Business Performance Measurement
With the acceleration of global competition, escalating commodity prices, and a slowing economy; it is becoming increasingly more difficult for mid-size companies to grow revenues and margins. Many CEOs and CFOs are faced with the challenge of where to start. The first question I’m usually asked is; should I borrow more money to finance the growth? Which is immediately followed up with; who will lend me the cash I need?
At this point, I ask the following questions:
- What strategic advantage would you have if you cut your delivery time of goods and services by 50%?
- What financial benefit would result if you eliminated 70% of your non-value added activities?
- What cash infusion would result if you reduced your raw material, work-in-process, and finished goods inventory by 80%
- If you had the money, do you have a strategy that would lead to revenue growth?
In order to answer these questions the company leadership team needs to conduct an analysis of their processes. This is where a lot of companies get lost. It’s not necessary to get into a complicated and long drawn out evaluation audit. By asking a few simple questions covering 6 topics; an accurate estimate can be made of how much money a company has tied up in unnecessary tasks and activities.
Six Topics of the Business Performance Measurement Series:
1. Customer Knowledge
2. Customer Perception
3. Process Speed
4. Inventory
5. Quality
6. Baseline Metrics
These 6 topics cover the critical areas of organizational performance that need to be measured in order to develop a plan to free up the cash to finance revenue growth. In my next post we’ll start down the self-funding path by reviewing Topic 1. Customer Knowledge.
Topic 1 Customer Knowledge Part 1 Voice of the Customer