Management Methods for Improving the Bottom-Line

Written by Scott Gauger Regional Sales Manager, TEAM Software

There’s an often recited business adage that states “what gets measured gets done”. This belief is underscored by the fact that the majority of successful business owners and management teams have already developed a good set of key performance indicators (KPI’s) that they use to help evaluate and manage their companies. In most cases these KPI’s are compared to historical results or industry benchmarks. They are also used to measure the effectiveness of company specific initiatives that have been championed by the owner or spawned as a result of a more formal strategic planning process.

In today’s competitive business climate this evaluation exercise is a necessity and has become a commonplace management tool. However, the majority of companies fall short of using this information to help drive bottom-line results. Information is gathered and reviewed at a senior management level but does not filter down to appropriate management and supervisory levels that can truly influence the results. Or, more importantly, when results are not meeting expectations, there is no person that takes ownership of the problem and is responsible for initiating the appropriate action items necessary to get things back on track. This is especially important in the labor intensive contract security services industry where labor costs must be closely managed and positive customer relationships maintained to be profitable.

Management Methodologies

Strategies for aligning overall business objectives with day to day management activities are many and varied. However, two specific methodologies that are gaining more traction in the service industry include the Financial Value Added and the Balanced Scorecard methodologies.

The goal of the Financial Value Added methodology is to put managers in the mindset of being business owners. In most cases this involves financial incentives or disincentives for meeting agreed-to “financial targets”. This approach is most effective when the manager has direct impact and control over the financial results of a portfolio of business. Often times this incentive may include a tiered-return approach that includes a combination of departmental, division and corporate profits. The tiered-return rational is to focus the manager’s efforts not only on their department but also the company as a whole. Again, clear guidelines and expectations must be set before implementing this methodology and above all it must be easily understood and perceived as fair and equitable.

Balanced Scorecard is another method used to align corporate strategy with everyday decision making. In comparison to the Financial Value Added methodology, Balanced Scorecard extends beyond just financial metrics. Customer satisfaction and retention, process improvement and employee satisfaction metrics are also quantified, measured and evaluated. The scope of the analysis is expanded to include non-financial metrics. However, clearly defined goals and role responsibilities are still attached to each goal. Results of each metric are shared continuously within the organization and efforts to achieve the desired results are the responsibility of the assigned manager. Balanced Scorecard advocates embrace the philosophy that a majority of an organization’s value is not recognized when tracking just financial results. They subscribe to the fact that monitoring and evaluating their efforts in all areas will contribute to both a sustainable and profitable organization.

Obviously, there are many other methods that can be employed to help translate strategy into action. The key is to develop a program and get started today. Failure to do so puts your company and your livelihood at risk.

Leading edge companies have recognized that in order to truly impact the bottom-line they must educate and inform their front-line managers about business objectives and results. More importantly, they must make these employees accountable for helping achieve these goals. Implementing a program that involves front-line managers is as much art as science; however, like anything else, it requires clear guidelines. It is essential to communicate expectations, share information, and clarify the front-line managers’ role in helping to improve the bottom-line.