“It was a great month — our revenue was higher than last year’s.” Sound familiar?
If this is how you judge performance, you operate in a void. It’s time to break away from the myth that just improving on last year’s revenue is a great goal to set. For years I have heard people in rental branches talk about branch goals. When pressing them for further explanation, I’m told something similar to the following: “Well, our branch did $60,000 in revenue in November 2004, and our goal is to do 10% higher than that ($66,000) in November 2005.” When I hear that simplistic answer, a number of questions then come to mind:
Why is your goal 10% growth?
What will that do to your bottom line?
Was your branch profitable in November 2004?
What was your fleet size last November? What will it be this November?
How are you going to reach 10% growth this year?
What’s the plan, and what are the specifics of the plan?
More often than not, branch personnel or managers have not thought about these questions, or their answers. Often, they are content with answering questions with the old standby: “Because that’s what we were told.”
Is your company training all employees how to truly measure dollars as they make the journey from the top line (of gross sales and revenues) to the bottom line (of net profit)? And, at the same time, are these employees learning how to effectively set goals? If not, you’re missing an opportunity to strengthen your team.
When you set company goals but fail to advise employees how to meet those goals, you’re being unfair to your staff. More importantly, this makes accomplishing the goals difficult. At the same time, absence of guidance also makes it difficult to hold people accountable for not reaching their goals if they aren’t involved in the process.
How do you start down this path? First, let’s start with measuring top-line performance. Be sure your employees are not just looking at total revenue as a barometer of how they’re doing. Make no mistake, revenue growth is important. But there is more than one way to discover your true performance. You can be more effective in making your team smarter business people if you look at performance on a per-unit basis.
Let’s expand on our example cited at the beginning of this article. If branch employees attained their goal of $66,000 in revenue, they would feel pretty good about themselves. But if we had a true look at performance from November 2004, it may reveal a different story:
Nov. 2004/ Nov. 2005/ Growth
Revenue/ $60,000/ $66,000/ +10%
Avg. Fleet Size/65/ 79/ +20%