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How Many Gauges Do You Watch in the Cockpit of Your Business?

Copyright 2005 Empower Business Solutions

As a business grows, the more moving parts it has. And the more

difficult it is to keep an eye on everything that is happening.

Then the balls start to drop. Does your business have as many

moving parts as a Jumbo Jet? How do 747 pilots manage?

When a business starts-up, because of the risk of failure, the

owner has to watch everything. Fortunately, when you start-up,

there is not a lot to watch! But it is hard to get out of the

habit, which is why so many business owners continue to

micromanage the business as it gets larger. Now if you could

keep your eye on every ball in the air that might be ok. But at

some point it becomes impossible to maintain, with owners

focussing on where they feel most comfortable, rather than on

what is most important.

Studies have shown that there are limits to how many different

things a human being can monitor and react to. This of course,

varies from person to person, but everyone has their limit. For

example, only the most skilled jugglers can keep more than six

balls in the air. The world record is 12. So when we try to keep

our eye on everything, we will start dropping balls.

So how does a Jumbo Jet pilot keep an eye on everything? Funnily

enough, they have six gauges in the cockpit, representing the

key areas of the plane's performance. Or in business speak, the

plane's Key Performance Indicators. These are the most vital to

keeping the plane in the air. So if the seat 57D does not fully

recline, or the airline logo paint is starting to flake on the

body of the plane, they do not know about it. They have the

flight attendants and the maintenance engineers to worry about

such problems. However, these personnel are highly trained to

notify the pilots if there is something they should worry about.

The pilot trusts these personnel to do their job and follow

their procedures, and only let him or her know about things that

affect the plane's safety. So the pilots can concentrate on

flying the plane.

But what if there is an engine problem. The plane's flight

management system is set up so that any problem with a key part

in the flight system will be evident on the high level gauges.

So if there is a drop in airspeed, the pilot will query the

system to determine which of the many causes may be responsible.

They are able to drill down from the high level gauge which has

moved from the safe area to investigate which of the plane's

subsystems may be a fault. In almost all cases, the pilot is

able to identify and either correct the problem or take action

that will enable the plane to land safety. If they worried about

every little non-critical problem on the plane, the chances are

they might only notice the big ones when it is too late to do

anything about them.

In business, the owner might identify that their cash reserves

are declining. (Cash at Hand is one of the biggest Key

Performance Indicators for any business.) Having seen this, the

owner might ask the accountant to look at their detailed reports

to identify the cause. Is it due to slow sales, overdue payments

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by debtors, cost blow-outs or overinvestment in inventory.

Having identified cost blowouts as the cause, the accountant

might ask the operations manager why costs have gone up. She

might advise that a maintenance problem has caused the over-run.

When the operations manager speaks to the maintenance

superintendent, she may discover the problem was caused by poor

quality feedstock. In other words, a cash problem was caused by

supplier quality control problem. Further analysis is of course,

possible. The owner has therefore uncovered a critical supplier

problem by interrogating staff after a key performance indicator

has moved from the safe zone.

By having a small number of Key Performance Indicators which

define the health of a business, and which are linked to other

more detailed reports, the owner can fly their business using

just few gauges. So, if there is a deeper problem in the

business it will become visible. Because an owner with an

excellent Business Management System is confident that they will

identify problems in a timely fashion, they can focus on flying

their business towards their ultimate objective which is their

real job.

About the author:

Dr Greg Chapman assists small to medium sized businesses with

business planning, business systems and marketing strategy. To

find out how you can Multiply Your Profits & Make Your Business

Run without You, and to find out How Good Your Business Really

Is with a Free Online Business Medical, go to Empower Business

Solutions website at: http://www.empowersolutions.com.au