Julia's blog

There is a wonderful quote by Albert Einstein in which he says, "Everything that can be counted does not necessarily count; everything that counts cannot necessarily be counted."

I was reminded of this the other week when an enormous package landed on my door. The big bundle was last month’s management report, accounts and “supporting schedules” for a business which, to give you an idea of size, employs about 30 people.

Because I was short on time I needed to prioritise the long reading list. I called the CEO to ask him which reports he looked at first and where I should focus my time. He laughed and said he only ever looked at the first 5 pages and guessed that the rest of the stuff must be produced for the other guys on the management team.

So I spoke to the other 5 executives. Four of them confessed to spending hours each month dutifully wading through the reports but not really understanding why they needed much of the information. The fifth executive was the CFO, John, who had been at the company for nearly two years.

When John joined the business he was a little in awe of his predecessor  - the CEO had spoken very highly of him - so when it came to producing management information John was loathe to change any of the reports that his predecessor had created. So he didn’t. He just supplemented the existing reports with lots and lots of extra information.

Periodically members of the management team would ask for specific information for a project. John would assume this information was required monthly and so he would start to include it as a regular item in the reports.

So that is how, over two years, the monthly information swelled to hundreds of pages.

John’s line of thinking was that one could never have too much information. But that’s not true.

The human brain loves finding patterns in data; we do it subconsciously. But when our brain is presented with too much information it can’t find the pattern subconsciously, instead we have to go searching for it. It’s a little like the colour-blindness test. Remember the circles with the coloured dots? If you aren’t colour-blind you can quickly pick out the “hidden” number. If you are colour-blind the circles look like a jumble of dots with no pattern. That’s what too much information looks like.

Because of his deep understanding of the business, and years of experience, the CEO was able to select the information that he found useful and be confidant of ignoring the rest: he could still spot the patterns. The rest of the team however felt obliged to pour through all the information, and in doing so were actually jeopardising their ability to interpret the data.

Yes, the CEO should have indicated that the business needed less management information; but he thought that the rest of the team found it beneficial. Yes the rest of the team should have said that they were overwhelmed by all the data; but they didn’t because they were worried about looking stupid. Sounds ridiculous I know, but this is exactly what happens in daily life!

So my suggestion this week is that you pick one piece of management information to review at each monthly meeting and ask:

Do we need this?

Why do we need this?

What story is it telling us?

And if it’s not completely useful, chuck it out!

I spent many years working in a professional services firm and one of the tasks that I least enjoyed was completing my weekly timesheet.  As I progressed in the firm however I reluctantly came to understand why we couldn’t run the business without them.  That little insight, did not get me to like completing the timesheets any the more, but it certainly got me to do it.

I was reminded of my inner tussle with timesheets recently by three businesses that, despite enormous initial reservations, started timesheet systems for their staff. The results completely proved their worth; all three business uncovered information that prompted the senior team to change the way they did business. Here are their stories:

Company 1 had two distinct sales channels: Channel A where the business responded to tenders for already scoped projects and Channel B where the business created ideas for projects and then sought sponsorships. Channel A was a much easier concept for the sales team to grasp so there was a heavy slant on chasing Channel A work. However when the business started to keep timesheets, (and costed in the total time of the project including sales time) it became very clear that Channel B work was much more profitable than Channel A and, surprisingly, actually took less “sales hours” to win. Accordingly the company has now refocused itself around selling Channel B work.

Company 2 already had a timesheet system in place but staff only recorded time spent actually implementing projects. When they started to include the time spent managing the client (stuff like answering little out-of-scope queries, chasing cash and general nurturing) it became obvious that one of their largest clients was sucking up an overwhelming amount of time and was actually their least profitable assignment. The result? It wasn’t easy but last week the client signed off a substantial fee increase.

Company 3 had a tendency to start many new projects but finish none. The staff enjoyed the thrill of exploring new ideas but lacked the urgency to progress the ideas through to the revenue generating stage. When the business started to keep timesheets and track the time cost of the new projects the extent of the investment in half finished projects was clear for all to see. Senior management has now changed the employee reward structure so as to shift the emphasis from idea creation to revenue generation.

So it is with a mild sense of irony that this week I urge you to consider adopting a timesheet system.  It might not make you popular but it could make you a lot more profitable.

Last week a business friend of mine was telling me just how important customer referrals were to the ongoing health of her business.  She had been flicking through some data on new customers and was delighted to see that a fair proportion had been referred to them from existing customers.

I think it’s fair to say that most businesses feel this way. Certainly the column inches devoted to the subject of customer referrals would have you believe that every business regards existing customers as the quickest and most effective way to source new customers.

But for such a ubiquitous strategy it is surprising then how few businesses actually measure their success with it.

Yes, many companies (my business friend included) measure the percentage of new business that comes from referrals, but few measure the percentage of customers that are doing the referring. At first blush this looks like a subtle difference but when you stop to think about it you realize that this is exactly the sort of information that separates the highly profitable businesses from the also-rans.

The reason we probably don’t do this measurement is because we don’t know how to do it easily. Fortunately a group of experts (Satmetrix, Bain & Company, and Fred Reichheld) have done the tough stuff and have come up with an incredibly simple, yet powerful way of measuring customer advocacy.  Don’t be put off by the fact that a group of boffins came up with this, in true genius fashion they have actually made the complex very simple. Try it, it’ s called the Net Promoter Score and it works like this:

·      You start by asking your customers the simple question “How likely is it that you would recommend our business to a friend or colleague?”

·      The customer responds by marking your business on a scale of 1 to 10.

·      Customers that score you 9 or 10 are called promoters, they are your loyal enthusiasts.

·      Customers that score you 7-8 are called passives. They are satisfied with you but unenthusiastic and are quite likely to turn their attention to your competitor.

·      Customers that score you 6 or less are called detractors. Quite simply they don’t like you. These guys are dangerous and could damage your brand.

To calculate your company's Net Promoter Score you simply take the percentage of customers who are Promoters and subtract from that the percentage who are Detractors. Clearly if you want to grow your business you need to increase the percentage of promoters and decrease the percentage of detractors. In other words you need to increase your Net Promoter Score.

The real magic of the NPS is not simply in measuring it once but in being able to measure it over and over again. Tracking your results will enable you to determine whether the efforts you are making to improve customer advocacy are actually working.

And of course you will be making that effort because, as they say, what gets measured gets done.