Wednesday, June 30, 2010

Metric Decision Making

One thing that I've come to understand about management is that it is far too easy to get caught up in emotions and "gut feelings" and when decision making comes from those things, it's very easy to get it wrong. Take firing someone as an example. I'm a top manager and as such, I've had more than my fair share of people who have taken shots at me. I've been insulted and undermined. I've dealt with passive aggressive individuals who were smiling to my face and stabbing me in the back. I've even worked with plenty of people who I just didn't really like very much. I can't just fire everyone that I don't like or who doesn't like me. Sure, if I give a directive to someone who understands and agrees to my face, but sabatoges me or my business when I'm gone, I'm absolutely going to send that guy packing. We need our team members to act like team mates and not like enemies. I think that's pretty well understood.

It's the emotional things that I really want to focus on though. If you don't particularly like someone, you might just have to get over it. Number 1: we dont make decisions based on likes and dislikes - period. Number 2: what if you get rid of a top-performer based on something personal and/or petty? What if you don't even realize that person is a top-performer? What if you don't even know what would define a top-performer? That's a serious problem.

You need metrics to help guide your decisions. You need to know how your employees perform compared to other employees in your company and to other people in other companies within your industry. This starts by knowing how your company performs compared to other companies. Do you know how much revenue each of your employees should generate in a work day. Do you even know how much they are generating at the present time? If not, that's a problem. You need to figure this out.

What about ratios too? Do you know how many people it takes to run your operation? Well, how many customers does each of your employees help per hour? 1? 2? 10? How many dollars does each of your employees generate? How many dollars per hour? Now, what if you don't particularly like someone because your personalities seem to always clash or because that person doesn't seem to want to do things "your way"? What if that person generates $1,000 per hour compared to your average employee who's doing it "your way" and generating $750 per hour? If that's the case, I think it's just about time for you to suck it up buddy.

Your not going to make decisions based on emotions and gut feelings when you can do a little work and find out some really solid metrics to help guide you. Without those metrics, you're going to lose someone who outperforms the rest of your team by 25% when you should be looking at the guy who produces $350 per hour instead.

This way of thinking will save your butt over and over again. It will help you decide which customers to dedicate most of your time to and which customers to stop spending time with at all. It will show you which products are selling the best, even if you don't particularly like them (which won't matter with metrics). As I've clearly shown you here, it will help you make smart hiring and firing decisions so that you don't lose valuable people and poor-performers. If you use your own numbers and compare them as many ways as you reasonably can, you'll be around a lot longer to keep making those smart decisions.

Metric Decision Making > Emotions & Gut Feelings.