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Critical Numbers - People/Relationship Drivers

Posted by Douglas A Wick on Mon, Dec 3, 2012

Priorities are essential to create alignment and initiate growth for your business.  You need to establish One Thing as the most important priority for the quarter and the year.  However you must realize that in doing this step you need to also create a balancing critical number.  Balance Productivity Otherwise your business will get out of proportion.  “All work and no play make Jack a dull boy” is a good quote to remember.  All focus on productivity and no focus on relationships (or vice versa) can make your business operate as if rolling on 4 flat tires.  Despite achieving success in one area the business fails to achieve significant progress.

Last blog (Top Ten Elements to Drive Business Growth - 4-3-2-1 Formula) we discussed the 10 key elements to drive business growth and Gazelles and Positioning Systems 4-3-2-1 formula to get your business on the path toward this in 2013.

The Two Drivers: People/Relationship and Productivity/Process Drivers should have metrics monitoring how you are doing in key areas of your business.  People/Relationship Drivers include metrics to measure employees, customers and shareholders, while Productivity/Process Drivers include Make/Buy, Sell, and Recordkeeping. This blog will focus on People/Relationship Drivers and the need to set Critical Numbers to balance these two drivers in your business.

This discussion begins with understanding the critical need for balance in your business between these two drivers.  Your business can get out of whack as offered in Balance Subjectivity & Objectivity – Required Strategic Disciplines and the short example provided about Delta Airlines. 

During the recent recession (2009), the unions working with General Motors resisted concessions that would keep the company afloat – as a result, the company declared bankruptcy and was bailed out by the Federal Government – the company was too out of balance focusing on its People that it lost its Productivity health. Contrarily, Enron is an example of an organization whose top management was so focused on results – Productivity – that its broke the law and damaged its People (shareholders, employees and customers). It is vital for the healthiest growth companies to consistently measure both Productivity AND People indicators.

It is important to balance Productivity Indicators (activities that you do or achieve), with People Indicators (activities that impact relationships). Companies that measure only one of these two areas tend to go out of balance and it can damage the company’s results (productivity) or relationships (people).

Of all the metrics we will ask you to define – the Critical Numbers are the most important. A Critical Number drives a short term priority that you want your entire team/company to focus on and improve.

Imagine if you could get the whole firm pulling behind a short term priority. Just think about the progress you would make if everyone was working together to make one specific thing happen.

How do you pick a critical number? Ask – what is our burning issue for this year/quarter – what do we need to improve most ? What is our top priority for this year? There’s often a strong temptation to choose Revenue as the Critical number – and we ask you at least at first to think more deeply about what specifically about revenue you would like improved.  Revenue can be improved so many different ways (increased number of new customers, increased pricing, increase frequency of buying for example) – think upstream and try to decide specifically what you want more of – and get your team focused on something more narrow that they can control .”

After you set a critical number, we recommend you set a second critical number which we call the counterbalancing critical number. Why? What if you had a tug of war with only one side pulling? You would get out of balance quickly. When you apply resources of your company to flex your muscles on one specific part of the company – you want to consider any negative implications on other parts of the company so you can counterbalance the effect.

The People/Relationship side of your business (employees, customers and shareholders) are extremely important to balance when you set priorities that focus on productivity.  The Delta story (Balance Subjectivity & Objectivity – Required Strategic Disciplines) shows how a company can reach it’s priority yet actually do damage to its reputation with customers.  The Enron example noted previously is an example of destroying trust with employees at the expense of hitting financial targets.  Similarly marching ahead and achieving a revenue goal at the expense of profits can hurt a business’ relationship with their shareholders.

When setting priorities be aware of which side of the two drivers your One Thing is focused on.  Is it the People/Relationship side?  For example measuring customer satisfaction as your number one priority for the quarter (using NPS Score) may need a counterbalancing Productivity/Process priority that measures operations efficiency or productivity.  Consequently measuring a Productivity/Process priority like revenue or productivity should have a corresponding counter balance priority that either measures customer relationships, employee engagement or shareholder satisfaction. 

Growing your business requires balance.  Getting to the mountain top as quickly as possible may seem like the most important thing.  You can leave a trail of damage on the way up that can harm or possibly reverse all the energy you expended if you aren’t aware of how these efforts affect the other driver or your business.  

Next blog Productivity/Process Drivers.

Topics: One Thing, People/Relationship Drivers, priorities, Metric Balance, Critical Numbers, Process/ Productivity Drivers

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1. Priorities: Determine your #1 Priority. Achieve measurable progress in 90 days.

2. Metrics: Develop measurable Key Performance Indicators. 

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Doug Wick, President

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The Strategic Discipline Blog focuses on midsize business owners with a ravenous appetite to improve his or her leadership skills and business results.

Our 3 disciplines include:

- Priorities
- Metrics
- Meeting Rhythms

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