Decisions with numbers

Business is Personal” has been a thing for almost 12 years now. While many things have changed in that 12 years, the nature and impact of good and bad decisions remains the same: the difference between success and failure.

“So says Captain Obvious”, you might say. Perhaps, yet your decisions continue to be the single most powerful (or weakest), positive (or worst) impact you can have on your company and your team.

The information and process you use to arrive at those decisions makes all the difference.

Demonizing the numbers

On a number of occasions, I have suggested that you start gathering metrics – even if you start with a single number and a yellow pad. Your data gathering might be more sophisticated than that, but it won’t matter if you aren’t using the data to make decisions.

It’s easy to demonize the numbers. They make it easy to make “impersonal” decisions, right? They tell us that Marta (who has only been here for two years) is producing twice as much as Jenny with fewer quality problems. Yet Jenny has been here for 10 years and must be loyal to the company.

The impersonal numbers say Jenny should be sent packing, or should find another job, or should be moved to another role in the company. Should we ask her if she’s bored, or needs a new challenge or is struggling with (whatever)?

Maybe Marta has more ambition and bigger goals than Jenny, who may only be here for the paycheck and is happy as long as that continues. Or maybe Jenny doesn’t realize her volume and quality are down and would change whatever is necessary to improve her numbers if the data told her about the problems.

Numbers don’t lie and don’t care about circumstances. They’re demonized because they seem to provoke decisions to be made without regard for the people impacted by them.

Data provokes questions. Is the data misinterpreted? Is there more to the story about why Jenny’s volume and quality are down? Is the data incomplete? Is the analysis incomplete? Like any tool, metrics can be used badly.

Ignore some of the numbers at your peril

The data indicating Jenny’s apparent lack of productivity and quality might be affected by the machinery she’s using. Is her equipment operating at full speed?

Do the metrics take into account that she is the subject matter expert in her department? Does whoever evaluates the numbers know that thanks to new hires in the last quarter, much of Jenny’s time is spent training new employees on her equipment?

Do the metrics reflect that her machine was down for 12 hours last week and that while her machine was down, she made service calls to pick up the slack for a sick staff member?

You want to know these things when you make a decision about Jenny’s performance numbers.

Decisions are personal and impersonal?

What data often does is reinforce decisions that you’re afraid or unwilling to make. Sometimes data tells you things you weren’t the least bit aware of, but be sure that these surprises are well-researched. There are often multiple factors affecting a single metric, and some are not always obvious.

When the numbers are ignored, decisions are delayed or not made at all because of a personal bias or a desire to avoid “hurting” someone. Meanwhile, the numbers keep telling you what you need to know to make the decision that’s best for the everyone.

When complete, a metric provides you with the information needed to make decisions based on what’s really happening in your company. Yet almost all decisions are personal to someone. How do we make personal and impersonal decisions at the same time?

We don’t.

Even if the decisions aren’t personal, the impacts usually are. Make sure the data used to make a decision tells the whole story. Make sure that both the directly and indirectly impacted understand the context of the decision. You might feel these things are none of the employees’ business, but that breeds the attitude that they shouldn’t care because, after all, it’s none of their business.

If the decision is best for everyone at the company, show them why. You’re responsible for making the company as productive, profitable, secure, and resilient as possible. Your decisions should reflect that.

Making good metrics into better metrics

The last two weeks I’ve been dancing around the topic of metrics without getting to the point, which is: How are things?

More importantly, how do you know?

Most businesses have some metrics. Some are very data-driven, some are barely so and there are plenty in between those two points. One of the differences between the very data-driven companies and those that are “sort of driven” is the quality of the metrics.

Good data vs. great data

There’s nothing wrong with good data. It’s certainly better than no data. Good data includes facts and figures like sales, costs, profit, inventory, payables and receivables.

Here are some good metrics: We have 1207 trucks on the road. Our drivers make $0.38 per electronically logged mile. It costs us $1.39 per mile for truck, driver, fuel and overhead (taxes, insurance, maintenance, etc).

Key to making good metrics into better metrics: Drill deeper. Hiding inside most good metrics is better, actionable information.

