May 17, 2011

At least I'm better than I used to be

Last weekend I was out riding my new bike for the first time (if you see me, I can show you a picture of it since it’s now the wallpaper on my phone!). I hadn’t found time to get my bike computer switched over yet, and that was a problem for me as it left me in the dark about whether I was any faster on the new bike. Each time I ride, I try to beat my previous ride’s average speed " that’s my gauge on whether I’m getting faster, slower, or staying the same. That got me thinking about the topic of measuring success and how something similar applies in the business world.

Usually when you think of business success, you think of achieving an end goal. But often that may be too far out in the future to be motivating, or the ultimate goal may even be hard to define. Therefore, I believe you often need to measure "success" as improvement of ongoing performance. 

A natural exercise is to measure your company against an industry average or the top performers. This is definitely an excellent practice, and many industry groups can provide these benchmarks. They can be very helpful. But what if your company is "different"? What if your business model, product, service, or market is unique within your industry? Maybe you have a hybrid business model (you focus on wholesale, but also have a retail outlet), have some uniqueness due to your geography (you do more heating than air conditioning because you’re in the northern part of the country), you have an unusual sales mix (you focus on service work instead of new product sales), and the list goes on. 

This is always an issue for businesses that focus on a specific niche, and this was our dilemma in assessing First Business Bank’s performance. There is plenty of industry data on banking, but since we don’t have branches and tellers (for example), most of the benchmarks aren’t very relevant.

So we began to measure ourselves against ourselves. Sometimes there was a logical goal for one of these measures, but most often it was simply about moving in the right direction. Once we were able to build some history, we could establish realistic and measurable goals for ongoing improvement.

This not only works well at the company level, but it also works at the department level. Industry benchmarks at the department level are even trickier to find and it is more difficult to discern if you are comparing apples to apples.

You can also utilize this method at the employee level. You can apply the concept of improvement against oneself in many positions, from sales to service to production. In a situation with many people doing the same thing, it may seem logical to measure the employees against each other. However, I think you’ll find most people will have a rationale as to why they should be expected to perform or contribute differently from their peers. For instance, in a sales group you may have legitimate differences: "my territory isn’t as good," "I have to spend more time working with larger existing clients with complex needs," or "I have supervisory responsibilities." Just like companies are different, employees are too. 

Measuring improvement against oneself eliminates the noise created by unlike situations. Whether you are looking at your company, a department, an employee, or even your personal goals, if you see continued improvement, I think you’ll find you’re on the right track.


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