I’m Too Busy to Know the Numbers
Steven Cesare, Ph.D.
A business owner from California called me the other day to talk about his company’s compensation plan. Given the apocalyptic economic conditions across the country, the business owner, like many landscapers, has finally accepted the fact that he should explore variable pay options like bonuses, commissions, and rewards rather than simply having the routinized public sector mentality of giving his employees 3-5% pay raises each year based on “merit.” As a capitalist, all I can say is: Better late than never!
With that topic in mind, I asked him to share some of his company’s key performance metrics with me. He said, “we do about $6-7 million a year.” I said, “About? Do you have any more details than that?” Interestingly, his abrupt response was “Why do you have to know that?” Calmly, I retorted that “we should have actual company performance indices in mind to represent a series of baselines upon which supervisorial, managerial, and organizational goals can be established.” That prompted an echo response, “Why?” I replied, “we have to know the numbers so we can design a fair, lucrative, and profitable bonus plan.” He then said “Steve, you don’t understand. I am too busy to know the numbers.”
He was right. I didn’t understand the premise, intent, or essence of his response.
I still don’t.
If he does not know the “numbers” for a $6-7 million dollar company, I guess he also does not know his wife’s birthday, his children’s names, or his social security number. That’s an extraordinarily busy business owner! If he is that busy, we should immediately promote him to Foreman, of a Mow Crew, on a single HOA account. If he does not know the “numbers,” he is way too busy to run his own company.
While I wholeheartedly agree that owners should definitely not clutter their minds with a Petabyte of arcane metrics, analytics, and “numbers” of minimal import. However, owners should have at least a Kilobyte awareness of the “key numbers,” in that they represent the due north compass point of business acumen. Individually and collectively, they gauge success, determine action, and direct change, all of which are underscored by “executive-level decision-making.” Last time I checked, the owner of any company, let alone one doing “about $6-7 million a year” is an executive-level decision-maker.
That said, here are the “key numbers” any serious, confident, and capitalistic business owner should have indelibly etched on his/her cerebral dashboard every day. Every day.
- YTD (Year to Date) revenue and YTF (Year to Forecast) variances for every revenue stream
- 18-month revenue forecasts for every revenue stream
- YTD gross margin and YTF variances for every revenue stream
- YTD Foreman and Laborer employee retention rates and YTF variances for every revenue stream
- YTD Job Retention and YTD Revenue Retention rates for the Maintenance Portfolio
Too much for you? If so, maybe you can join the aforementioned business owner on the Mow Crew. I hear they need another Laborer.
Of course, there are myriad other metrics you can, may, or want to know (e.g., debt to equity ratio, cash flow, the ratio of enhancements to a maintenance contract, change order percentages, EBITDA, injury incidence, overtime ratios, insurance premiums, overhead costs, revenue per man, customer acquisition costs, sales pipeline ratios, weekly payroll, current AR/AP aging, working capital, break-even point, operations revenue backlogs, burn rate, and last but not least, net profit). Just make sure you know the “key numbers” first!
At the end of my conversation with the business owner, I uncharacteristically did not leave my cell phone number with him. Why not, you ask? He led me to believe he was too busy to remember the number.
But for you: I will gladly give it to you if you are signed up for my HR Helpdesk!
If you have any questions or comments about this topic or anything else related to human resources, Sign Up for Steve’s HR Helpdesk!
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