I hate managing by nagging. It’s usually counterproductive, and it doesn’t contribute to a great team environment. I’ve found through my own business and through working with others that managing by scorecards and metrics is a much better approach. It allows everyone to understand the organization’s main objectives – and when scorecards and metrics are properly aligned with company objectives, the results can be powerful.
These aren’t external metrics that you share with investors or in press releases; rather, I’m talking about internal scorecards that you use to make sure that your whole team is pulling in the right direction and that everyone’s contributions can be systematically assessed.
The metrics you come up with should be specific to your business and to its stage. If you’re an early-stage startup, your metrics might be more focused on just getting and keeping users/subscribers/clients. If you’re in the scaling-up phase, your metrics will probably skew more toward consolidating your customer base, expanding into new markets, and developing beneficial business partnerships.
Here are some tips to help you come up with your own performance metrics and use them to drive business results.
Set Your Metrics
It’s better to hone in on a limited set of impactful measures than create a laundry list of every possible performance dimension. Zero in on metrics that really drive your company’s performance. These could include the number of weekly sales calls made, the number of accounts closed per month, monthly conversion rates on prospects, or cross-selling additional services to existing clients.
When developing your scorecard, take the opportunity to touch base with your team. Ask them what metrics they see as most important. Soliciting – and incorporating – team feedback will help you get employee buy-in.
Communicate Early and Often
Your key set of metrics is doomed to failure – unless you make an effort to ensure that employees engage with these measures.
The key to doing that is transparent communication. Explain why you’re introducing these metrics, clearly describe the process, and give the team members an opportunity to air their concerns and make suggestions.
Measure, Measure, Measure
As they say, “What gets measured gets done.” You absolutely need to measure your team’s performance against the metrics you’ve set on a regular basis. Measuring performance and regularly reporting the results will get everyone focused on the outcomes.
You should also consider how you want to communicate the results. Will you share them individually? Do you want to publicly post scorecards, relying on peer pressure and competitive instincts to help spur performance? How often will you communicate performance results?
Give Your Metrics Some Teeth
Tie results into performance reviews, and consider them when discussing raises, promotions, and account allocations.
I like to take a carrot-and-stick approach by balancing rewards with repercussions, but you can use whatever approach you’d like. For example, you can scale rewards based on the size of individual accomplishments, or you can offer greater incentives to individual team members who work together to hit team goals.
No matter what you do, though, you need to make sure that people understand no one is exempt from meeting goals. And be sure you address compliance in a manner that’s consistent with your company values.
Constantly track that the measures you set. Eventually, you’ll find that you’ve outgrown your current metrics. Maybe it’s because your goals have become too easy to meet, or maybe they no longer reflect your long-term vision for the business. Once you reach this point, you should go through the whole process again in order to cook up some new, more relevant metrics.
David Ehrenberg is the founder and CEO of Early Growth Financial Services, an outsourced financial services firm that provides early-stage companies with day-to-day transactional accounting, CFO service, tax, and valuation services and support. He’s a financial expert and startup mentor whose passion is helping businesses focus on what they do best. Follow David on Twitter: @EarlyGrowthFS.