What if you had to measure the success of your business without using money, how would you do it? Obviously we need to make a profit to stay in business but we can be profitable by dumb luck or by living off past success and this doesn’t do anything to help us determine whether we are doing the right things inside the business for long term sustainability. The pressure for most publicly held companies to produce increasing profits on a quarter by quarter basis is in my opinion extremely detrimental to long term health and really limits the choices that are available to business managers and CEOs. This short term focus on profits for measurement is certainly not the only way to measure the health of a business. Sometimes a great new business venture or product line takes more than two quarters or a year to produce profitably. That is why sometimes it makes more sense to keep a company private if you can find the funding without going public. There is always a consequence to finding funding in the equity and venture capital markets. (Remember the tortoise and the hare? Patience still has its benefits!)
The late great basketball coach John Wooden of UCLA would tell us that the score doesn’t matter! In other words the most successful college basketball coach would tell us that money doesn’t matter. Wooden’s focus would be on the fundamentals of business, the teamwork, the competitive spirit and work ethic in order to measure the success. John wooden knew that his team would be able to score higher against weaker teams and it wouldn’t really mean anything and it might even create laziness for the next effort. We certainly have the same tendency in business. When the economy is expanding we want to pat ourselves on the back but it could be that there is so much demand that our customers just about had to choose us. Whereas, when the economy is contracting and our sales are down we usually are thinking we must be doing something wrong and really we might performing at the top of our game but it is just not reflected in the money score.
If you are flying an airplane at 500 miles per hour onto head winds of 400 your ground speed isn’t going to look to good but that doesn’t mean that there is something wrong with the airplane! Measure success with the fundamentals of your business, process improvement, innovation, team effectiveness, productivity etc. For many of us we will have to create some new measuring systems to do this but it is well worth it! Using profit to measure our success is the easy way but not by any means the most effective!
The late great basketball coach John Wooden of UCLA would tell us that the score doesn’t matter! In other words the most successful college basketball coach would tell us that money doesn’t matter. Wooden’s focus would be on the fundamentals of business, the teamwork, the competitive spirit and work ethic in order to measure the success. John wooden knew that his team would be able to score higher against weaker teams and it wouldn’t really mean anything and it might even create laziness for the next effort. We certainly have the same tendency in business. When the economy is expanding we want to pat ourselves on the back but it could be that there is so much demand that our customers just about had to choose us. Whereas, when the economy is contracting and our sales are down we usually are thinking we must be doing something wrong and really we might performing at the top of our game but it is just not reflected in the money score.
If you are flying an airplane at 500 miles per hour onto head winds of 400 your ground speed isn’t going to look to good but that doesn’t mean that there is something wrong with the airplane! Measure success with the fundamentals of your business, process improvement, innovation, team effectiveness, productivity etc. For many of us we will have to create some new measuring systems to do this but it is well worth it! Using profit to measure our success is the easy way but not by any means the most effective!
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