Quality isn’t just about accuracy, it’s also about the depth of the metric and the insight it communicates. What would happen if you drilled deeper into your good metrics? Would you find additional information to take action on?

Let’s drill deeper into the trucking metrics I mentioned above – on one topic: downtime.

Downtime isn’t on the list of metrics. It’s hidden inside overhead. It’s not solely about the maintenance to get the rig back on the road. It has hard costs (repair parts, repair labor) to you and to the driver (lost mileage and thus lost pay), in addition to the possible cost to your reputation. Showing up late or not at all not only risks your relationship with the client, but may also put their client relationships at risk. Embarrassing a good client by showing up late with their clients’ goods and materials can cost you far more than the price of that run.

What if that downtime makes you late for the next pickup? How far can this cascade across your business and the business of your clients?

Drilling down into good metrics

Here are a few downtime related questions to drill down with:

How many minutes of unplanned downtime do your trucks average per 100000 miles? What’s the average cost to get them back on the road, per incident? Per downtime hour? What would the change in revenue and expenses be if you could cut the average time in half?

If all of your rigs are company-owned, which model and model year are accruing the most downtime? For companies who lease rigs from drivers, which model and model year accrue the most downtime?

Is this downtime consistent across all owners or is there an 80/20 breakdown, where 20% of the drivers are accruing 80% of the downtime? Same 80/20 question for company-owned rigs. What costs are within 10% of the rest of the industry? Which ones aren’t?

Can any of these differences in performance be resolved with references to a better repair shop, a different brand of part / fuel / oil, better record keeping, more frequent maintenance or a different maintenance process?

For the ones that are outside industry norms, what can be done to leverage and improve the ones where you are beating the industry? Is there a legitimate reason for your business to be “below industry standards” in some ways?

Getting to better metrics

Having the answers to your business’ drill-down questions helps you improve consistently on a sustainable basis.

There are a couple of keys to drilling down:

Get organized. Before you can find better metrics inside your good data, your good data needs to be organized.

Take it a bite at a time. It’s easy to do one pushup before you get in the shower. Tomorrow, it’ll be easier to do two. Next week, 10 will seem easy. If you try to take on all of this at once, it will be discouraging because of the size of the task and the complexity of it. Keep it simple so it’s easier to delegate later.

Leave the rabbit chasing for another day. There will be plenty of time to address the things you notice while drilling down into one thing. You will almost certainly notice other things that require attention. Resist the urge to jump on them. Instead, make note of them and then finish the task at hand.

Procrastination is not a good metric. Start today. The more you know, the better prepared you’ll be for radical industry changes, like big rigs without drivers.

18 questions to increase sales

This week, I’ve been working on metrics because I can’t have my fingers in every pie at once – at least not once the number of pies grows beyond my ability to manage them all in my head at the same time. Even if you can do that, it’s very difficult to sense where changes are happening much less where trend directions are changing.

Some of this can be done by gut feel because you’re right in the middle of it, but sometimes gut feel will burn you because you filter what you’re experiencing through existing expectations. Thus the need for metrics – so that you don’t have to spin too many plates at once, assume too many things or make decisions based on too much gut feel.

Metrics are questions, too

Metrics are a form of question.

For example, a common metric for businesses with a web site is “page views”. A page view metric asks the question “How many people saw a specific page this month?”. When all of those page view metrics are combined, it becomes the question “How many people saw our website?”

Website metrics are pretty common and easier to collect than metrics from other media – which are often on you and your team to collect. The work to do that might seem painful, but you can learn a lot from it.

How many people called about the radio special you advertised on KXXX? How many people visited the store and mentioned the radio special you ran on KXXX?

These things are important so that you know whether to invest in marketing that item on KXXX vs. marketing something else on KXXX, vs. marketing anything at all on KXXX.

You would do the same for anything else marketing on any media, otherwise you’ll have nothing other than gut feel to help you make these decisions. Traditional media doesn’t often provide these metrics, because they can’t. Radio, TV and print newspapers can’t do that because they usually aren’t contacted by prospects seeking whatever you advertised. It’s tough to know if you aren’t part of the transaction process.

That doesn’t mean you shouldn’t track them.

