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Measuring Performance

FastTrac, Kauffman Foundation

An old adage says, "What gets measured, gets managed." In other words, you cannot improve on something if you don't know your status today. Baseline data provides a starting point, but you must continually measure success as time goes by to ensure quality and results.

Measuring success is like flying an airplane and continuously checking the horizon compass to keep the plane on course.

Don't be afraid to look for outside assistance in the process of measuring performance. Just as you go to a lawyer for legal advice and an accountant for financial advice, look to a business or management consultant to assist you in developing metrics for measuring performance. Sometimes an outside eye can identify barriers to success or unrealized potential.

Use Success Measurements Worksheet to assign your expectation of the level of achievement for one of the indicators you chose. This measure might be a numeric value or a qualitative statement indicating what would be considered successful.

The final step in the measurement process is to determine, through the use of performance criteria, whether the employee was successful in achieving the goal. Use Performance Standards Worksheet to create criteria and to write three performance standards for your job description.

You Are What You Measure

Mary Naylor is the CEO and founder of Capitol Concierge, a service business for office buildings, and VIPdesk, a premium concierge service for national brand leaders in the financial services, auto, and travel industries. The businesses collectively bring in approximately $15 million in annual revenue.

Capitol Concierge gives office-building owners the ability to offer a concierge service from the lobby of their commercial properties. They hire and train the individuals, and the property manager pays them an annual fee to staff the building and provide services—flowers, gifts, tickets, information—to the people who work there. In seven years, Naylor grew that business from one location to 80 buildings.

Naylor explains, "I'm a big believer that you are what you measure. Every company should have a critical number that you look at as a driver of your business, whether it's cost per order or cost per request—whatever drives home the underpinnings of your business model. In addition, we have about five key indicators that I use in both companies which the entire team will track week to week. Our critical three are recognized revenue, annual contract value, and cost per request. Other indicators are total requests, total product sales, number of clients, population base, and burn rate."

The company keeps their three critical numbers and key indicators on a giant board, and everyone in the company knows what they are and how individual numbers impact revenue and profitability. Because they're tied to the same goals, the employees are consistently on the same page.

They regularly ask themselves: Is every position still critical? Are we getting maximum productivity out of each department and division? Can we re-bid and do things cheaper?

Naylor is adamant that you have to take care of your team. "We have a stock option plan for all employees, so everyone has a stake in the company. Plus, everyone's bonus is based on the same two numbers measuring revenue and profitability. We pay out the bonuses if we hit the numbers—or some portion thereof on a sliding scale—and if we don't, we don't. It's tied to company performance, so we win or lose together. The people are the business. If you forget that, you won't have a company that lasts."

© 2007 Ewing Marion Kauffman Foundation. All rights reserved.

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