In the early stages of Red Planet Dust I posted on my views on strategy and decision making in companies regularly. With Collaborability becoming more prevalent at Red Planet Dust lately I still have a reservoir of “one liners” available that some day will complement the list.
A few days ago I could not resist using one of these one-liners:
Funnily, I have often said to my clients:”what you measure, is what you judge, is what you steer. So be conscious about what you measure!”, an other version “How you measure, is how you judge, is how you steer. So be conscious about how you measure!”
Together with my long time friend Henk Hofmans I have been investigating the possibilities of Business Intelligence (BI) considering the technological advances in data collection, tools and distributed accessibility. We both have come across “dashboards” at companies for years. He handsomely translated my one-liner in “If you only look at your dashboard while driving, you will certainly crash”. The next thing he added was: “You need to know were you are driving!” I fully agree. A dashboard is only a tool to realize higher (strategic) goals for the organization helping to do that as efficient and effective as possible.
The best “dashboard” I have seen to date actually is the one encountered very early on in my career at Technische Unie. It was not even seen as a dashboard yet for this “idea” only became en voque years later. They were able to manage dozens of sales offices very successfully at arms length operating in strongly differing competitive situations based on a pretty simple function that linked turnover, cost and margin in an intelligent algorithm leading to a “Return on Investment”. The managers could earn a max of 3,5 months extra in wages as a bonus based on the return realized (1 month for every extra 10% margin realized over 35%.)
Depending on the situation in the region the sales office was operating in and tailored to the personal preferences of the manager it could choose for a well balanced strategy. Some would go for high volume, low margin hence low cost, others for relatively high margin hence lower turnover while optimizing cost. The information provided gave the manager the ability to truly balance its approach to get to the highest return for the company possible. Turf fights over clients and over business involving multiple sales offices was taken care off. The link up of the relevant parameters, based on the core function of the sales office and the discretionary powers of the sales office manager while safeguarding a basic contribution for the central services (NB IT, HQ overhead, logistics, warehousing, inventory). Once they reached the 70% level it was in the interest of the company to get higher turnover over anything else for that helped to offset the fixed cost. The overall strategy and the way to manage these office at arms length were perfectly in line with each other. IT supported it with transparency on all the figures involved and the formula did its magic work optimizing returns adapting easily to the regionally differing conditions. At the time “TU” as it is often called was the most profitable wholesaler by far.
NB Management used this formula and its reports/data to discuss the progress per regional sales office 1:1 and once a year the best sales office was crowned; it was therefor also culturally and management-wise totally embedded in the operations of the company. For a wholesaler – as for may other businesses – it is of utmost importance to manage – hence minimise – working capital and this is mainly done by increasing the turnover rate of the inventory and strict debtor management. These two topics were key for management to discuss both with sales as well as the procurement department: they were key to the “dashboard”.
To me, this is the essence of a dash board, or a balanced score card: it needs to identify (only) the business drivers relevant to reach the strategic goals of the companies based on a clear understanding of what the company does, how it is managed and how it fits in to the value chain. Here comes in the role of the strategist.
NB Dashboards are not something you push off to a trainee as I have seen happening at many otherwise reputable companies.
In the Netherlands we have the proverb: “meten is weten”. In English this would be “to measure is to know” without the internal rhyme… The above post is my reaction on this proverb that should be extended accordingly. an other take on this:
“Anything you measure, you can change,”
says Jay Endsley in
Maybe originated in a different context I find this a nice contribution to above post.