How to Give Employees Key Indicator Responsibilities

This is an excerpt from SmallBusinessSchool. Jim: Well the key in the entire report has two purposes. Number one is to make your management job easier. It allows you quick access to the important things in your business and it shows you the trend the direction of what’s there going but it even more important a use of their key indicate a report is to engage your key employs in the management of the business. If you were for instance to hand them a PNL, a balance sheet, cash flow statement you have trouble reading am I right? Hattie: Right. Jim: What do you expect of your employees? Hattie: Their eyes cross. They go no wonder I’m not the owner. I don’t even want to full with this. Jim: Right. Further more if you got a bunch of key employs and let say you’ve got your bookkeeper and on your key report remember we talk about you have percentage or receivables over 60 days and if—six months ago and your percentage of receivables over 60 days was 10% and now they’re 5%. Everybody in this meeting knows that your bookkeepers doing improving at collecting your receivables. Hattie: Jim points out that Nanny needs a specific key indicator to watch. Jim: But I want to go back to this 25% gross margin this year. If I were your consultant I would say this is your number one problem here in this company and so that you should create a key indicator report and the top item in that indicator report should be gross margin and you should do everything that you can do to focus on increasing that 25% to 30% 35 whatever within reasonable time frame. And the first place it sounds to me like you need to do is to go back to the job causing for redo the job causing form. Redo the logic with which you estimate jobs its too low. I mean some things wrong here because my guess would be in your industry that had gross margin should be up in the 35 to 40% range. Hattie: Creating financial reports and tracking key indicators would be hard without software but now it’s easy. Male: We’re able for the first time to get quality information back right now on where we are and what we’re doing and that is something I have never had in the strict of the company. I now know what my receivables are. I know now what my payables are. I now know that my accounting for payroll is going to be right. Jim: When a business owner gets to the point where his favorite day of the month is the day that financials come out or even better than that. His favorite day of the month is the day he can push the button on his software and that will kick a preliminary PNL. When that’s the favorite day of the month then you know you’ve arrived that the point where financial statements are meaningful to you. Where you know that you get it that its all about numbers.