6: Instrumentation

Cars have a variety of instrumentation including the ubiquitous speedometer and odometer, rev counter, oil pressure gauge, turbo boost gauge, warning lights for the traction control and so on.  The general rule is that cars have instruments that give the driver information appropriate for that vehicle.  So while a battery powered town car might need a speedo and a charge indicator, a 200mph super-car will have a whole array.

Sitting in the driving seat of a company, one needs a similar array of information to allow us to monitor progress and anticipate potential problems and the instruments required will also be broadly different for each company.  So why do many companies lack a decent array of management information?  Two reasons: first, people aren’t certain what they need and second, they are not sure how to get it.  Easily.

The first challenge relates to the levers that we use to control our company: if there is a lever, then we should be able to understand the effect.  I think the ubiquitous instruments should monitor cash-flow and profitability, both in real-time, but other questions might include:

– Are we well advised to pour more of our profit into advertising?  It depends on whether it has an effect on bringing in more business or keeping customers happy.  How do we measure this?  New sales (ask the sales & finance departments), improved customer understanding of our proposition (ask your customers or agents), greater perceived product value in marketplace (listen to discussion within the industry)… all are measurable and give an indication to answer our initial question.

– Do we need more staff?  It depends on whether we need more capacity or new skills.  How do we measure this?  Utilisation rates (ask HR & finance), forthcoming sales (ask the sales department), maternity cover (ask HR), new product areas (ask R&D and yourself).

The great thing about having management information from day one (or from today if you don’t already have it) is that it helps you to spot trends over time and better understand what levers to apply in given circumstances.

I feel that a clarification is necessary here.  Management information is about what is happening right now and ahead, in the same way that a speedo tells you how fast the car is going and a SatNav where the road goes.  Information that tells you what happened last year (statutory financial accounts), last quarter (VAT submission) or last month (PAYE figures or even last month’s sales) are like a service history: desirable from a car ownership perspective, but utterly useless to the driver. 

You should be asking: how big is the forward sales book; how profitable are each of your products and customers; how fully utilised are each of our workers; how happy are your staff and what are their concerns? 

This information, allied to anticipation, will enable you to drive your company harder and with far more certainty.  Ignore it at your peril!

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