What You Can Measure, You Can Manage

Background

Bill was a painting contractor. Most of his contracts were with repeat customers, some of whom had done business with his father. The business had thrived under Bill, enabling him to invest in a motel, a restaurant, real estate and other businesses.

The Problem

Suddenly, Bill encountered a big problem. He signed a contract to repaint a large motel. The foreman was a steady fellow who’d been with Bills firm for 20 years, but the job was falling behind schedule. As the weeks progressed, other problems arose that put the job even further behind. Now Bill was facing penalties for not finishing on time. He was watching his profits tick away on the clock..

The Solution

Bill, his foreman and I met for breakfast to review the situation. I suggested a contest, with incentives where needed, and advised them to split the crew into two teams. We divided the remaining work in two equal lists of areas to paint and things to do. We calculated the time it would take to complete a quality job on budget and with a profit. Bill announced to the two crews that the goal was to finish their respective tasks in the allotted time, adding that any time saved under the allotted time would be a bonus—paid time off. As a kicker, the team finishing first would get a case of beer.

The Result

The whole motel project finished two days ahead of schedule and the crews won two paid days off. They all experienced the satisfaction of a job well done. Bill met the contract terms and made a profit – his reward. Bill hated to lose money on a contract. As he was fond of saying, “Its ok to be tired and it’s ok to be broke, but being both broke and tired is stupid!”

Commentary

Management frequently has financial benchmarks for progress or profitability, but they rarely share them with the team. By using non-financial measures and by breaking down the goal into easily identifiable subunits and extending a challenge and a reward on top of wages, the pride and initiative of the team were engaged and everyone came out ahead. Profit is not a particularly good interim measure of progress. Physical units of measurement allow team members to keep track of progress for themselves. Then they can manage themselves. What you can measure, you can manage.

Author Bio
Don Morrison of The ProfitProcess consults small business owners on making a business more profitable, Valuation of Small Business, Business Valuation Resources, Small busines development, Small business value development, Leadership Development of Small Business, Working Capital Generation Improvement.
http://www.theprofitprocess.com/