting up performance dashboards for your business, give us a call.

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Tuesday, May 22, 2012

We're Quite Optimistic

According to a March 13th Gallup Poll, Huntsville ranks fourth among cities in the United States according to satisfaction about where they live and the direction of their community. In other words, we like it here and think we're headed in the right direction as a community.

The Gallup-Healthways Well-Being Index tracks community satisfaction and optimism on a daily basis and reported the averages for 2011. The top five communities for 2011 were:

1. Provo-Orem, Utah
2. Lafayette, Louisiana
3. Raleigh-Carry, North Carolina
5. Greenville-Mauldin-Easley, South Carolina

The index is based on 353,492 interviews with residents in 190 metro area across the United States conducted between January and December 2011.

Mayor Tommy Battle was quoted about the survey in the April 2012 Huntsville/Madison County Chamber of Commerce magazine initiatives, saying " It's no surprise that the citizens of Huntsville are optimistic. We live in this beautiful area, filled with green mountains, parks and rivers, and we have a welcoming city that is both affordable and financially sound, with a strong economy and bright future. We have much to be grateful for."

And the congregation said: "Amen!" 

I couldn't agree more Mayor Battle. 

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Tuesday, May 15, 2012

Performance Dashboards: Operational Measures

We’re talking about performance dashboards and what to measure in your small business. We’re looking for the most important performance measures in the operations of the company.   

Operational Efficiency

Operational efficiency measures typically are thought to apply only to a manufacturing or fabrication type operation.  However, most businesses will have some type activities that when measured, indicate how efficiently they run their business.  Again, the specific measures that you choose will be dependent on your individual business, but here are some potential measurement ideas:

  • Manufacturing Efficiency
  • Raw Material Usage
  • Scrap Rates
  • Labor Hours per Unit
  • Utility Usage
  • Lost Time Accidents
  • Transportation Costs
  • Inventory Turns
  • Monthly Closing Days
  • Job Efficiency
  • Operating Efficiency
  • Vacancy Percent
  • Job Cost Turnaround
  • Billing Days

Do you have other operational related measures that small business owners should measure?

Leave a comment with your suggestions. If you need help setting up performance dashboards for your business, give us a call.

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Friday, May 11, 2012

Performance Dashboards: Financial Measures

Performance dashboards are a commonly used management tool to improve corporate performance.  Stephen Few, a business intelligence guru defines dashboards as “a visual display of the most important information needed to achieve one or more objectives; consolidated and arranged on a single screen so the information can be monitored at a glance.”  While this sounds good in theory, how can a small business use dashboards to drive a more profitable operation?  What specific items should be monitored? 

Cash Flow and Profitability

“Profit is illusion, cash flow if fact.”  The old adage clearly identifies the most important criteria in constructing a small business dashboard.  There are many ways to measure cash flow and in each business the important measures will be different.  One fact cannot be over emphasized in a small business setting: cash is king. When you run out of cash, you’re out of business. We should measure profitability, too…right?

Businesses need both profitability and cash flow to be successful over time. So you should consider both these measures. Maybe you can compromise and measure EBITDA, a sort of hybrid of both. If you can only measure one, measure cash flow.  As a business owner, you should be focused on cash flow already. In fact, your primary concern as business owner is to know how much cash you have in the bank, how much cash is coming in over the next few days or weeks, and how much cash you’ll have to use over the same time period. It’s up to you to manage that. You can have accountants who do calculations for and make accounting entries for you, but don’t turn over this job to your accountant. It is fine to have both of you focusing on this, but don’t turn this job over to your accountant. You are the only one who cares enough about your business to have this job.

Within the cash flow and profitability section, here are some potential measurement ideas.
  • Bank Cash Balance
  • Operating Cash Flow
  • Cash Conversion Cycle
  • Days Sales Outstanding
  • Days Cash on Hand
  • Gross Profit Margin
  • Operating Profit Margin
  • Net Income Percentage
  • Return on Assets
  • Debt Coverage Ratio
  • Product Line/Category Profitability
  • Division Profitability
  • Plant Return on Investment
Do you have other financial related measures that small business owners should measure?
Leave a comment with your suggestions. If you need help setting up performance dashboards for your business, give us a call.

