GCE Strategic Consulting

Blog - GCE Consultant's Insight

The blog that shares our expertise and perspective for driving business transformation, based on the successes and failures we've seen everywhere from start-ups to Fortune 500 companies.

Metrics Matter!

Metrics matter but only if you have the right metrics.  I have a customer right now that I am working with as a fractional Integrator / COO.  Great company, people, and culture but they struggle with metrics, not just what to measure but why they measure it and what outcomes should come out of it.Best practices for running a business are to come up with 12-16 key leading indicators that can allow you to predict your business better. In sales, it isn’t much different.  I think most people try to focus on closed business or win rates and that is good to have as it shows you historical data and trends. While there is an argument for using history to predict the future it still isn’t a leading indicator.What is the difference between a leading indicator and a lagging indicator?  A lagging indicator follows an event, for example cash collected.  A leading indicator signals a future direction such as a certain number of quotes out the door we know will lead to a certain amount of sales closed.So how do you set up the right metrics that are leading indicators?  One way I have found to do this, and specifically with this client, is to look at the current state of the business and then map out what the future should look like.  Next, highlight some of the problems that may prevent this future and use the Sigma five why’s approach.Here is an example:  Current company sales are growing at 5% per year, and the client believes it could and should be 20%.  They put a bunch of metrics in place to measure such as the number of quotes put out, number of phone calls, number of new leads created and establish goals for each.  But how do they know if they are the right metrics and/or the right goals?  The answer is, they don’t thus leading to the       re-engineer approach.Establish a problem statement,for the example above it would be, “If sales do not increase to 20% growth rate per year we will have to lay off part of the employees.”  Then ask the five why’s to get to the root cause of the issue.  In the case of our example, we ended up realizing that the sales team was too overloaded with broken systems and processes. They were only spending 1/3 of their time selling.  In order to increase sales time, the solution was to take stuff off their plate and re-allocate to lower cost resources.This realization together with the goal of getting to 20% growth prompted us to dig deeper to find the right metrics for success.  We found that every face to face call had a close rate of 40%, which is pretty good.  This one very simple leading indicator, the number of meetings, then allowed us to develop a future map for success.Example:

  • Average deal worth $10k
  • Average win rate off of meetings 40%
  • $1M Company goal with 20% growth rate

If you run the math, this means you need 100 deals to close.  What this also means is the company needs to have 250 meetings face to face throughout the year.  By getting to the root cause and understanding the challenges the sales team was having, we were then able to put the right metrics together.  Implementing this change along with some others led to an annual growth rate of 25% for this customer.  Now, every employee understands each metric, why it is important and how it helps them predict where their business is going.Deliverables Sample:-Leading indicators to predict business for company and business unitAny additional questions, please reach out to me www.gcestrategicconsulting.com  and in the next article we will look at “Top Grade.”