The right questions help increase sales

Coming up with the right question can be a lot harder than not having the answers.  You have to be careful to ask open-ended questions designed to tell you what you don’t know, rather than asking questions designed to confirm your assumptions.

Where is the profit in your business that you haven’t yet found?

For most people, the answer probably lies in your existing customer base. The next question I’d ask you is how many of your customers are buying 100% of what they should be/can be buying from you?

How can your current customers help you find that profit?

The natural follow to the previous question.

To rephrase it, what percent of your customers are giving you all the business they could? Who are those customers? What actions will be necessary to either sell to the ones who aren’t buying everything you make, or determine the ones who won’t buy?

Once you’ve identified the ones who won’t buy, it’d be good to identify why they won’t and correlate that (if possible) with where they came from as a lead. Are the leads who buy some buy not all (or who buy once but not ongoing) leads who came from a certain type of media or a certain type of marketing campaign?

Are the ones whose initial purchase is different than the ones who do keep buying – and buy it all? Can that be solved by pursuing slightly different leads, or by changing marketing or the product / service?

Finally, can / should that gap be fixed? Does it matter if this group of clients aren’t recurring buyers, or that they don’t buy everything you offer?

Are you communicating with customers optimally at all touch points?

Are there touch points you aren’t thinking of?

I was chatting on Facebook with a reader earlier this week who owns a locksmith business. After our conversation, I wondered if there was an opportunity to get involved in home and/or commercial property sales – ie: lock / key / lockset changes that might be warranted when a property changes hands.  It’s an opportunity to get a new client if there are enough buyers who want locks changed at purchase time.

Does your business have secondary transaction opportunities like that?

Big Data, Small Business

Last week, we talked about questions.

Questions tend to produce answers and more questions, which can result in a pile of stuff that overwhelms a small business.

As a business and client base scales, these questions produce data that you can use for guidance, decision making and to ask even better questions. Again, this can result in a pile of stuff (data, in this case) that overwhelms a small business.

A common reaction to this phenomena is to ignore the data, or to be so overwhelmed by its volume that you can’t discern anything from it. Entrepreneurs tend to want to do it all and if they can’t do that, doing part of it seems like a failure. It isn’t.

Identifying your big data

Let’s look at one of the questions from last week’s post and see which ones are likely to produce decision-making data.

How does this impact our key performance indicators? Examples: cost per lead / new client / sale / deployment, support load, lead time, etc.

This implies that you already know your cost per lead, cost to acquire a new client, cost per order/sale, cost per deployment, average lead time per product/service and the support/customer service load your products and services require. Not gut feel, but actual numbers.

Actual numbers are important because our gut is often right when it comes to strategic decisions and the like, but it seldom has a clue when it come to numbers like cost per lead – particularly if you’ve never watched it.

Lead cost, sources, media and campaigns

For example, what impacts cost of a lead at your business?

Lead source is a good place to look.

You might get leads from referrals (cheap and strong, warm leads), from local TV ads, from local newspaper ads, from different media in your education-based marketing, from the phone book (yes, some businesses still depend on those leads), from direct mail (likewise, still quite productive if used properly), from your website, mobile app, and so on.

Each of these have different creation and distribution costs. Each will produce a different lead flow, much less volume and types of client. While in the beginning, you’re likely to lump all of this data together, at some point you need to break them out by media and eventually, by campaign.

You’ll want to do that so that you can answer questions like this:

  • How do you know which media produces the most profitable clients?
  • How do you know which campaign (and on which media) produces what number and type/quality of client?
  • How do you know if a particular campaign works well on one media, but terribly on another?
  • How do you know which media (or campaign) tends to produce clients that are high maintenance to the point that you tend to fire them or not accept them in the first place?
  • How do you know which media produces the best (however you define that) clients you have? Is there a specific type of campaign that does this?

From time to time, an owner will tell me that their businesses doesn’t do any marketing so this kind of thing doesn’t help their business. If that’s really true, you’ll usually have referral sources that produce more and better leads than referrers do.

Would it be helpful to know who is sending you the best referrals?You probably have a gut feel on this, but are you sure that it’s accurate?

