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Creating Meaningful Measurement is More than Numbers
Tips on managing and growing your business.
“You can’t manage what you can’t measure” is a quote attributed to management consultant W. Edwards Deming. The gist of the quote means that things must be measured to determine whether or not they are beneficial to a company. However, this is a distortion of Deming’s words. He commonly stated that there were important things in business that could not be measured, but that still needed to be managed. In fact, one of his “seven deadly diseases of management” is running a company on visible figures alone.
Deming is also often quoted as saying, “In God we trust, all others bring data.” This seems to contradict his seven deadly diseases of management. However, Deming’s writings seem to indicate there is a delicate balance between data and anecdotal information. We need to use data to make sound business decisions, but there is more to it. Too often decisions made by business owners are based solely on anecdotal information or a “gut feeling.” Conversely, some business owners only use data in the decision-making process.
Instead of “you can’t manage what you can’t measure,” a better phrase would be “to be successful, measure the correct things and act upon the findings.” Think about all the data points your laboratory collects. You gather sales information, production information, product information, etc. If you were to try and manage all of those data points, your decision-making would be paralyzed by the sheer amount of information.
A good metaphor for processing data is a sieve. Take all the information you gather and run it through the sieve, extracting only the information that has meaning and can further your business. Your Key Performance Indicators, or KPI, act as the sieve. For sales and marketing, some of the KPIs used to filter data may be a new business, client retention, and percentage of chair (how much work a dentist sends us). On the production floor, the KPIs may be remake percentage, turnaround time, or labor as a percentage of sales.
Once you have identified your KPIs, it is time to start asking questions. The first question to ask is: Where are you today? Next, ask where do you want to be? Here is an example of the process.
• New clients in 2012 = 240
• New client goal for 2013 = 350
• Increase for 2013 = 110 more new clients, or a 45.8% increase
Now we have an initial goal to work toward, but we need to get more specific and use our sieve. Some of those 240 new clients from last year only ordered a night splint and that was the last we heard from them. Other clients sent us all of their work. In 2013 we would rather have clients who sent us all of their work instead of the “one and done” dentists.
Our next measurement might be the average sales from a new client or the new client retention rate. Of all the new business we brought in last year, what percentage of customers sent us cases 3 months after their first case, 6 months after, and lastly 12 months after?
• New client 12-month retention rate in 2012 = 50%
• New client 12-month retention rate goal for 2013 = 60%
• Increase for 2013 = 10 percentage points
The goal is to start to look at more specifics. For 2013, the goal is to gain 350 new clients and have a 12-month retention rate of 60%. Twelve months is a long time to wait to measure, so we will also have benchmarks for 1 month, 3 months, and 6 months.
Remember the phrase “measure the correct things and act upon your findings”? We are now measuring the right things. Now we need an action plan. This is the area where most goals and strategic plans fail, because there is no plan behind the measurement. This is where we go back to basics—who, what, when, why, and how much?
Start with why. Why does your retention rate drop down at 6 months? Start using your anecdotal information and gut feelings to investigate the numbers. Our drop in retention rate tells us that we are great at initial follow-up, but not so good later on down the road.
Next, go to what. What are we going to do to achieve our goals? Using the example above, we would work with the sales team to improve follow-up. If we have not seen a case in 2 weeks, that account is flagged for a call or visit.
Next, focus on who and when. Who will be involved in the change process and When are we going to make the change? Create a timeline for change and for evaluating results.
The last step of the plan is How Much. What is the ROI on this project? We have now created a full project plan that takes into account the data we have gathered along with the anecdotal information that gives us a clear way forward to manage and grow
About the Author
Deborah Curson-Vieira is the marketing and communication manager for Dental Prosthetic Services (DPS) in Cedar Rapids, Iowa.