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Tuesday, May 8, 2012

Performance Dashboards: What to Measure

Dashboards can have many different uses.  The specific departments or users of the data will determine what is included on the dashboard.  For example, a corporate accounting department would have a vastly different dashboard than a manufacturing unit.  While the accounting department would measure things like length of monthly closing, the accounts payable cycle or days sales outstanding, the manufacturing unit might measure operating efficiency, labor hours per pound of production and lost time to injuries.

In the same way that different groups within a large corporate setting will have vastly different dashboards, a small business will likely have a much different dashboard than a large public corporation.  And in fact, the dashboard of one small business will be different than the dashboard of another.

A dashboard is nothing more than a tool for improving performance.  As such, it must be created to monitor the most important measures of your individual company performance.  It is also important to remember that a business owner can only keep his or her eyes on a limited number of measures.  Careful deliberation on the keys to success of your business should be the items that populate your dashboard.

Another important consideration is the use of comparative analysis to artificial measures like budgets and quotas.  While a department or even an individual dashboard might contain comparative measures to quotas or budgets, a company-wide comparison to an artificial yardstick is usually not advisable.  Remember, a corporate performance dashboard should identify and measure the keys to business success.  Is comparison to a budget or quota really a key to your business success?  If the yardstick has been put in place by your primary lender and is a determining factor in the renewal of your credit line, then maybe it is.  If it’s a self-imposed yardstick, you should be careful of using valuable real estate on your dashboard with such a measure.

Copying the dashboard of another company will be no more effective at managing your business than using their financial statements to run your company.  Having said that, there are general categories that all small business owners should consider when compiling a dashboard; cash flow and profitability, operational efficiency, and sales and customer satisfaction. We’ll talk about each of these categories individually over the next several posts.

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Tuesday, May 1, 2012

How Fast Are We Going, Anyway?

Now that you’re actively collecting data and making measurements and attempting to improve your business, how do you go about reporting your progress? This is one of the most difficult decisions that business owners and manager have to make. What do we report, how should it look, how often should we update, and who’s going to do all this updating in the first place?

First, start with the most important measures for the unit being measured. That is, if you’re measuring your customer service department, then decide what are the few important measures on which we should concentrate for that department. If you’re preparing a reporting mechanism for the board of directors, then you’re going to look at the whole company.

You can only concentrate on a handful of measures at one time, so pick the three to six most important ones for the area in which you’re working and go from there. As you make improvements to one area, you can substitute another area that has become a bigger problem. As you get better at working with these data points and trends, you can add more measures.

One way to display the information is in the form of a dashboard. Just like in a vehicle, you have a dashboard with the few important data points that you need to successfully “manage” your transportation system. You don’t want to get a ticket for speeding, so you have a speedometer. You don’t want to run out of gas, so you have a gas gage. There are other gages on your dashboard showing the status of various systems in your vehicle. Some are gages, some only tell you when you have a problem, like the check engine light. And unless you’re Penny, when that light comes on, you need to check your engine. If the light is off, you can assume you’re engine is operating fine. Together, these different measurement systems indicate the status of your transportation system. And the real beauty of a dashboard is you can see it and understand the status of your system in just a glimpse. Similarly, your company dashboard needs to be arranged to use different types of gages so that it’s logical and displays the whole system status quickly.

Here’s an example of a corporate dashboard from computer networking company F1 Solutions, here in Huntsville. F1 ownership and management decided what was really important to measure and set their tech staff at programming the measures into an automatically updating system that displays their performance relating to response times and customer service.

Unless you’ve got a talented tech staff, you probably won’t be able to create a fancy dashboard like F1. You don’t need to either. For a bunch of tech guys, this is a problem that needed to be solved. You probably don’t have resources like this available at your company. What you need to figure out is how to display the information in a meaningful way that allows you to properly manage your systems with the least amount updating.

If you need help with your measurement systems, give us a call.
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