Thinking back on those questions

Given the detail on the one question of cost per lead, you can see how this can become overwhelming in a hurry. Don’t fall victim to that. Take it a step at a time.

You may start with another metric. Cost per lead is important for almost everyone, but it isn’t always the best place to start.

When you ask questions like “How did the pilot program go?” – it might provoke follow up questions about the data collected during that pilot which would support the “How did it go?” question.

If those answers aren’t backed with data, then that might provoke you to add data collection to your pilot projects in the future. This will take more time but it will produce better answers that don’t depend on gut feel or a need to be right.

Better answers are what we’re looking for.

Pricing custom work well is a strategic advantage

How good is your business at pricing custom work?

If you don’t have a way of pricing custom work that consistently accounts for your costs and labor, how do you know if you’re making any profit on these deals? How would it feel to find that you’re losing money on half your custom work?

Do you have a spreadsheet or software program to help? If not, do you have some other formulaic means of pricing work?

If you read the May 12 New York Times “You’re The Boss” piece by the owner of Paul Downs Cabinetmakers, you’ll learn that these guys are fortunate enough to have a formulaic method to determine the price of a custom item.

That they have this formula puts them ahead of most businesses that do custom work. However, the trouble starts when they discuss what’s going on behind the scenes as there are a number of things going on that conspire to cause problems when reality and the pricing formula meet on the shop floor.

The failure points

Downs mentions that the spreadsheet’s material prices haven’t been updated in over 6 years, that material use and overages are not tracked, that tool use and labor methods have changed and that the info in the spreadsheet is sometimes entered wrong and fails to match the reality of the work actually being done.

As you read about all the possible failure points of this spreadsheet and how they’ve allowed it to become outdated and stale compared to their business reality, you can’t help but wonder how they got to that point.

Here’s the thing… this type of situation is pretty common.

Our tendency to think we’re too busy to address these critical, but tiny (at the time) maintenance issues has a way of giving us permission to postpone giving them attention. We think we’ll take care of them someday since some other thing seems more important right now.

It doesn’t seem to work that way, despite the best of intentions.

What usually happens is that the business lets these little things get out of sync an hour at a time, a day at a time, a week at a time and so on until we find that our internal systems look like they were designed to run some other business (or none at all).

At some point, things will have crept so far out of line that you’ll have no choice (like Downs) but to address them. Not only has the job you face become massive, your strategic advantage of having accurate, formula-driven custom pricing will have become the exact opposite.

Why does it matter?

The trouble with getting your business into this situation is that it severely damages your ability to see trends, know if you have enough (or too much) raw material or labor to deliver upon your work commitments.

If you’re already stuck, you have to consider the cost of continuing with a broken pricing model, assuming you have one.

If you aren’t sure you’re turning a profit on custom work – the showpiece work of your business – this merits immediate attention.

This is your best work. It’s the work that generates the reputation that earns your bread and butter work. It’s the work that you use to get your best, most profitable clients.

And yet you aren’t sure exactly how much profit you make on it?

If a close friend was in that situation, you know how you’d react. You’d go out of your way to make the situation clear to them, helping them if possible.

Why not do the same for yourself?

Should this take six months?

No, it shouldn’t. While Downs says his expert worked on this for six months, I suspect what he really means is that it took six months from start to finish – not that his expert worked on it eight hours a day, five days a week for six months.

The important thing to remember is that this doesn’t have to be perfect the first time.

Start with the highest impact item you can wrap your head around. and implement it. Tweak and add pricing components one at a time to improve accuracy.

This allows you to see results and adjust for accuracy and additional information without allowing any single change to be so complex that you have no way to assess its worth, much less its accuracy.

Get to work!

Where does new business hide?

In every town, there’s a place where new business hides.

If you can’t find its hiding place, your business is likely to struggle.

Most of the time, that struggle is rooted in the inability to dependably produce predictable, month to month revenue.

Without predictable month to month revenue, businesses close, scale down or at the least, fail to reach their potential to support their owner, their family, their employees’ families and their community.

Revenue consistency problems influence a business owner’s decision making because their decisions end up being driven by cash flow. Decisions based on sales you made last week (much less yesterday) rarely fit into a long-term strategic plan.

