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How often have you gone into your accountant’s office at the end of the year wanting to know how your business did? As an accountant, providing you with an “official” score sheet for your company’s performance is just a small part of what we can do and isn’t the best or only approach to determining financial performance. The problem with relying solely on this approach is that the events that created your income statement and balance sheet have already happened. Since the results are all in the past, it’s not something you can change. To really influence the success and growth of your business, it’s important to be proactive. This year, rather than ask your accountant “how did we do?”, try asking “what do we need to do to be more successful?”
Traditionally, how we measure outcomes is:
Profit = Revenues – expenses; represents a financial view of your company’s performance.
But how do we influence outcomes and improve profits? To do this effectively, we need to look deeper into the activities that generate revenue and drive your expenses.
Profit = People x Process; represents a business view
If you break down any business there are four key areas you can measure your performance: Customers, Operations, People, and Finance. Within each area, there are Key Performance Indicators (KPI’s) that should be measure and monitored. “If you can’t measure it, how do you improve it?”
What are KPI’s your company should be measuring? There are literally hundreds of variations of different KPI’s as every business is unique. The first step required is to identify the KPI’s that are specific to your business reaching its overall goals. For the forestry industry, many will only have one customer and what they are receiving for “services provided” may not be easily influenced. As a result, your focus for achieving improved results should focus on the other three areas.
Once KPI’s have been established, a key step is monitoring the results, be it weekly, monthly, quarterly or annually depending on the type of KPI.
You then need to engage and empower your team to improve the numbers through four steps:
What will you get out of all this effort?
It is important to note, that when creating your Balanced approach, all of the four components are equally important to one another and do not need to be completed in any particular order. Applying the Balanced approach to your operations is not a major undertaking. The best way to start developing your approach is to have a half-day planning session with all of the members in your operation. A qualified facilitator can lead you through this session and help guide the process so you can determine the best way to prioritize items and develop action plans for your operations.
This article was originally published in the Spring 2011 issue of Truck Loggers BC magazine.
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