Better measurement for improved profitability

©Jakub Jirsak via 123RF

What was surprising in the subsequent analysis was that the agents who they thought were their best sales agents, i.e., making the most sales, were in fact their least profitable agents as they made the most sales but had either higher default or cancellation rates, sold products with lower margins and/or used the most leads, thus leading to a higher opportunity cost.

Measuring the metrics

Monitoring performance requires many different metrics to be managed. Many companies do not have all the required information available and if they do have information available from one (or multiple sources), the challenge is to firstly combine and interpret information from different reports and/or sources to achieve a holistic view of performance and, secondly, to do this regularly so as not be reactive or remedy problems when it’s too late.

As Dell Inc. founder Michael Dell once said: “Anything that can be measured can be improved”. It is therefore imperative to be able to measure the key variables to ensure the business or division in the business achieves its goals. It’s also our responsibility to ensure we measure the right metrics; far too many companies measure metrics which they are capable of measuring and not necessarily those they need to measure to have the biggest positive impact on the business.

All the above lead to a scenario where we do not have the right information (easy to interpret and digest) available as real-time as possible to see problems and make decisions to remedy those problems. Standard reports that business systems provide are simply not sufficient - reports must be adapted to the requirements of that specific company or division.

If we continue with the sales example above - managing a sales environment in terms of profitability is complex, as many different factors determine profitability, e.g. sales, conversion rates, different lead sources, different products with different margins, opportunity cost, differences in sales agent salaries, cancellation rates, time on book, etc.

Management conundrum

Many companies find it near impossible to manage the fine balance between these different metrics, have the information as real-time as possible and, to consecutively expect the sales agent to know how to change his behavior to improve these metrics and therefore also boost profitability. The same conundrum applies to many other types of environments such as debt collection or customer service, for example.

What works in this case is a dashboard that shows the company’s entire business model (thus the fine balance between these metrics) without exposing the cost structure to people who need not see it. In this way, the business intelligence combines information from various sources to provide a more accurate, broader picture of what is happening. It places management in a position where they can easily see a problem (thus interpret), take action (remedy) and see the impact (or lack of impact) of the the actions applied.

By introducing dashboards that provided operational visibility, a company will be able to apply new measures geared towards making the workforce more efficient and productive, but, more than that, be able to respond strategically to ongoing business changes.