Mike Clark's Business Bites: How to avoid the clash of metrics

Clear goals and metrics empower people to perform to create win-win for all parties. Photo / Unsplash

OPINION:

Do you enjoy sports? Do you follow a team?

Do you know the rules of your business as well as the rules of your favourite sport?

People can get very passionate about sport. They will stand up and shout encouragement at their team, cheer wildly when their team scores, hurl abuse at a ref if they think a bad call has been made, and generally be very emotionally invested. Do you see this level of emotional investment in your company?

Do people care passionately and deeply? What difference would it make if staff were more engaged and connected at work? If you feel engagement is lower than it could be, a great place to start looking at how you can encourage stronger connection is your metrics. Are the rules for winning at work as clear as they are for a sports team?

People like to win. It is a common trait that is easy to tap into. Does every member of your team know if they have won every day at work? A great frustration for many people at work is when the rules and regulations make no sense and/or are not even well known. This frustration only increases when the rules/metrics at work are counter to the stated expectations.

I have seen this often with sales teams where a sales rep has a target, say $1million of sales in a year, and they go all out and hit the target but do so by discounting products far too quickly because their focus is on hitting the million dollars.

Unless it is your business strategy (think Briscoes), discounting is a bad sales strategy. It kills gross profit and net profit and can create a slew of long-term challenges - like price wars, running out of stock, doubts about product quality, etc. The problem in this example is not the sales rep - they are being motivated and incentivised to reach a target. People do what they are rewarded for doing.

The problem is the goal was not clearly stated and the rules not clearly known and understood. Selling $1m at a low gross profit creates cash-flow problems, makes buying new stock harder, and impedes the ability to pursue new opportunities. Clear goals and metrics empower people to perform to create win-win for all parties. Experience has taught me that the same sales representative, if told to sell a million dollars at a 35 per cent gross profit, is likely to still hit their target.

We see this clash of metrics in many corporates. The marketing department is measured on how many people they can get to join the company and so they offer amazing deals like free TVs and fridges or a month's free service. However, there is often no correlating metric for retention, and so customers get very good at jumping from one deal to the next. Telecommunication companies and power companies would have to be the worst at this.

Retention is a lot cheaper than attraction. Corporates do not reward loyalty. They rely on the strain of change to keep people.

As a company, what are you doing to retain your staff and your clients? Ensure your team knows when they are winning and that your metrics work for you!

• Mike Clark is director and lead trainer and facilitator at Think Right business training company.