Performance Metrics

PERFORMANCE METRICS:
WORK NOT MEASURED
CANNOT BE MANAGED

The lack of performance metrics and formalized "performance standards" in family-owned businesses is not a new problem, but it has become more critical. Indeed, it is a survival issue for maintaining the viability and vitality for many family-owned businesses.

“Not having a system for measuring performance is a significant shortcoming of many family owned businesses,” according to leading family business expert Don Schwerzler. “Performance metrics form the basis of integrated work management systems. These ERP (Enterprise Resource Planning) systems can reduce costs by 20-30 percent while at the same time improving quality, order process time and customer service.”

Schwerzler has been studying and advising family business entrepreneurs for more than 40 years and he is the founder of the Family Business Institute , headquartered in Atlanta GA.

Clearly, businesses can run without having performance metrics. But the alternative is longer hours and much more work trying to maintain the profitability of the business. Simply stated, performance metrics can enable a family business to work “smarter” rather than “harder”.

One of the more common complaints we have from family business owners – not being able to find good people. Part of the problem is that the work ethic has changed, but the business has not adapted to that change.

Having a system for measuring performance can allow a family business to do more with less. “If I can out think you, I can outwork you,” stated Dr. James Crupi. “ The new work ethic is based on intellect.”

That change in the work ethic is anchored by computers that not only accumulate and process information, but have created a new and compelling sense of urgency: the "pace" of doing business has increased geometrically.

Executives graduated from business schools over the past twenty years have been trained to manage by assessing a business in terms of performance metrics.

"But how effective are these management professionals in a business environment lacking these work management tools?" asks family business master strategist Don Schwerzler.

How effective would physicians be in providing patient care if they lacked access to lab tests, x-rays and other tools for diagnosis? What if they had to "guess" the patient's vital signs?

To develop the performance metrics and to develop the performance standards necessary to keep your business healthy requires that the major work functions in every department be identified as to volume and it must relate to time.

Most simply stated, "WORK NOT MEASURED CANNOT BE MANAGED" according to the productivity experts at Southern Business Research.

To underscore this crucial issue, pose this exercise to your senior managers at your next management meeting: "Take the next fifteen minutes and write down the following information for each department or work unit that reports to you:

• What is the "measure" of work (# invoices filed, # holes drilled, # phone calls, etc.)?

• What is the hourly or daily volume?

• How much time is required to complete each unit of work?

Make sure the managers do not try to explain the "process" (the first thing that happens...etc.) of how the work is being done, just the quantities. Collect the data from each manager. Then ask them to actually gather the hard data from each department or work unit supervisor. The exercise is completed when the two sets of data are compared. The variance involved may illuminate a pot of gold!

Ironically, successful family businesses are coping with the demands of the future not with new or more sophisticated theories of management - but by getting back to the basics!

They are returning to those ingredients that made the business successful in the first place; QUALITY, SERVICE and EFFICIENCY. All three can be achieved simultaneously only by establishing performance standards and using performance metrics to ensure the standards are being met.

If you are a family business want to significantly increase the growth and profits - we can help.

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Work not measured cannot be managed.


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