Mark: Welcome to unsuitable on Rea Radio, the unique financial services and business advisory show that challenges your old school business practices into traditional business and culture. On the show you’ll hear from industry professionals. We will challenge you to think beyond the suit and tie. We will offer meaningful modern solutions to help you enhance your company’s growth. I’m your host, Mark Van Benschoten.
How you define success in your business? Once defined how do you measure it? Are there certain goals that you have to achieve before you can consider yourself successful? It’s common to think of success as a black and white concept. You’re either successful or you’re not, but in business that’s not always the case. Like in life, you could have a very smart child, but who’s a criminal. Is that successful? Rea’s chief operation officer, Jeremy Senften is here to tell us what we should be measuring to determine whether our business, or a particular initiative is successful, and how those results impact our bottom lines. Welcome to unsuitable, Jeremy.
Jeremy: Thanks, Mark. Great to be here.
Mark: I used to be glad that you were here until you buffalo’d me, but thanks.
Jeremy: You’re welcome.
Mark: On your bio you have a quote. Are you familiar with your quote?
Jeremy: Why don’t you tell me what it is?
Mark: Sure. I will. I got it written right here. “In the gap between the stimulus and the response lies the power of choice.” That’s powerful. Where did you get that?
Jeremy: Yeah, I think I read that in a book somewhere. I saw that in a clip. I’m not sure, but I picked that up a few years ago and I like to repeat that every once in a while.
Mark: I think it’s good and I think it’s applicable to what we’re going to talk about today, because we all have a choice. We get a stimulus. We need to react, and we have choices. Sometimes people don’t think that, but it definitely impacts their success.
Jeremy: Yes, it does.
Mark: You still stymied over the Buffalo thing, so I’m going to let you off easy.
Jeremy: Thanks.
Mark: What is success? If you were to define success, what’s success?
Jeremy: Boy, it depends. Are we talking about business? Are we talking about your personal life? I think there’s all different kinds of success. I think this is a business podcast, so maybe we’ll stick a little bit on that side of things.
Mark: Great.
Jeremy: I think, and again I’m giving you a broad answer here, but I think that’s different for every business. I know you talk a lot about not for profits on this podcast, listen to those and in for profit businesses too, they all need to go in and they need to define what do we want to do? What’s the purpose of our business? Some business might say, “Hey, success to us is a huge bottom line.” Other businesses, success to us might be helping out this group of people. I think maybe real successful businesses can do both. They’ve got a mission. They’ve got a vision and they can help others or create something of value and then also make money off it and have a good bottom line.
Mark: I agree with you. Success can be defined a lot of different ways, and a lot of different situations. Just wanted to hear your thoughts. You can’t say, “Oh, this is success,” or, “This is unsuccessful,” because what might be unsuccessful for me really might be success for somebody. Depends on their perspective and their situation.
Jeremy: Yes.
Mark: One thing, in the intro we talked about it, it isn’t just about … It could be an initiative. We might want to measure success on initiatives, not just a financial result.
Jeremy: Yeah, I think initiatives can lead to financial results, but they don’t always. There are certain things and they’re hard to measure in business. There are certain things that can make a business successful that don’t necessarily immediately go to the bottom line. Something I can think of that we talk about here in our company, we talk about education and training, and those sort of things. It’s hard to stick a quick bottom line number to those initiatives that we have, but we know they’re important. They’re important for employee retention. They’re important actually for customer satisfaction. You can make the connection between education and training to customer satisfaction and customer loyalty. We make some of those connections without having an ultimate bottom line goal to that, but it’s one of those initiatives that we think are important.
Mark: I don’t know if you had a chance to listen to Don and Annie’s podcast yet about a structured leadership program. They talk about the similar concepts. I don’t know if you have had a chance to listen to that yet.
Jeremy: I haven’t. I’ve listened to almost all of them, but that one’s next on my que.
Mark: Okay, good. I hope you catch up on that. You talk about difficult things to measure. I’ve heard you talk about leading and lagging indicators. I struggle with that. Can you give us some examples?
Jeremy: Sure, Mark. I can do that. One thing I think everybody can really relate to is losing weight. It’s the number one New Year’s resolution every year, so probably everybody in this room and everybody who’s listening to this podcast at one time or another says I’m going to lose some weight. That’s the good example I can use between leading and lagging indicators. When you’re trying to lose weight, the lagging indicator is the weight loss. That’s the after the fact thing.