Predicting revenue isn’t all that difficult. You simply have to check the Sales Thermometer.

What’s a Sales Thermometer?

Imagine that there’s a thermometer on the front door of businesses and homes that told you to pull in and sell something to someone because they had developed a need or a want that *had* to be fulfilled.

Armed with a town full of sales thermometers, you’d have all the new business you’ve ever wanted and wouldn’t waste a bit of time chasing around town after people who didn’t want or need what you sell.

Instead, you’d simply drive through town, check the thermometer and stop at the places where the temperature was the highest.

On days when you need a little extra revenue, you might get up a little earlier and drive around a little later so you could check more thermometers. 

Once you took care of the places with the hottest temperatures, you could retrace your steps, scan for the next highest set of temperatures and take care of those sales.

As the sales thermometer readings change on other homes and businesses, you’d see them during your travels so you could pick up on the newest opportunities for new business – simply by being observant.

Scaling

There is a downside to this sales thermometer thing. It has some scalability issues.

For example, you can only drive so far in a day and every customer who takes an hour of your time consumes an hour that you can’t use to check other thermometers. That will eventually force you (subconsciously at least) to stop and work with only the hottest thermometers.

If only there was a way to automatically check the hottest thermometers without spending all that time driving around.

Fortunately, there is.

Getting new business isn’t a joke

While talk of a sales thermometer seems like a bit of a fantasy or even a joke, your business’ inability to consistently produce new business from existing and new clients is no joke at all.

If your business struggles with that, the problem isn’t the lack of a thermometer. The problem is that you aren’t reading it. 

The sales thermometer in the information you should already have about your clients and prospects.  The thermometer’s temperature is driven by behavior and interaction, both yours and that of your prospects and clients.

Those behaviors are like a patient’s symptoms. Monitoring  and acting on them in a predictable, repeatable, systematic way is what gets your business to the point where you *can* produce consistent, predictable month to month revenue.

Random revenue from new business is an indication that you’re not watching and acting on these symptoms on a consistent basis. We all know we need to do these things, but sometimes we get sidetracked by the crisis-of-the-day.

While they should be acted on individually for each prospect or client, these symptoms should also be grouped together (aggregated) to help you monitor the health of your business and your market.

Things that drive up temperatures

What causes rising temperatures?

  • Interaction behavior changes.  You should know when someone is paying more attention than a typical prospect. Do you have a way to detect this?
  • Sales cycle behavior changes. You know how long it takes to close a sale. Is that timeline changing? Are certain prospects skipping steps in the process? Is their path-to-purchase pace is faster than normal? If so, does your internal behavior toward those prospects change to suit their timeline?
  • Purchasing behavior changes. For example, customers who are buying more (or less) often than they normally do. Even if you’re tracking sales on paper, you can monitor this .

Are you monitoring the sales thermometer?

Habits and Heatmaps

Here’s your sign.

While it is a well-known “redneck” comedian punch line, it’s also something you should be looking for.

Some signs you must seek out, while others have been right in front of you all year long.

Many of those signs are buried in your existing business data.

Habits

Your business data illustrates your customers’ behavior, including buying and service calls. Some companies use it, some don’t.

For example, I realized today that I hadn’t sent out thank yous to a few clients. It’s been a very hectic, deadline-filled November and December and this is something I usually do right after Thanksgiving.

Not this year. And no, it wasn’t on my calendar because it’s just ingrained behavior. Bad Mark. Bad, Bad, Bad.

When I do remember this (and now, when it pops up on my calendar), I use high-end vendors to ship items like fresh or smoked salmon to a short list of folks that I do business with year-in and year-out.

One of the reasons I forgot? I didn’t get a catalog from either of the two vendors that I usually use. Well, sort of. I got a catalog two months ago, but that isn’t prime ordering season for “corporate gifts”.

The problem with this is that these businesses know when I order. If they look at the data from prior orders, they could *predict* when I place an order and what I might buy, much less where I’d send it.

Predictable Male Behavior

If I bought a two pound smoked salmon for the last five years, they know this because the ship to isn’t my name or address (not to mention the “It’s a gift” checkbox on the order form).

