19th October 2017

The Second Discipline of Execution.

Where I live, out in the country, broadband was so slow that I invested once in satellite broadband. The concept seemed like a winner but in fact it was useless and unworkable. Why? Because there was a limit on our usage and when we had gone over quota the speed was throttled back to be worse than dial up. That wouldn’t have been so bad other than there was no way to see what our usage had been and what capacity was left. It was a bit like having a car with no fuel gauge, you knew that you would run out of fuel eventually but you had no idea when that would occur, or when it stopped, had we run out of fuel or had the car broken down.

Without the metrics, the fuel gauge in this case, we simply don’t know where we are. We don’t know what is working and what is not working. We don’t know what to do more of and what to do less of.

The second discipline of execution is metrics. It is about having the ability to measure our progress on a daily, weekly, monthly and annual basis. A few years ago a very successful businessman once opened a conversation with me by saying that the trouble with most small businesses was that they didn’t know their numbers. I was astonished that this should have been his opening comment and as I reflected on it I realised how right he was. If we don’t own a set of scales it is almost impossible to know whether the diet is working or not. You can’t manage what you can’t measure.

I know lots of you will be metaphorically patting yourselves on the back and saying that you have numbers in your business. Perhaps you get quarterly or even monthly numbers from your accountant. Are they the right numbers, I wonder? Are they timely enough? Are they accurate enough? In my experience most smaller businesses don’t have good numbers on which they can make decisions. Nor do they have the most useful set of numbers. That is what tends to keep small businesses small.

For businesses to grow they need to have timely relevant and bespoke numbers. Very many businesses simply have the generic profit and loss statement that the standard accounting package throws out. For most businesses that simply isn’t enough. In your business sales per employee, or profit per employee might be the most useful number, or client retention, or average invoice value or recovery rate or conversion rate. Which one is it and which one will be most useful?

The second discipline of execution is metrics. How useful are yours?