You Are What You Measure

The oft-used missive, “You can’t manage it, if you can’t measure it,” only goes so far.
Inasmuch as you can’t run a business without some level of information on what is actually going on – or at the very least, knowing how much money is coming in versus going out, which always struck me as harder to pin down than it really should be – I don’t know of any business these days that relies on that as the sole measure.
Primarily because top line revenues and bottom line results can be affected by the many lines in between, businesses seek to manage metrics that provide a shorthand for both success or failure, and can be tracked on the run.
Daily sales, for example, are purely a top-line metric, long relied on by store owners to determine how well the business is doing. It’s almost always held up against the “nut”: the fixed costs related to opening the door that day. It’s not a detailed measure, but it’s not unreliable either, as long as both are accurate. Another measure for many of your trade customers is car count – again, not a bad measure in and of itself, provided it is not viewed in isolation.
The same holds true for inventory turns, average sales per employee, GP%, average sale, and more retail-appropriate metrics such as GP$ per square foot, foot traffic, and conversion percentage – and any number of other business metrics that you may monitor on a continual basis.
We live in a time when all these, and more, are readily available to even the most inept number crunchers among us. The simplest of management systems can provide the kind of insights into customer behaviour and market shifts that in a previous era would only be apparent to the true business savant. These new systems allow owners and managers to keep a finger on the pulse of the growing, multi-branch organizations that make up an increasing part of the aftermarket landscape.
With so many metrics at your fingertips, combined with the greater separation between management and operational staff with the larger organizations, it is more important than ever to select the right measures of success.
As an extreme example, if you were to reward a store manager for building retail traffic, but not total or even average sales, you might end up with a busy store, but no focus on merchandising and show floor selection. The equivalent at your repair shop customer level would be judging a tech for the number of cars worked on, but not the size of the work order or the thoroughness of the repair.
Today, businesses continue to be hyper-focused on customer satisfaction, so you and your customers need to ensure that you are measuring activities that build customer satisfaction.
It’s not easy, but here are a few:
+ Returns: Break out warranty from “wrong part” returns.
+ Delivery: If you measure delivery times, measure how accurate your estimate is.
+ Out-of-stocks: Don’t think of this as a lost sale; think of it as a customer’s wasted call.
+ Rate of perfect order completion: You might call this service level, but it’s the all-or-nothing aspect that makes this measure valuable in terms of customer satisfaction. Pads but not rotors? Three spark plugs? Perhaps you had to substitute brands. You should track that.
+ Pricing errors: Why this can cause grief should not need explanation.
+ Credit handling: How many of your credits are handled within the month?
I am not suggesting that these metrics replace the ones you are accustomed to, nor that you necessarily tie them directly to staff compensation – at least not until you develop your own benchmark data and have mechanisms to affect the outcomes.
Rather, these are measures for your business. And that, more than anything, makes it a measure of you. nJN