Risk & Business Magazine Reider Insurance Fall 2015 - Page 10

Like the tradeoffs between the balance sheet and the P&L; it’s this reputation/ productivity balance that is the essence of business. We want to make our customers, employees, and shareholders increasingly happier, which should lead to a more valuable company; but we can’t give away the store in the process. “We want to make our customers, employees, and shareholders increasingly happier, which should lead to a more valuable company; but we can’t give away the store in the process.” this one), etc. In turn, the customer group represents all those who pay you. After you subtract one from the other, what’s left over, hopefully, is some cash to pay back the bank, investors, and the owners. It greatly simplifies how you view a balance sheet if you look at it through this three-stakeholder lens. If you think about the balance sheet, it lists a bunch of people and organizations with whom your business has a monetary relationship, telling you who owes who and what cash, if any, remains – hopefully a significant amount of cash(flow) if you’ve structured the business model correctly! Process/Activities These three groups of people, in any business, are then engaged in only three main activities or processes: making or buying stuff; selling it; and keeping track of the transactions. I refer to this as the “process” or “activity” side of the business where the focus is on doing things better, faster, and cheaper (less costly, for those that cringe when they hear the word “cheap”). It’s these three fundamental activities that determine the profitability of the business. Simply put, making and buying stuff generates costs. In turn, selling this stuff generates revenue. And, again, if you’ve structure the business model correctly, you’ll have quite a bit of profit left over when you subtract one from the other. “Simply put, making and buying stuff generates costs. In turn, selling this stuff generates revenue.” Like with the balance sheet, this triumvirate of basic processes provides you a greatly simplified lens through which to understand and view your income or profit & loss (P&L) statement. The Juggling Act What you’re left with is a model of business where you have three groups of people with whom you have to maintain a positive reputation; and three groups of activities you have to keep productive. PRODUCTIVITY REPUTATION Employees 10 Customers Shareholders Make/Buy Sell Recordkeeping # of suggestions Net Promoter Score Cash Flow Quality Pipeline Accuracy Retention On-Time Performance ROI Cost Sales Cycle Time Timeliness Utilization Rate Brand Promise Metrics Equity Speed Close Ratio Usefulness RISK & BUSINESS MAGAZINETM FALL 2015 What the firm needs, then, are some key metrics that measure reputation and productivity on a daily or weekly basis. This brings us back to the six main areas of business we need to juggle and the challenge of finding easily measurable key performance indicators (KPIs) that let us know how we’re progressing. Below are a few suggested KPIs for each of the six areas. And once you have KPIs for each of the individual areas, you can create formulas that let you combine the “people” metrics into an overall Reputation Score; and combine the “process’ metrics into an overall Productivity Score. With these two numbers, you’ll be 90% ahead of those driving their business without a proper set of gauges – a key (and balanced) competitive advantage. Verne Harnish is founder and CEO of Gazelles, a global executive education and coaching company, Verne has spent the past 30 years educating entrepreneurial teams.  He’s the author of Mastering the Rockefeller Habits which is endorsed by over 100 CEOs of mid-size companies and is published in ten languages. As a Certified Gazelles International As a Certified Gazelles Strategic Advisor, AndyInternational Buyting provides Strategic Advisor, Buyting provides strategic directionAndy for high growth strategic direction for high growth companies and their management companies andgrow theirtheir management teams as they organizations teams as they grow their organizations to the next level. Learn more at www. to the next level. Learn more at www. AndyBuyting.com AndyBuyting.com