Are you Overlooking these Gauges on Your Business’s Dashboard?
January 20th, 2022
The problem is that all of the financial data gets a lot of our management’s attention because it is so much easier to measure. And what gets measured is what gets managed. Think about it. We get quarterly, monthly, weekly, and sometimes daily financial data that we use to help us manage our businesses and make them more profitable. However, when I ask most entrepreneurs how the culture, leadership, or engagement in their organization is, the response is usually “ehhh…pretty good.” My guess is that if you called your accountant or CFO and asked them how the revenue for last month looked and the best answer they could give you was a shoulder shrug and “pretty good,” you would run them out of town with a broom. But the reality is that most of our companies don’t put metrics to the people side of our business—and remember, “You can’t manage what you can’t measure.”
Depending on where you are in your business, the people side of your business is, has been, or will be the most frustrating part of your business. I know this to be true because 1) People are complex and difficult, 2) People develop slowly, and the results of your work are not always externally evident, and 3) People development, particularly on teams, does not have widely used or understood measurement tools.
The three people metrics for your human capital dashboard are CULTURE, LEADERSHIP, and ENGAGEMENT. To be clear, these human capital metrics will rarely, if ever, take prominence on your overall dashboard. I get it. I run a business, too. Profit and cashflow are a primary focus. You must keep your eyes on the profit and cashflow gauges—they are like your speedometer and tachometer. They are front and center, as they should be, but, interestingly, your speed and the RPMs of your engine are made possible by what the other secondary gauges are measuring in the background. You know, those smaller gauges off to the side of your dashboard, things like fuel, oil pressure, engine temperature, battery voltage—as it turns out, those things are important too. Take my word for it, if your oil pressure gauge drops to zero you had better pray it’s a gauge malfunction, or your speedometer is not going to be looking too pretty in just a few seconds. Your human capital gauges, just like your oil pressure and temperature gauges, are often taken for granted. You just expect those parts of the business to run smoothly. But when they don’t, bad things happen, so they are worth measuring and keeping an eye on.
I was once asked why I didn’t put revenue as one of the primary gauges and instead put it with the other secondary gauges. My response was, “Revenue is not the defining metric for small business success.” Some people will balk at this statement, but I really don’t think that revenue should have the place of honor that we typically give it. Some of this is just my philosophy on business, but it has been my experience (and the experience of many other business coaches) that many entrepreneurs place too much attention on revenue. Mike Michalowicz, in his book, Profit First, does a great job of dispelling some of the myths around a “revenue-driven company” and a “growth for growth’s sake” mindset. If you are wrestling with profitability in your own business, I highly recommend reading Mike’s book. He’s funny and down to earth. I have recommended it to several of my clients who have very much appreciated his perspective.
