After many ups and downs on the financial market during the past few years, many business owners are starting to change their perspectives, definition and assessment of corporate performance. While keeping in mind that healthy revenue and profit margins are essential to a company, these things don’t necessarily mean that the business will be capable of sustaining its current performance and improve its profits in the future.
This is where performance measurement comes it. Briefly, this rather new philosophy is defined as the process of collecting, analyzing and reporting information regarding a certain system. Basically, a company can put together a simple or more complex way of assessing the outcome of its efforts and foreseeing new ways to be better for future purposes.
Here are a few efficient actions what your company can take to ensure its measurement system evolves in time:
1. Define your goals as accurately as possible.
When you want to measure your success, first you need to determine what your specific goals are. There are many things you could pursue, like customer retention, getting into a new market segment, reducing customer complaints or increasing sales. Your goals should be challenging, but achievable, so you need to be as accurate as possible when setting them up. You could for instance search for the solution to increase sales by 25%.
2. Know your metrics
Depending on your type of business, you should focus on the metrics that are relevant to your specific industry. They could refer to marketing, production, management or technology. Each of these include different criteria that you need to consider carefully when going this road — such as sales growth and product quality for marketing, quality control for production, strategic planning and employee turnover for management or engineering abilities for technology.
Assess which of these metrics are important to your business and follow them closely.
3. Collect and organize information
After identifying your metrics, you should find smart ways to collect and organize all data that is significant for your company. You could use tracking and reporting tools so that at the end of the day you can rely on reports that will show you where you stand.
4. Bring in the competition
Don’t forget that your competition is there for one big reason — it can help you compare what you have achieved, where you’re going and with what results, against those of the companies which activate in the same field as you. Also, you can check the Internet for press releases and annual reports of public companies, whose figures may be relevant to you too.
5. Don’t shy away from doing the much needed research
Some of us often adhere to complex ways of doing their performance evaluation, forgetting the basics. Research is one of the primary tools used to conduct this evaluation. You will always need information about your customers, so find clever ways to get it and then use it to improve your business. You can either conduct quality research, where you will try to understand your customers` behaviour and habits (such as personal talks or focus groups) or quantitative research (such as surveys), which mainly focuses on numbers. Or of course, you can do both.
6. Be realistic
As far reality is concerned, business owners should do a regular check up on where they are standing. There is nothing more deceiving than being on a wrong track, so it is important to understand your strengths and weaknesses. Put your strengths in the spotlight and as weaknesses are concerned, you should always search for ways to improve them.
7. Keep your customers loyal
It’s common knowledge that getting a new customer is five times more expensive than keeping a current one. Perpetuating Customer Retention is one of the main rules you need to hang on to throughout the process of performance evaluation. Treat each customer as the most important you have, make each of your clients feel valued and respected, deliver just as promised and be always on their side. You will also use the success you have with your existing customers to attract new ones.
8. Don’t forget about your employees
Happy employees will almost always translate into good performance for your company. Evaluate your business by conducting regular surveys among your employees, check to see if they are satisfied and their performance is still high rank. If their results drop, there’s an alarm sign right there that things aren’t going as planned and you should figure out a plan to solve the issue.
9. Practice what you preach
After researching, collecting, organizing and prioritizing all these information, you will be able to draw conclusions and make plans according to them. Don’t fall into the common trap of ending your work here. This is merely the beginning, as what follows is even more important — what follows is putting into good practice what you have learnt from all the previous steps.
10. Practice makes perfect
And as any business process, performance evaluation will start to prove its merits in time, for your clients and collaborators, as well for your employees. So be patient and thorough!
In the light of all that performance evaluation can entail — what we were able to comprise in this article and what is yet left to say — one thing is certain: the greatest challenge is changing the mentality. The process of performance measurement requires business owners and employees equally to shift the way in which they think, which may be quite difficult for some. The measurement system has to become part of the organization itself.
At the end of the day, companies should go beyond measuring financial results. With modern performance evaluation we are looking at a new, fresh way of understanding how your business works, how it performs and why it performs that way.
Some business owners are applying the instinctive method, meaning that they are basing their management decisions on rather subjective data, poor scientific evidence and beliefs about what makes a business thrive which are not very close to reality. For these managers, results are often random and cannot be controlled. Other companies are on the other hand implementing neat measurement systems, this way being able to identify correct cause-effect situations, to overcome issues and come up with viable solutions.
At TRISOFT, we have been focusing on performance measurement systems that are relevant and appropriate for our business environment and that over the past years have provided us precious information helping our team to get better with every step. Our management as well has been developing strong strategies in order to meet the requirements of this dynamic and rapidly-expanding universe.