Great Companies Use Their Resources

by Fiona Flynn on / 61 Comments

Category: Leadership, Mentoring Questions

SPECIAL GUEST BLOG By Fiona Flynn, Sales and Marketing Mentor, Mentors.ie

Are you overstaffed or understaffed?  Do you get the most from external suppliers and partners?  Are all your business assets used to maximum effect?  As companies turn their attention towards growth strategies, post recession, the focus is now on how to use all the resources available to drive profit and income.

So how do you ensure that your people and your resources are employed to greatest effect?

“The five step process is very logical,” says Fiona Flynn, Mentors.ie, “however, relatively few companies really use their resources to optimum effect.  The problem may be lack of factual data.  Executives genuinely don’t have the factual information to know whether their employees are deployed properly, or whether their sales teams are focusing on the best customers, or even whether spend on operations creates maximum efficiency.

This five step process helps companies to identify and evaluate resources and to realign their focus on the best opportunities:

  1. Identify the resources that most impact on the profitability of the company: Look at your Sales teams, distribution channels, and areas of operations that impact the bottom line, for example.  Which ones can deliver the greatest return for your business?
  2. Build a detailed simulation model of the areas that you want to evaluate.  Use data drawn from the relevant departments, for example, in Sales, you may wish to evaluate the administrative burden relative to the time spent actually selling.  Furthermore, you may wish to determine the amount of time and money spent on highly profitable customers versus low value customers.
  3. Prioritise activities in order from most valuable to least valuable. By its nature, work expands to fill the time available.  If you and your teams don’t fill your business time with high priority and valuable activities, then that time will be used up on activities that have little or no impact or perhaps even a negative impact on profitability.
  4. Seek out efficiencies. Extract the low value activities from the business model and find ways to carry out those activities at low cost.  In sales, you may want to set up a call centre for low margin customers, so that you can switch the focus of your sales personnel to more profitable clients.
  5. Focus on high value, high priority work. Resource optimisation means that you allocate the best of your resources to the activity that will generate most profitable income.  Organise your teams, budgets and operations to focus on highly profitable activity.  Using the additional resources that you make available; look for ways to add value in order to increase profitabili

The KPIs That Matter For Your Business

by SeanDonnelly on / 2 Comments

Category: Finance, Sales & Marketing, Strategic Change

SPECIAL GUEST BLOG By Sean Donnelly, Financial Management Mentor, Mentors.ie

“Navigating our way today in a more competitive environment cannot be accomplished merely by monitoring and controlling financial measures of past performance.” Robert Kaplan.

Traditional financial performance measures are insufficient. Future success will be increasingly influenced by increased focus on intangible assets such as customers, employees, product innovation and systems. Measuring the right things, the right way and taking the right action is the key to running a successful business. This entails defining long term objectives, translating the overall business strategy into a linked set of short-term measures and the mechanisms for achieving them. Linking of departmental & individual responsibilities with systems for feedback, learning and process improvement is key. It is critical to identify those factors which will drive performance (causes, leading indicator) from outcomes (effects, lagging indicator) factors. Unless you can successfully identify, measure and improve the correct key drivers you may be chasing at the outcomes rather than the actual causes.

Three types of performance measures:
1) Key result indicators: these tell the board how management have performed in terms of a critical success factor eg. customer satisfaction, net profit, return on  capital employed.
2) Performance indicators: that tell staff and managers what to do, eg. profitability of top 10 customers.
3) Key Performance Indicators: KPIs that tell staff and managers what to do in order to increase performance dramatically eg. analysis of reasons for sales leads not converted.

Typical characteristics of true Key Performance Indicators:

  • They are measured frequently, sometimes hourly, daily or weekly depending on the KPI. Monthly measures may be closing the stable door after the horse has bolted.
  • They include many non-financial measures.
  • They are acted upon regularly by owner/Chief Executive & top management team.
  • All employees understand them and what corrective action they indicate.
  • Responsibility for KPIs can be attributed to teams or individuals.
  • They have a significant impact on the organisation – eg. they affect most of the core critical success factors.
  • Positive results on KPIs affect other measures positively.

Examples of KPIs:

  • No of orders won, new leads opened, leads progressed to order stage, no of customers trading.
  • Market share & trend analysis.
  • The cost and effect of marketing, in terms of the numbers of enquiries or leads being generated, orders won and the cost of the leads/orders.
  • The conversion rates from prospects and enquiries to secure new business.
  • Percentage of customer deliveries on time and in full.
  • Customer satisfaction rating, complaints, returns etc.
  • Sales breakdown with gross margin by market sector. This could also be shown by product group.
  • Key efficiencies of operations processes, including waste & re-works.
  • Overhead spending vs budget, sometimes broken down into two or three elements or functions.
  • Staff/labour turnover figures.
  • Key financial management figures such as debtor days, creditor days, stock levels and cash liquidity.

KPIs may be classified as past, current or future measures. The most important KPIs are current and future measures. The prime purposes of KPIs are to provide knowledge of how to improve the processes and to motivate management and staff to constantly improve processes and performance.

© 2010 Mentors.ie All rights reserved.

Powered by Wordpress