Vercor

Measuring for Peak Performance

Roger Haggerty

Careful planning and impeccable execution result in peak performance. In today’s world, we see evidence of this simple fact in sports, the arts and in stock market valuations. Some of these business and sports institutions have reached the level of dynasties with stellar results, year after year.

So the question to ask your self is, “Why can’t good planning and execution be applied to my business to achieve peak performance year after year?” Use the following checklist to help you focus on how to utilize your human and financial capital to achieve peak performance. It is based on a set of processes and business practices from that age-old maxim, “What gets measured gets results.” Although this is no overnight panacea, improving your adherence to this checklist will result in a process of continuous growth.

Why is this issue important to your company?

A building products distributor had achieved record sales, but failed at creating excess cash flow or a better bottom line. The following year brought another new record in sales, asset productivity, increased margins and enough excess cash flow to reduce its debt level by 50 percent. The difference? The distributor implemented many of the process and business practices outlined on the peak performance checklist.

Conversely, a professional services firm with fewer than five “yes” answers on the checklist questions went out of business six months after ignoring the checklist results.

What is the CEO’s role in this process?
The CEO should complete the peak performance checklist then meet with the management team to discuss the results. This meeting should focus on assigning responsibility for designing solutions and implementation targets that address the organizational deficiencies uncovered through the checklist.

1. “Yes” answers on the checklist will have to be evaluated for their depth and results. If a “yes” answer corresponds with a process that is not effective, that process needs to be reworked to meet the company’s objectives.

2. By the same token, what will be the risks to the company for failure to address all “no” answers in a positive manner? If your company relies on bank debt to finance working capital or has term loans, the peak performance checklist should enhance your borrowing relationship. If you are considering an exit strategy, the peak performance checklist should have a positive impact on the sale price of your company.

3. A timeline should be created for any changes indicated by the exercise.


Measuring for Peak Performance Checklist

The Mission

1. Have you defined your overall business objectives? Y/N

2. Have you identified the strategies you will need to achieve the overall
objectives? Y/N

3. Have your put together the tactical plan that will support your strategic
initiatives? Y/N

4. Have you allocated the resources (people & capital) necessary to achieve
your overall business objectives? Y/N

Getting There

1. Does your company use budgets (profit-and-loss statements, cash-flow and
capital expenditures) as an integral part of your planning process? Y/N

2. Does your budget process have the support of your key managers? Y/N

3. Does your budget include a write-up on how the plan will be achieved? Y/N

4. Do you belong to trade organizations that publish key financial indicators
for your industry? Y/N

5. Do you compare your results to published information on your industry
and do you incorporate that information into your budget process? Y/N

6. Do capital budget items over $10,000 have a required ROI timeframe? Y/N

7. Do all employees know what their roles are in achieving the financial plans
of the company? Y/N


Reporting

1. Have you identified key performance indicators and do you get timely
information on those indicators? Y/N

2. Are your financial results shared with your management team and reviewed
in a timely fashion? Y/N

3. Is your management team required to commit to specific steps to correct
budget shortfalls? Y/N

4. Do you report current results against plan and last year? Y/N

5. Do you update your plan based on trends? Y/N

6. Do you use the trailing 12 months indicators to measure results? Y/N

7. Do you report on actual ROI versus planned ROI for capital items requiring
ROI? Y/N

Rewards

1. Are your key managers compensated based on exceeding their specific
performance indicators? Y/N

2. Do all employees participate in a bonus plan based on exceeding the
planned budget? Y/N

3. Are all employees encouraged to participate in profit improvement initiatives
by contributing suggestions for ways to increase profits? Y/N

4. Do you discourage activities that do not have a direct or indirect impact on
achieving the financial plan? Y/N

Rating Your Answers

17 or more “Yes” answers -- Congratulations. You should meet your company objectives.

12-17 “Yes” answers -- You have potential, and the chance to meet your company objectives.

Fewer than 12 “Yes” answers -- Your luck is better than your business acumen. If you achieve your objectives, it is more miracle than management.

Roger Haggerty is a partner with the Atlanta consulting firm, The Interlochen Group. He has 30 years of experience in helping companies achieve their financial objectives. He received his degree in Business Administration from Babson College, a leader in entrepreneurial studies.

Copyright © 2002 by Robert Haggerty.
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