Plot Future Using Current Numbers
Thanks to computers, fiber optics, the Internet and old-fashioned human curiosity, we are awash in information. Mankind has finally found a commodity whose production promises to forever outstrip its consumption.
Data dumps and number crunching have become de rigueur in every company. As a consequence, we are being forced to discriminate between information that is nice to know and that which is necessary to performance.
Q. Help! I’m drowning in data and I can’t determine which reports are flotsam and which are soon-to-sink jetsam. How can I tell which numbers and which reports are essential to the profitability of my business?
A. There’s no universally applicable answer to that question. What you must know about your firm’s current performance in order to provide appropriate management direction depends on the nature of your business, its competition, and the markets it serves. It is also conditioned by your personal management style.
There’s no question that we are routinely served more information than we are capable of productively digesting. It has been demonstrated that one edition of a contemporary newspaper contains more information than the entire acquired knowledge of the average citizen living in the seventeenth century.
As you have discovered, the challenge today is separating the wheat from the chaff. Not only will nonessential information tend to lead a manager astray, but its consumption eats up valuable time, thus diverting attention from the things that truly matter. The challenge is to find your “key numbers.”
In the good old days, entrepreneurs depended on their profit and loss statements to provide a measure of their performance. Problem is, in today’s frenetic environment, the best opportunities to act have passed by the time the statements are available.
P&L’s present a nice historical portrait, but typically they are not capable of prompting the specific actions that must be taken immediately in order to stay competitive.
Cash flow reports are a little better, but even these documents focus on results rather than precise, individual, causal circumstances that, if responded to quickly, can make a critical difference.
In every business there are a handful of individual numbers that can be compiled daily to give managers both a sense of company performance AND the ability to quickly push the operational “buttons” most important to problem resolution and opportunity exploitation.
To determine which “key numbers” work in your organization, review a week’s worth of company activity to see which “results” were most distressing and which most satisfying. Then look back and try to envision what you did (or might have done) on a given day that most affected these outcomes.
What prompted your decisions or actions? What information might have triggered different, more rewarding actions? What do you regret not knowing? What slate of insights, information or understanding would have most profitably guided your actions during that week?
In other words, be a Monday morning quarterback. Determine both the plays that were - or would have been - most beneficial for the company and the clues you had (or which you should have had) to best accomplish play selection. Try to find the few numbers that would have most quickly and accurately guided the formulation of your play book.
What five or six numbers were available - or should have been available - on a daily basis to prompt and guide your actions? Sales? Collections? Back orders? Raw materials prices? Competitor’s advertising space? Occupancy rate? Orders received? Average time to delivery? Customer waiting time?
Determine which individual numbers - not reports crammed with statistics - give you the best insight and cause for action. Make sure they are given to you fresh, each day, before you have to make critical decisions. Over time you’ll be able to evaluate the relevance of these numbers and refine them or make substitutions.
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The following fields overflowed: CREDIT = Paul Willax The Spokesman-Review