Measure to Manage

How do you answer the question, “What is the function of business?”

Peter Drucker stated that the function of business is to attract and maintain customers in order to make a profit, or in the case of a non-profit to remain financially viable.

If you can accept this basic premise, then answer this, “How do you currently measure how well you are doing in the area of attracting and maintaining customers, and what are you doing to improve?”

What gets measured gets managed. What are you measuring?

What gets measured is reflective of your true values and vision. If margins, profits, monthly gross shipments, and return on investment are your key measurements, you value profits. These measurements are often referred to as “Self-Gratification Indicators.” They make you feel good (provided the numbers are good), but they can also be manipulated by a good financial person (re-evaluating inventory, LIFO/FIFO, etc.). Therefore, they do not necessarily measure how well you are actually doing in the eyes of your customers (internal and external), and as such, do not indicate your future strength. At best, they may be a report card of past decisions.

Measurements are also a powerful way to focus an organization’s efforts to produce desired results. The brain is like a computer. It does not know the difference between the truth and what you actually tell it. Therefore, we as human beings can actually program our brains. Positive thinking works better than negative thinking. The clearer the positive focus that people have on what they are doing, the greater the chance for higher performance. What provides this focus? It’s the vision and values that are provided by leadership.

However, the vision and values must be in alignment with:

  1. What is being measured.

  2. The behaviors of management.

  3. The processes that management has put into place.

Therefore, leadership’s role is first to define the vision and values in order to tell the people in the organization how to reprogram their brains. However, telling is not enough. In organizations where change has failed, the utterances of management’s new values and visions have only become “wallpaper” for the lobby. Only words.

In next month’s post, we’ll examine how to get started on that reprogramming.

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