Success measurement is the most crucial aspect of strategy execution. Measuring a strategy would enable an organization to move toward goals and objectives by capturing areas that should be worked upon for long-term success.
Evaluating your business strategy and business advisory services is a momentum exercise. To set it up for success, you must evaluate it before, during, and after implementation. Here’s how.
1. Define Your Business Growth Goals
The first step in measuring business growth is to state goals. These goals will most likely be stated based on the company’s growth stage. For start-ups, such goals may simply be to build a customer base and grow sales, even if it means breaking even or making a small loss due to the costs associated with expanding the business.
However, more established companies may wish to generate more profitable levels but maintain a flow of new prospects into the business. These are some growth metrics that companies can zero in on:
- Revenue – Revenues are the amount of money that comes into a company.
- Greater Profits—Higher profits generally mean everything is humming along. Nevertheless, businesses will still have to consider factors like the number of customers being onboarded or leads coming in to ensure future success.
- Higher Sales—Although usually, increases in sales suggest that a company is growing, this must be dealt with cautiously. A rise in sales is caused by heavy discounts in the short term or increased sales, which may render a company in danger of overtrading.
- More Customers—Customers are a source of growth. However, this can be a very negative business model if there is a high acquisition cost and low customer retention.
2. Review Goals and Objectives
Each business strategy will have its own set of clearly defined performance goals. Lacking these, it may be challenging to identify the deviations that may damage your shot at success, to facilitate the implementation process, and to know when you have succeeded.
After you have set your goals and objectives, plan to revisit them both while you are implementing your strategy and after the fact. The best way to do this is by comparing them to critical performance variables—the things you need to achieve or implement for your strategy to succeed.
For example, if one of your company’s values is customer loyalty, then one of the essential performance variables would be customer satisfaction. When such satisfaction declines, customers no longer experience value in your products or services, which could negatively impact the company’s bottom line.
3. Review Measures
Evaluating the performance of the business requires measures—quantitative values, which you can scale and use for comparison and which must relate to the right story. You need to consider three questions when reviewing measures:
- Are they aligned with my strategy?
- Are they objective, complete, and responsive?
- Do they link to economic value?
If, for example, you feel that higher brand loyalty would improve your business, you may want to monitor measures such as the number of new customers, the average number of purchases per client, and the number of social media followers. A balanced scorecard may provide an overall view of your business performance measures, getting all your employees on the same page.
Even if you have the best strategy in the world, you must consider your measures. So, you have to ensure that measures throughout the business reflect your plans so that every employee will devote their efforts to executing that strategy.
4. Control Monitoring Systems
Although balanced scorecards are great diagnostic control systems—an official information system used for monitoring organizational results—they do not provide insights into all the measures of success. Therefore, you will need other systems to facilitate the strategic plan analysis.
For example, the analysis features in customer relation management systems would be utilized to prepare reports in tandem with the corporate goals and objectives. To achieve customer loyalty, you may schedule automatic reports on the following:
- Buying trends
- Buying frequency
- Client satisfaction score
But for these systems to work, you must put much time and thought into their design. You have to be willing to negotiate and set goals—as we’ve discussed—but then you have to design measures for those goals and then link performance incentives.
5. Select Your Metrics Wisely
The action plan that you create to support your business strategy must contain your list of what you will measure. These can be milestones—completion of a task or a project by a specific date—or quantifiable performance measures, such as growth in revenues and profits, to offer some examples.
There is no silver bullet when it comes to selecting milestones. Business milestones can be anything, perhaps linked to the launch of a website, the purchase of a piece of equipment or a vehicle, hiring key staff, or obtaining a loan for the business.
For performance measures (often known as key performance indicators or KPIs), there are many, many things that you can measure. Choosing which ones to pursue is usually very difficult, but it should be done carefully because these metrics will get your organization’s attention.
6. Tie to Strategic Objectives
Some metrics will be financial, such as profit, revenue, and cash flow. You should also monitor metrics dealing with marketing and sales goals, such as conversions, repeat business, operational efficiency like a value creation index, safety such as hours lost due to injury, and environmental impact like energy use.
Your metrics should be clearly related to your strategic objectives and motivate your employees to take the actions you want.
7. Keep It Simple
Make sure to overload your staff with enough KPIs to track. Opt for up to four per department. It’s also vital that you train your team to track the metrics. With training, the data may be updated and monitored correctly. If this is the case, the implementation of your strategic plan may be placed in jeopardy.
8. Keep Data Current
Be sure your measures include the latest data and are reported promptly within your company. This is the key to making them a source of feedback on your efforts and an early warning system for problems.
9. Use Dashboards
Performance dashboards are a great way to track your KPIs. You can also use periodic newsletters or strategic plan implementation reports to provide updates to your team and your stakeholders. Utilize data that are clearly shown and easy to interpret from visualizations.
You should also talk more in-depth about your metrics at follow-up meetings conducted to address the execution of your strategic plan. In those meetings, you can also address your choice of measurements to ensure they are informing you and driving your best results.
The Bottom Line
Measuring the success of your business strategy on a monthly or quarterly basis would enable you to gain insight into your business’s expansion. You would avoid the risks of overtrading because you would scale this nominal growth against set targets. Brava Consultancy, a business consultant company, can help measure the success of a business strategy through benchmarking and performance evaluation.