Does it sometimes feel as if you’re spinning your wheels? You set ambitious goals in the new year and now we’re well into the second half of the year and those goals are starting to look way out of reach. Don’t panic. What you need is a half- year assessment. Forty-six percent of this type of business plan has materially changed the path of the business after six months. These changes are so pervasive that making this type of the business plan a continual practice may be warranted. Take advantage of the calendar and readdress the position of the company vs. the goals previously set. These changes can potentially be for the better (exceeding the goals) or for the worse (major disruption or not achieving the goals) — not having a formal strategic plan is the worst situation to be in. Failure to plan is a pan for failure.
Financial reporting and analysis are retrospective processes, so why wait until the end of the year to assess results and drive growth? Generally, year-end results are not available until late in Q1 of the following year, and relying solely on this data does not allow the organization the opportunity to assess performance on a proactive, continuous improvement basis. Strategic Continuous Improvement (CI) requires an accurate set of measurement / metrics and financial information – the information need not be annual, semiannual, rolling 12 months, or even quarterly. The key is timely, accurate information from which to gauge your progress and determining where alternations may be beneficial.
Furthermore, it is imperative for management to understand how their organization performed during the first half of the year. Traditional revenue and cost analysis continues to be a rudimentary measurement of profitability. Other metrics such as EVA, foot traffic, production by labor hour, sales calls to clients and other metrics provide the underlying yardstick for performance measurement. The key is to preview—don’t just review—performance. Additionally, when going through the process, focus on strengths, set challenging goals, and make it a productive exercise.
Entrepreneurs tend to be optimists in nature. Believing the next quarter is “THE QUARTER.” Placated by theories that improvement is around the corner, these reactions just stave off the admission that outside intervention is necessary. Attaining the acceptance of this will give the objectivity to take action. Objectivity is also critical in evaluating procedures and processes when there is not a crisis on the horizon. A fresh set of eyes providing an independent review should include benchmarking against like companies, industries and geographic location. And it should be performed by professionals with operational expertise and financial acumen.
Businesses that have an organizational-wide buy-in of strategic objectives are among those that thrive. A realignment of priorities to instill a collaborative understanding of performance measurements may be necessary. A period of flat production is an opportunistic time to shed holdouts unwilling to accept change. Communication of performance results - the results of the organization as a whole - along with clearly defined benchmarks and milestones provides motivation and increased efficiency. Performance efficiencies attained during slow-growth periods should be accomplished during periods of expansion and increased production.
A half-year scorecard provides for financial and non- financial metrics from internal and external perspectives. Benchmarking is the yardstick to evaluating key performance measurements. This is especially true when budget to actual measurements are outliers on the scale of predictable results. Year-end analytics, even those that are prepared on a quarterly basis, are not providing the information when it is needed. A year-end analysis to communicate that milestones were not met, invites justifications rather than providing for innovation and a learning opportunity. A half-year scorecard will provide timely information that can be utilized to produce solutions while they are still pertinent.