Putting Together A Statistical Management System
Klaus Hilgers, Founder and President of Epoch Consultants, Inc. (USA)
Klaus Hilgers is an internationally known consultant, speaker and trainer. He has been providing consultancy on management know-how to owners and executives in various businesses for more than twenty years. Mr Hilgers has developed management, sales, marketing and communication programmes for many private, public and professional companies and organisations, including DuPont, UPS, RCA, BethlehemSteel, BudgetRent-a-Car, the U.S. Navy, and Vermont and Texas state governments.
Mr Hilgers received a master's degree in sociology from Montclair State University, New Jersey. He is a professor at the International Hubbard College of Administration, a public educational institution, which offers programmes based on the Administrative Technology developed by L. Ron Hubbard. Mr Hilgers is the author of books, video seminars and articles on management, sales and other related topics.
If you haven't noticed, things don't stay the same for long. The economy was terrific and now we have a recession. You lose a staff member, a new competitor opens around the corner, people get laid off from work, your promotional actions didn't give you the response you expected. You're wondering if you should discount your prices, raise them or keep them the same.
Many factors affect your business in both positive and negative ways. We need to control those factors so that we provide a quality experience for our customers. The key tool for keeping your finger on the pulse of your business and its performance is by using statistics. According to Jack Welch, former CEO of General Electric, one of the things he looks for in people is "the ability to consistently execute and deliver on their promises." The way you "see" if they have delivered on their promises is by looking at their measurable results.
Having a good statistical management system as the one developed by L.Ron Hubbard allows you to manage and control your business. Just as a driver of a car looks at the dials of their car to determine its speed, fuel level, time, distance, battery life, oil level in order to determine the health and performance of their vehicle, so does a business need its dials. They are the indicators of the viability and performance of that enterprise. The indicators tell you what’s working, what's not working, and what needs to be corrected and improved.
What is the Product of a Business?
Any business has to produce a product or service. This product has to be measurable or it is not a product. A business should produce a Valuable Final Product (VFP) for its customers. "A Valuable Final Product is something that can be exchanged with other activities in return for support. The support usually adds up to food, clothing, shelter, money, tolerance and cooperation (goodwill)," as pointed out by L. Ron Hubbard in Modern Management Defined.
When I ask business owners to define their product there is the longest silence one ever heard. But if you don't know your product, then you can't figure out the statistic that shows the quantity of the product being produced or obtained. Let's take for example Health Club. An example of a VFP for this business is Enthusiastic Members participating on a Regular basis at the club and referring new members. With this product you can figure out the key statistic in the club because what is really being measured is participation. Clubs are in the participation business. How many people come to the club, what's the usage? How many referrals were received this week? You can quickly see the relationship between usage and referrals. The trends will be the same. If usage goes up then referrals tend to go up and vice versa, unless you don't ask your staff to get referrals.
There are many types of numbers to keep. There are numbers that show the performance of the Business, the Divisions, the Departments and the performance of the individual staff member. Each staff member should have some statistic that shows his or her productivity. Marketing people can track walk-ins and call-ins, which shows their response rates. The sales people can track calls made, appointments made, number of tours given, closing ratio and number of referrals received. Then one can determine which are brought in the most business. What area of your business management needs improving?
Why Keep Numbers?
1. What gets measured and rewarded gets done.
2. You can see if things are getting better, staying the same or getting worse.
3. You can see success from failure.
4. Helps determined future strategies.
5. Managing by the numbers is better and safer then by operating on hearsay, feelings, hunches and personality contests.
6. It gives you the facts, and nothing but the facts.
7. Lets the staff know how they will be measured and rewarded.
8. Tells you what needs correcting and strengthening.
9. Key to performance evaluations.
10. If you can't measure it, it's probably not worth doing.
These are some of the reasons you want to keep the numbers.
Graphing the Numbers
Lots of businesses keep statistics and look at their numbers, but don't graph them. A statistic is used to make comparisons between now and an earlier time period. Do we have more customers this January and last January? Do we have better retention this month versus last month? Graphs allow you to make the comparisons easily and quickly and see the trends affecting your business. As one business owner pointed out, "Since I started graphing my numbers, I have a more realistic picture of what's going on and am able to make more effective and quicker decisions." This system is being used by a lot of the most successful businesses around the world.
Interpreting the Numbers
The numbers will show a relationship. We know that if referrals go down so will new sales, which will affect the income. There are a lot of strategies for improvement, depending on the circumstances. Knowing what questions to ask can help you come up with solutions:
· Am I getting enough people into the store, club, business?
· Do I have a sale or marketing problem?
· Are the salespeople closing at least 65% of their presentations?
· Am I getting enough referrals?
· Do we promote enough and to the correct public?
· Is my staff trained?
· Are any staff members affecting the business in a negative way?
· Am I rewarding and acknowledging the marketing and sales people for their accomplishments?
· Is my staff really motivated?
· Is our advertising getting the response I should be getting?
· Is our pricing correct?
The numbers will be the determining factor in whether or not something needs to be changed. The amount and quality of your promotional activities leads to the number of people coming into the business which leads to the number of sales presentations which leads to your closing ratio which equals the number of new customers or clients.
1. Determine what you want to produce. What is the VFP for the business, divisions, departments and each staff member? This takes some thinking because if you have the incorrect VFP it affects your production.
2. Identify the correct statistic to measure that VFP. Lots of mistakes are made here.
3. Develop a system for tracking those Statistics. Gather statistics for such items as Gross Income, Profit, Sales, Website Hits, Value of Service Delivered, Cost of making your product, Promotional Responses and Repeat Sales.
4. Graph those numbers weekly, monthly or yearly.
5. Notice the trend and analyse the numbers. What do they indicate?
6. Develop a written strategy to improve the numbers. What is the correct strategy in a recession? Should we promote more, less, different? You are only as good as your strategies.
7. Work with your staff to implement those strategies.
8. Evaluate the effectiveness of the strategies based on the new trend and repeat the above steps.
9. Reward your staff for their accomplishments.
10. Set new targets and quotas on a weekly basis.
Great management starts with caring about what's going on, observing what's going on, being aware of what's going on, evaluating what's going on and acting on what's going on so that conditions continuously improve in your company. The key tool to your success is having the facts, having the numbers that show your productivity. Remember what gets measured and rewarded gets done.
ã 2005 Epoch Consultants Inc. ALL RIGHTS RESERVED
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