Given typical male shopping predictability (“get in, get out, move on”), they could have won the order by simply dropping a card in the mail or sending me an email saying “Hey Mark, we appreciate that you’ve ordered our delicious smoked salmon as a gift for the last five years, would you like us to send Joe another two pounds or would you prefer something different but in the same price range, such as our crab sampler?”

Or something like that. How tough would that be? No cold call. No catalog. Just an email from data that already tells them how I behave.

Do you want to do this for everyone? Probably not, but it would be of use in concept at the very least. Look at your order/sales data. Not just across the board, but for your best customers, however you define that. When do they buy? Might be a good time to place a reminder in front of them.

Look for the heat

Have you ever looked at a heat map?

On a heat map, the “hotter” looking places are either the locations where most people click or they indicate where eye-tracking tools determined that people are looking most of the time when they view a page.

Below, you can see an example website heat map illustrating click locations.

The red places indicate locations where the most people clicked.

The yellow and green areas are slightly less popular click locations and the blue are even less frequently clicked.

In other words, red is hot, yellow is warm, green is cool, blue is cold – just like on a graphical heat display – only this one shows the locations where people click on this web page.

 

Videos also do a nice job of illustrating data on a heat map, like this click location map.

This video shows a heat map eye movement on a video advertisement and the results aren’t what you might assume from seeing the still preview image.

Stir

Like any other measurement device, tools like the heat map help you understand if your site is well-designed for your user community (they are not alike from niche to niche) and can indicate usability issues, copywriting problems (and wins) and design strengths and weaknesses.

Your sales/order data is full of behavioral information.

People tend to be visual learners. What if we stirred these two together?

What would you learn if you looked at your calendar overlaid with a heat map based on your lead, sales, order and service data?

Billboards and plumber’s pants

Drive around long enough and you’ll see a billboard that says “If you’re looking, it’s working”.

I see the same slogan on electronic advertising displays, which can be found everywhere from restaurant restrooms and gyms to billboards.

Is it “working” when you accidentally glance at the back of a plumber’s pants when he’s on his knees with his head buried under your sink? Or when you stare at an auto accident?

A definition

“My ad is working” means “people take action as a result of the ad”. It does not mean “someone with a heartbeat saw the ad”.

“Working” doesn’t always equal spending money, but it does always mean taking action.

After you glance over at that auto accident, if you put on your seat belt…. that’s action. Cause and effect. Taking action.

That’s what “working” means when it comes to an ad.

“But, you can’t track billboard response”

Yes, you can.

I’ve yet to see a media whose usage cannot be tracked.

To be sure, you can’t track how many people read your ad on a billboard or in the newspaper, though you can estimate numbers based on drive-by traffic statistics published by governmental agencies (for billboards) and subscription + newsstand buys + online page views (for newspapers).

The number *reading* your ad isn’t the important number. Sure, if you have a general consumer product, you want to tell as many people as you can, but you don’t go to the bank with “eyeballs”, page views, newsstand copies or cars-per-day.

You go with sales revenue.

What you really want to be paying attention to is how many people took action as a result of your ad, no matter where it is.

You can absolutely track what happens if readers take action, but many businesses don’t. As a result, they’re operating on gut feel, guesswork or a seat of the pants idea of what their ads are doing.

Look at the advertising you’re doing. Are you tracking any of it? If not, how do you know which ads work and which don’t? How do you know which media work (for you) and which don’t? (or don’t work as well)

Just because an ad or media is “free” doesn’t mean you shouldn’t be tracking results.

Start tracking and you’ll start knowing what’s working and what isn’t.

Profit vs. Market Share. You choose.

Today’s guest post is from Mark Sigal at O’Reilly, and speaks to your focus in your market.

Pay close attention to the comments about profit vs. market share.

I live in Verizon country. No AT&T here, at least not yet. All you hear and read is about how Android devices are outselling iPhone devices like crazy.

Read this for a different view of the same data.

You decide which is more important.

PS: Is it possible to lead a market by copying the current leader?

UPDATE: An alternative opinion or two.

Are you measuring the future or the past?

