I often have conversations with business owners about implementing a Key Performance Indicators program in their company. We often get hung up in sharing numbers with the employees in the company I'm speaking with. If we want to improve the financial operations of our companies, we need to be prepared to share certain financial information with our employees.
If we're going to identify key performance indicators in our company and then notice what drives those numbers, we need to share this information with the people who work in our organizations.
Sharing information about what actions we want to take, measuring those actions and posting results from new actions is called open book management. Opening certain financial reporting and the measurements to everyone in our company will often spell the difference between excellent and mediocre financial performance.
If you're not willing to share all of your financial numbers with your employees, start small and see how working on one key performance area with shared drivers helps your business. If you see a positive result (and we think you will) expand the program to other KPI's you may want to see improved.
Information provided by Josh Patrick, CFP, CLU, ChFC, is principal of Stage 2 Planning Partners, South Burlington, Vt., and specializes in working with closely held business owners on a variety of concentrated issues that are unique to owners of private firms. He can be reached at 877-880-5112; email: email@example.com; www.stage2solution.com.
Additional resources that build on the topics of this article
Read an overview on key performance indicators - the two or three numbers from your financial report analysis that spell the difference between the success and failure of your construction business.