In business, there are many challenges. The quest for growth is an ongoing issue. But how do we get there? How can an entrepreneur be equipped to make the right decisions for his or her business? Knowing your small business and mastering your internal processes is a solid foundation for successfully running your business. Here’s how measuring internal processes can help you make the best decisions and achieve your growth goals.
Why do we need to measure an internal process?
Knowing your business means empowering yourself to make smart decisions that will have a positive impact on performance. This can be achieved by measuring internal processes to understand their quality and weaknesses. This form of feedback is used to determine whether an activity is effective or whether, on the contrary, it should be reviewed and how it should be improved. The owner can then decide what needs to change, why, and how to improve it. All of this must be done to meet the following objectives:
- Meet your goals: Every small business has objectives to meet. Measuring whether activities are producing the expected results, whether there is a surplus or a gap to catch up. If so, the performance indicator will quantify the shortfall and help you adjust.
Better managing your business: Measuring provides reliable indicators of objectives. These tools help build evidence-based management. This avoids managing intuitively, based on presumptions. In fact, this method is counterproductive and often illusory.
Be more competitive: The goal of a business is to thrive and make its place in its market. Measuring enables you to grow and be more competitive thanks to optimal internal processes. A well-functioning company generates more profits and can meet a large demand.
The mistake to avoid
Accounting ratios are performance indicators, of course, they provide an indication of costs and expenses on a quarterly or annual basis. However, this measure is not sufficient because it does not provide clear information on the processes, their performance and the reason for the losses. We must avoid this mistake and introduce a number of dynamic measures in our business.
What processes can be measured?
Any business activity is quantifiable. With the multitude of performance indicators available on the market, SMEs can calculate and understand, using objective data, their internal processes, regardless of activity or department.
- Recruitment process
- Human resource management (motivation, retention rate, etc.)
- Business development
- Marketing
- Accounting
- Production
- After-sales service
What are the performance indicators?
- The percentage of net earnings
- Unit cost customers
- Percentage of sales to existing customers
- The level of customer satisfaction
When to measure?
While every time is good, it’s good to measure your internal processes before taking action, during and after hiring, before raising prices, launching a product, etc. In addition, the measurement tools available to SMEs can be CRM, dashboard, ROI analysis, process mapping and more.
- Before: Knowing whether funds are sufficient, adequate resources and effective strategy.
- During: Are the results in line with expectations? Should performance or strategy be reviewed?
- After: Should we review our strategy and improve our processes? Are the results satisfactory?
Measuring even when things are going well.
Certain quarters or months are particularly profitable. By measuring a process, the contractor can know exactly where there has been an increase in performance and how it has happened. In particular, it will know which activity generated better results compared to the previous period. It will be able to replicate this success by adjusting its process accordingly. For example, sales for the first quarter were higher due to a new hire or the implementation of a social media marketing campaign. By noting performance, SMEs will be able to add this activity to their business development. If a person does not measure a process on the basis that sales are good and satisfactory, they will not be able to identify the factors that contributed to that success, how they can be improved and to what extent.
In a nutshell
A company’s performance is measured only by traditional annual performance indicators. A company that wants to grow strategically will be able to use different data to obtain an accurate profile of its organizational performance, profitability, competitiveness, etc. By doing so, it will benefit from several advantages, including greater efficiency.