This was the story of Hurricane
Creative Commons License photo credit: cyberuly

Recently, I’ve found myself involved in a multitude of conversations about community benefit organizations and education.

Something Hildy said reminded me that I need to discuss running those two entities “like a business”.

One of the first things that you hear from business people after a story in the news about a failing school or wacko teacher is that schools need to run like a business.

Listen to the news about today’s natural disaster response (or some such) and you’ll hear the same about community benefit organizations (sometimes called non-profit or non-governmental organizations).

“Run them like a business and it’ll solve all your problems”, they say…in so many words.

Backlash

Of course, the next thing out of the mouths of some of the folks involved in education and community benefit (you might call them non-profit – a poorly chosen name) organizations is something like this:

“Oh, you mean like Enron, Goldman Sachs and Lehman Brothers?” (or the currently top-of-mind business cretin of the moment)

Why yes, of course. That’s exactly what those silly business folks meant.

They have studied your troubles at length and have decided that it’s best to run your school district or your food bank like some sort of corrupt dictator, complete with automatic weapons, fast cigarette boats, and under the table money.

With that behind us, let’s get real.

Reality strikes

Seriously though, what does someone mean when they say they want to run your school or non-profit  “like a business”?

In the case of schools, let’s gloss over the likelihood that it probably means they don’t really get how complex a school district budget is, noting that it’s a recursive budget of budgets consisting minimally of bond funds, Fed and state monies and that oh-by-the-way annual operating budget.

Those oddball budgets are then scrambled a bit more by the goofy manner we’ve chosen to fund education: Head count, which produces oddball economies of scale of the type that few in business have to deal with.

In the case of the community org, the common mistake is assuming that all (or most) activities have to have a hard dollar return on investment – and that if it one can’t be found, they are failing somewhere, perhaps everywhere.

What they really mean about schools

I think much of this comes from a sense of low/no accountability, something that makes business owners nuts (oh just wait, we’ll come back to that).

Much of this comes from the news media. You see stuff about the teacher in Florida who slept with her 15 year old student, or stories of rooms full of bad teachers in NYC who are paid not to teach because they can’t be fired, or the litany of schools failing based on No Child Left Behind Act criteria and it isn’t long before it’s easy to stick em all in one bucket of non-accountability.

The obvious place for business people to start is “Why are you spending $ on that?” and “Why can’t you fire that bad teacher?” (contracts, legalities and the 17 conflicting definitions of “bad teacher” notwithstanding)

What they really mean about orgs

In the case of a non-profit (I had to use the term at least once), it often relates to the blank stare you often get when asking for standard business metrics, such as marketing leads, “sales” and return on investment.

The organization that measures their success on things that are hard-to-quantify financially is going to take some heat from people used to using standard metrics to gauge success. Even the ones I’m involved in often have a difficult time producing that info.

Questions of a future past

The big questions in all of this are:

  • What’s getting measured – and are those the right things to measure?
  • What are you doing with that information?
  • What does any of that have to do with what you’re REALLY trying to accomplish over the long haul?

Think about it… we measure teachers based on their students’ grades and test scores. Like tax returns, they indicate historical performance.

What do we do to measure future performance?

I’d like to be able to see trend info showing how various learner types do in each teacher’s class and how each type of student’s learning, problem solving and creativity advances as they experience each teacher type.

For example: Who is the most effective math teacher for 6th grade kids who learn visual/spatially and are reading 2 years below grade level? Why is that teacher so effective for that group? Why does that teacher fail to reach non-spatial/non-visual learners as well as other teachers? Why is he so effective with Asperger’s kids? Do these success trends change when they are teaching science or history? Why?

Do these patterns of success (or not) change based on race, income, family situation and other factors we can’t control? What controllable factors are impactful, if any – for this learner type? Have you tried addressing them? What happened?

Answer: They have no idea. But it isn’t entirely their fault. They’re forced to answer the wrong questions in order to find a way to balance their budget.

Is there a line of questions like that – about your business – that would transform your thinking from past performance (letter grades) to future performance? (matching learner types with teachers who are the most effective at teaching each type of learner)

The punch line: Considering that last question, are you truly running your *business* like a business?