Critical Numbers: Make Your Team More Aligned and Effective
Posted on 15th November 2022 at 13:27
WTFDTM? What is a Critical Number?
Technically: The one metric, operational or financial, that represents a weakness or a vulnerability, that If not addressed properly, will negatively impact the overall performance and or long term security of the business
Why are they important to the team?
Essentially the correct understanding and use of Critical Numbers can encourage the team to work together towards one common goal as well as benefitting the health of the entire business.
1. Provides focus on what is important
2. Provides a common goal/ something we can all work to
3. Provides a learning opportunity for everyone to understand what is important – helps with empowerment over time by understanding ‘what is the right thing to do’
How do we use Critical Numbers in ESUS?
We build them into the 90-Day planning approach and identify one or two critical numbers:
For the overall business – and assign responsibility
For each team/ department and ideally for each individual
We then monitor and review them through the business rhythm – so they are included in the Smart7 updates at an individual level, and then in the Smart30 at the business level.
How do we work out what is a Critical Number?
In the Smart90 process we are identifying a handful of priorities for the business for the next 90 days. We then identify one (or maybe 2) numbers/ metrics that are critical/ ‘must achieves’ - what is paramount that we hit?
We carry out a similar process for each key department/ e.g. marketing and individual so that we have an overall business Critical Number that we are working towards collectively, as well as supporting Critical numbers that we are working towards individually.
Questions to help us get to what could be Critical Numbers:
Are there considerations related to your business model that are absolutely critical to ongoing success?
Are there challenges your business faces right now that deserve attention – for example declining quality, increasing error rates/ bug fixes, overdependence on a client or supplier or key individual, high employee turnover etc.
What keeps you awake at night?
It should be something that the team agree:
Will have the greatest impact on the business
Is a must achieve in order to succeed/ survive
Clearly defines ‘winning’ for your business
Focusing too much attention on top or bottom revenue or sales vs. the behaviours/ drivers required to achieve it.
For example – if we want to lose weight, the critical number might be our calorie intake (or the amount of exercise we take) – because these are things we can control.
So rather than focusing on ‘Sales’ for example, where is the ‘bottleneck’ or where is the ‘problem’ in the sales process that we need to fix? Perhaps is in the conversion rate – maybe we are getting a good number of leads but we are just not able to convert. Maybe we are getting stuck at a particular point – so that should become our critical number.
It’s not all about the number!
It’s about the process of getting to it that is equally if not more important – combined with how we go about delivering against it. This is where Smart90 and the planning process combined with the business rhythm can help hugely.
A tool that can help you
Our InFlight Checks should help your thinking combined with the process of asking the right questions during Smart90. Helping you ensure that you have thought through the 4 pillars of scaling up and identified any weaknesses that need addressing.
How are Critical Number different from/ or similar to Key Performance Indicators and how do they link to other parts of ESUS?
‘If Everything is important, then nothing is important’ Remember, there are countless things we COULD be doing better, there are fewer things that we really SHOULD be doing better, Smart90 Priorities and Critical Numbers are about the things we MUST do better.
So, you will have heard us talk about Key Performance Indicators (KPIs), the Balance Score Card and also Critical Paths.
Critical Numbers are typically not additional to these, they are primarily a way of focusing the mind and attention of the whole team onto what is absolutely essential this quarter. It does not mean that the other things are not important, just that right now, this is the most important thing.
What about Critical Paths?
As part of our SmartStrat Planning process, we identify things that are critical to achieve in the next 12 months if we are to stand a chance of hitting our 3 year goals and beyond. We call these our Critical Paths. Our Critical Numbers identified for the quarter should relate to achieving the Critical Paths in some way if we have carried out our thinking correctly.
A couple of ways of looking at KPIs:
If I said to you, imagine you are stuck on a desert island and you can only have 5 numbers sent to you each month to help you know whether the business is going in the right direction, what would they be? These would typically be your KPIs. We extend that a little into a Balance Score Card – which is essentially a company dashboard where we define and track a set of key indicators that are ‘balanced’ across 9 key areas of the business – not just sales and operations. The question we ask is ‘how do we know if the ‘[ ]’ are where we
want them to be’. The 9 areas are:
1. Financial Performance
2. Team/ People
3. Marketing/ Lead generation
5. Operations/ Production
6. Business Admin
8. Continual Improvement
9. Stability and Value Growth
Ideally we look for 1 or 2 key measures for each that will tell us if each area is on track to avoid us measuring too many things.
Another way to look at KPI – Key Performance Indicators
Keep People Interested
Keep People Informed
Keep People Involved
Keep People Inspired!
This month's ScaleUp Club on Critical Numbers will give you the opportunity to speak with us and peers about critical numbers and help you get yours set up and on-track! Book your spot here: https://bizsmarts.co.uk/scaleupclub/criticalnumbers
Get your own copy of ESUS (your perfect ‘companion’ as you navigate through your ScaleUp Journey – a kind of ‘handbook’.) https://www.esusgroup.co.uk/
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