High-speed performance: Getting from 0 - 60 in 5.2
Smooth handling. Great horsepower. Outstanding acceleration. When it comes to a motorcycle, performance is everything. The same holds true in business. While a good mechanic can help keep your bike in top shape, you need more for your business. You need the right measurement tools – and an engaged, enthusiastic team – to keep your business running smoothly.

Performance management can help you uncover those tools. The process is about identifying which key drivers are critical in helping you get the financial results you want.

“Ensuring your employees are actively involved in that process will go a long way to helping you achieve your goals,” reveals Steve Wilkinghoff, an MNP business advisor based in Medicine Hat, Alberta.

Knowing your drivers
Steve works with clients and their employees to identify the “drivers” or key performance indicators (KPIs) that have the greatest impact on the success of a business. KPIs can be identified by analyzing the four key areas of every business: customers, operations, people and financial results.

According to Steve, the customer component can entail anything from how satisfied your customers are with your service to whether your business is attracting enough of the “right” type of new customers.

The operational component takes into account factors such as the time it takes to serve a customer; the steps involved in serving that customer; the flow of information and whether it can be improved; and whether new steps should be considered, existing steps altered, or some steps eliminated completely.

People factors look at how happy your staff are in general. Are they absent often? Late for work? Do you have a high employee turnover? Is your business attracting enough talented people?

The financial component includes taking an in-depth look at how your business is performing in a wide range of areas, such as revenue, gross margin, debt and cash flow.

Steve stresses that how well your business performs in one area has a direct impact on all other areas. For example, if you can’t find enough staff to keep up with customer demand, your team may feel tired and overworked, and employee morale will decline. This, in turn, could have a negative impact on the quality of service your customers receive. In time, the decline in service may translate into a drop in sales and profit.

Maintenance time for Big Boys’ Toys & Cycle Shop
Ivan Karsten knows just how important it is to keep a bike and a business running smoothly. Ivan is the owner of Big Boys’ Toys & Cycle Shop, a Harley Davidson dealer based in Dunmore, Alberta. While Ivan’s business has been doing well, his business advisor, Steve Wilkinghoff, recently noticed a decline in gross margin on his year-end financial statements.

Steve used ProfitDriver, a unique financial software package, to analyze the dealership’s financial information at a more in-depth level. ProfitDriver enables individuals to create “What if?” scenarios by determining how even a slight change in a financial ratio, or key driver, can have major implications for a business. In the case of Ivan’s dealership, the decline in gross margin was costing Ivan approximately $320,000 annually.

As a result of the analysis, Steve and Ivan began talking about how Ivan could enhance productivity and increase revenue by incorporating performance management strategies into the business. To kick-start the process, Ivan invited his entire team to a planning session in November 2006, which was facilitated by Steve.

The goal of the session was to give the team an overview of what performance management was all about, including how it could benefit the overall business, the customers, and individual job satisfaction.

Just two days after the session, Ivan had already received positive feedback from his team - and even noticed a shift starting to take place in how they thought about the business.

“It’s really helped to have someone like Steve, who is an objective third-party, walk everyone through the process and get them thinking about how everything they do is linked, whether it’s selling a bike to a customer or ensuring repairs are made on time,” says Ivan.

Steve adds that he could already see a shift in gears at the session. During a discussion on customer service, the sales team mentioned that customers occasionally became upset when a service technician walked by without acknowledging their presence.

The technicians realized that even though they may not be able to assist the customer directly, simply saying hello if they were walking by helped convey a positive impression. The team has decided to make the action a “performance standard” to which they all hold themselves accountable.

The road ahead
In the coming months, Steve will be facilitating additional meetings with Ivan and his team, including a financial fluency session.

“To take it to the next level, it’s crucial that our team understands how their individual actions contribute to the bottom line,” Ivan explains.

To build that understanding, Steve will be working with the team to come up with a scoreboard as well as KPIs specific to each of the four business areas that drive profits. For example, if the business’s overall goal is to increase revenue by two per cent, the service team will know they need to increase productivity by five per cent.

The team will also identify which activities they need to complete each day to reach that level of productivity.

“It’s that type of ‘line-of-sight’ linkage between everyday activities and the ultimate financial and strategic goals of the business that gives Performance Management its power to transform a business,” reveals Steve.

While it’s early in the process, Ivan says he’s already looking forward to sharing his experiences with colleagues in the Harley Davidson Performance Management Group. The group of Harley Dealership owners from across Canada meet three times annually to exchange financials, benchmarking, and best practices. Ivan’s dealership is the first in the group to be developing a performance management strategy.

“The steps we’ve taken have been really positive, and as we get further along in our strategy, we’re expecting even greater things down the road.”

Top 4 Steps to Effective Performance Management

1. Ensure your team understands the financial basics of your business.
   
   
2. Work with your team to identify your Key Performance Indicators.
   
   
3. Encourage each member of your team to accept “line-of-sight”
   activities and responsibilities that enhance your overall business and team goals.
   
   
4. Measure your performance against your KPIs.

By Steve Wilkinghoff, MNP Business Advisor. For more information, please contact your local MNP advisor or Steve at 1.877.500.0786.

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