Meaningful Plans Link Action With OutcomesWritten By Matt Di Iorio
Article Date: 11-01-2004
Copyright (C) 2004 Associated Equipment Distributors. All Rights Reserved.
Will your forecast for 2005 include everything it should?
It’s November and planning and budgeting for 2005 are well under way. Most of us will forecast increases; not so little as to be construed as sandbagging, yet not so much as to require explanation.
That’s not to suggest the projections and prognostications of economists, analysts and trade publications won’t be taken into account. We’ll also confer with our suppliers, employees and customers.
The question is: Will we develop budgets that reflect our plans, or plans that reflect our budgets?
When Robert Kaplan and David Norton unveiled The Balanced Scorecard in 1992, they suggested that most companies tend to focus on traditional financial measures at the expense of activities that influence critical financial outcomes.
There is a time lag between implementing new strategies and the financial results they are intended to generate. Kaplan and Norton believe companies that develop, trend and respond to metrics relating to customers, internal business processes, and learning and growth are more likely to achieve the financial outcomes they seek. These metrics are intended to compliment, not replace, financial measures.
Many successful companies measure customer satisfaction and have systems in place to record and respond to changing customer demands. They do so not to comply with the policies of suppliers, but to deliver more value than their competitors.
Many also measure operational performance indicators that influence customer satisfaction, as well as internal efficiencies. However, relatively few companies have written plans for developing the people responsible for improving internal business processes, customer satisfaction, and ultimately, financial outcomes.
Abigail Adams said, “Learning is not attained by chance; it must be sought for with ardor and attended to with diligence.” Translation: There is no time like the present to plan for your company’s continued improvement, growth and prosperity.
If your budget calls for a 10 percent increase in service sales, why will customers spend 10 percent more than they did last year? What do they currently think of your service capabilities? How will you improve your current and prospective customer's perception of the value you provide? These are some customer metrics you may need to address if you're committed to growing sales.
Will your internal business processes support your claims of improved service capabilities? Do you measure response time? How will you improve it? Do your technicians diagnose problems quickly and repair equipment right the first time? How are you measuring these attributes?
Are your people trained to deal with customers, or employees for that matter? Do they know when to invest in or reduce service capabilities? Trust that they are doing everything possible with the tools they have, but if you'd like something to change, you may need to expose them to new ideas.
Every improvement or change is driven by a change in behavior or performance. Changes in people drive changes in operational excellence, which contributes to improvements in customer service, which often results in better financial outcomes.
When you decide on your company’s financial goals for 2005, be sure to include customer, operational, and perhaps most importantly, learning and growth benchmarks in your plan. Meaningful plans link action with outcomes.
Excerpted from November 2004 Construction Equipment Distribution.
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