Tracking Performance

By Chuck Violand

March 14, 2016

In the early years of our companies, tracking performance is pretty easy: how many jobs did we do today, this week, this month? How much revenue did we generate and how much cash did we deposit in the bank? Sometimes we even use a more basic measure of our activity by asking ourselves how tired we are at the end of the day.

While a CEO’s responsibility to track his company’s performance doesn’t change as his business grows, the things we track and the ways we track them does. Fortunately, if we’ve done a good enough job on the first two CEO accountabilities (charting the course and hiring the right people) it makes this third one a whole lot easier.

If you reported to a board of directors, you’d be answering their tough questions about the performance of the company. How would you rate your company’s current performance? How would you rate your own current performance?

If your company was a publicly held entity, you’d have to answer to shareholders about your company’s performance. But, most of us are privately held, usually by as few as one or two people, so we don’t feel the need to report performance to anyone other than ourselves…and maybe our spouses.

When you consider that 82% of the businesses in North America are family run businesses and that, for a significant number of them, those businesses are the primary source of income for the family (sometimes the only source when spouses are also employed in the business), it tends to reframe the notion of our board of directors and our responsibility to them. If we expand on this definition to include lenders (banks, family members, friends from the bar—anyone who has loaned us money) and our employees, it can redefine it further. Suddenly, we realize that people other than just ourselves are watching the decisions we make and how our companies are performing, and that trying to sweep poor performance under the rug doesn’t really work. At least not for long.

If we’re serious about growing our companies we have to run them like businesses, and that starts with tracking performance. The inside performance of our companies is the easiest, since most of the factors are within our control: revenue, profitability, cash flow (A/R, A/P, cash-on-hand). As our companies grow, so do the financial metrics which then might include the company’s investments, financing options, liquidity, and how the company is performing compared to industry leaders.

But, tracking performance doesn’t stop with the company’s financials. Before numbers ever show up on a financial report we need to be tracking performance in other areas. These include our company’s operating Key Performance Indicators (KPIs), and sales and marketing activity (web-based as well as front-door activity). We also want to measure how many people join our companies and how many leave (turnover), how long our people stay with us (retention), and if they are growing in their jobs, since all of these will directly affect the financial performance of our businesses.

The list of performance metrics needing tracked never ends, and neither does the CEO’s responsibility to see that it always gets done.