MEASURE PERFORMANCE AGAINST GOALS
You must perform
excellently in business in order to stay in business. And it is very helpful to
be able to quickly assess progress, to see how you’re doing - to know if what’s
happening is going according to plan or not - so you can make course
corrections, steer clear of pot holes, swerve around obstacles, take advantage
of the fast lane, and drive your business on down the road to providing customers
and clients with better and better products and services, and to generating more
and more personal financial rewards and experiencing all the success that goes
with doing that.
An obvious benefit of
measuring your performance is to learn where you are struggling. If you operate
your business from a budget, against which you are performing monthly variance analyses,
you can see where your results are not meeting your projections.
The numbers paint the
picture. You might conclude that your financial projections were too optimistic,
that you bit off more than you could chew. You might conclude that your performance
- your personal business behavior - is subpar and that it needs some minor adjustment
or a total overhaul. You might determine that you are overspending, perhaps using
marketing tools that are not generating enough sales. You might determine that
you are taking on too much debt leading to more debt service. You might
determine that you have a cash flow problem, that perhaps you are not collecting money
that is due.
Over both the short
and long term, consistent measurements can serve to help you identify your strengths
and weaknesses so you can decide to modify your business behavior, put additional
controls in place, or initiate other remedies to strengthen the performance of your
business.
However, with all analysis
there is a big caveat. When you are endeavoring
to make some sensible conclusions - so you can grow your business and perform
even better - by connecting the result of your monthly budget variance figures to
human behavior - the doing of the tasks that produced the numerical result you
see in the analysis - is there any real causal
certainty. Is it possible to really know HOW you achieved a particular
result, or WHY you did not?
To get some useful
clarity on this question we must take a tangential turn and delve into
philosophy just a bit.
Here we go. Big Fat
Truth: The inside of your own mind is the only thing about which you can be sure
and certain. That is where you know for sure and for certain that George Washington was the
first President of the United States. You know in your mind. In fact, every bit of
what you know is based on your experiences and thoughts, feelings and sense
impressions. That’s it.
Whether you see it in
a bank statement, or on a spread sheet, or in a stack of past due bills, the “facts”
are in your mind, not in a piece of paper you hold in your hand, or in a computer document.
Some really smart people
say we do not really know anything. We
just somehow come to believe things. Our lives - and everything about we say
and do in our behavior - is perpetuated upon finely-tuned beliefs made subtly
over time. Everything we have ever known has been done before, been repeated precisely, or been changed
slightly or radically, and then redone a bit differently, either by us or by
other people. There is no evidence to prove that we know much of anything.
There is no evidence to prove that we even know who, or what we are, because
everything that we have ever learned has been made up by ourselves - based upon
BELIEF.
So, back to where the
old rubber meets the old road and to the reality of operating your business and
calculating the consequences of your endeavors to make a buck or two - sure,
measure all the stuff you feel you must measure, all the key variables smart people
and well written books say to measure - but remember the truth. When it comes
to making rational conclusions and forecasting what to do next based upon them,
there will always be a lot of guessing going on - always, because no one can
ever know anything for sure and certain. We can only believe we know HOW or WHY
something happened, or did not happen, or might happen again.
By all means, please
measure and analyze performance Do it because there’s no better way to “know”
and no better data upon which to set future goals as you make or remake plans and move ahead in your business. Them's the facts Jack.