Metrics: Reverse Engineering Them.

Over the past few months, working as a retail Area Supervisor who: stocks shelves, opens the store, sets the tills, counts the safe and daily deposits, as well as looking at some simple metrics has given me quite an interesting view into how operations come together to produce profits that we can measure. Since I also come from a healthcare background, taking a look at a metrics sheet is almost like looking at an X-ray…

And that X-ray might reveal where some of the strong and weak points are in your business, as far as profits are concerned. But a few important details that this picture will leave out comes down to everything that’s leading up to them. Numbers can be accurate; but as far as relationships go, you’re only getting a single dimensional image of what’s actually there. While every number that we see in our bottom line comes down to debits and credits, what about the spaces in-between? For our metrics to be as accurate as possible, there are quite a few more categories that we need to take a look at beyond daily sales, and how much we’re putting out and taking in.

For a quick example, we often minimize staffing hours due to short sales from the previous week to keep more profits in our pocket. While this makes sense on the surface, how many sales are we losing – from doing this?

From stock that’s not out on the floor, to having less people to make those sales possible, to an increase in stress for both employees and customers, this example alone reveals the shadow-side of making those cuts…Which, if we fully measure them, will only land in the debit category. Long-term, beyond the initial X-ray, this leads to less satisfied customers, a decrease in sales, less rotation of stock, more mistakes, more go-backs, more damaged goods, as well as a few potential holes in our staff due to the frustration of back-up in the process, overall. So, as you can see here, those numbers are not exactly cut and dry. And this is just one example!

To more accurately measure your metrics, draw a circle around one area of your business. See where those numbers are adding-up emotionally and logistically, first. Do some reverse engineering here. Meaning, if cutting something positive to raise profits (short-term) is going to cause more of a back-up tomorrow and all the days that follow this line of logic – this means profits will also be dropping off in a few other areas, as well. At first glance, this "full-circle" approach might seem unorthodox; but remember everything we have in place (if it’s working or not) is adding-up to the numbers we’re trying to measure. And, although we might have some very complex methods and calculations at our fingertips, entering long-term conditions into this system won’t always reveal what’s there, or what will be in the future. In following a straight line, just like reading an X-ray, you might identify a few patterns, but not the whole picture.

In business (just as in life) where those breaks are, will reveal some of what’s there. But how to prevent those negative conditions (or debits) requires you to leave those numbers alone for a bit to come back to them with fresh eyes. And when you do, not only will you have a new perspective on how your numbers are being produced, but you’ll also have a much better understanding of where your daily operations are headed. Since we often use last year’s numbers to predict what’s going to happen this year (almost like predicting the weather in the Farmer’s Almanac) you can do the same thing right now, without having to look so far back into the past.

The truth is, regardless of what those numbers look like, check-in with a few key positions in your store. They might not be able to read and analyze the sheets the way you do, but they can tell you which way the wind is going to blow and how fast, long before those numbers are set in place.

You might be surprised to find out that leaving just one stumbling block in place every day, can add-up to hundreds of millions of dollars in lost revenue. I can’t reveal all the specifics of my firsthand experience with this due to respect, privacy and confidentiality, but what I can tell you is that my latest formula to tighten up those metrics was revealed from a simple faulty change sorting machine. The little extra time spent here alone every day (or on a similar issue) if applied to a very large retail company is costing them about $36, 000, 000 in lost profits and sales, annually. And the cost to fix this very simple problem for at least the next two years comes out to roughly: $2,500, 000. Imagine that?!

As you’re analyzing where your recent profits are coming from, take a look at a few simple things as you’re going about your business. What looks like “spare change" on the surface, might be adding-up to so much more than you ever thought it would. And, if taking a few moments out of your day can literally save you millions (both short and long-term) that sounds like a pretty worthwhile ROI to me. So, get curious and take a look around...You might be amazed at what you discover.

(And, if this idea worked out for you, I would love to hear about it!)