What you need to do is really concentrate on those leading indicators. You can’t just say, “I’m going to lose weight and then weigh yourself every week and say, “I’m not losing weight, what’s going on?” There’s two main leading indicators to losing weight. Those leading indicators are the number of calories that you take in and the number of calories you burn. That’s where when you think about leading, when I think about leading and lagging indicators, I think about the easy weight loss example. Those leading indicators are both influenceable and measurable.
You think about, in a business setting, what are my leading indicators? Or if I’m trying to lose weight, my leading indicators, I can influence and I can measure how much exercise I get a day and how many calories I take in. There’s accountability built into that where probably half the people that are sitting around now have one of these Fitbits. That’s an accountability device to help you measure those leading indicators when it comes to losing weight, and it really helps drive that lagging result, which is your ultimate goal of losing weight.
Mark: Can you apply it to business?
Jeremy: Yeah, I think I touched on it earlier. If one of your main goals in your business is increased customer retention, or maybe customer loyalty. That’s a lagging indicator a lot of times to leading indicators, some leading indicators that you can try to measure that are influenceable and measurable that help you achieve that. I talked about training. When we train our people and we develop our people, you might not think … How do you make the connection between customer loyalty and satisfaction and training your people? If you train your people and they’re trained in those skills that they need, both the technical way and the soft skills to help service your customers that can then lead to that increased customer loyalty and satisfaction. That might be one of the lead indicators that you’re looking at to try to influence that lagging indicator which is your ultimate goal.
Mark: That’s a great point. I’d like to circle back. You mentioned influential and measurable. I think those are really key as people try to come through and develop these things, because sometimes I get hung up on leading/lagging, but I think if I’m correct saying, “Your leadings, I need to be able to influence those, and I need to be able to measure those.” Then that could be a leading indicator.
Jeremy: Yeah, a leading indicator is sometimes called the bet. Sometimes you’ll go into something and say, “Okay, I want to achieve this result. I want to achieve more sales.” Who doesn’t want to achieve more sales? I’m going to bet that more customer sales calls are going to lead to that. That’s a pretty simple one. I think that’s pretty well known in business.
Mark: Sure.
Jeremy: Or we do research calls at Rea & Associates. Not exactly sales calls, but that’s one of our, that we built into our strategic plan are more research calls, we feel are going to lead to more customer meetings, which are going to lead to more business and more sales for us. We can measure … Both influenceable and measurable on those leading indicators.
Mark: The research calls influenceable. You do and don’t do them, and measurable, did you do them, didn’t you do them?
Jeremy: I did 12 this month, or I did 10 this month, or I did 0. Sure, yeah.
Mark: That makes it clear for me. I’ll probably forget in 20 minutes, but right now it makes a lot of sense to me.
Jeremy: I’ll remind you.
Mark: I appreciate that. Another thing when people are talking about measuring success if how do you track it? The weight loss example, you step on a scale. I’ve heard this term, scoreboards or flash reports. Any comments on those?
Jeremy: Yeah, you’ve got your lagging indicators, your leading and lagging indicators, but what you want to do is you want to be able to communicate those to people. People need to see are we making progress on those? Read a couple articles and books on this lately and they talk about having … There’s a coaches’ scoreboard and a players’ scoreboard. The difference, we’ve got a lot of coaches’ scoreboards. Management has all these spreadsheets and indicators and all this stuff that they look at that they might look at weekly, monthly, that type of thing. Those are the coaches’ scoreboard. The players scoreboard, that’s something that you publish to everybody in the company so they can see, hey, we’re making progress on this goal. What I’m doing today is having an effect on our ultimate goal, our strategic plan.
An important part that’s missed a lot in organizations are the player scoreboards. We let the rank and file so to speak. They know what’s going on and they see. We help them make that connection. What I’m doing right now has an effect on what’s going to happen and what’s going on in the big picture in this company.
Mark: I think that’s great. I agree with you. I’ve never really heard it described that way between the coach and the player. The player says, “Here’s what I did last week and here’s how it fits in or doesn’t fit in.” Probably creates some little hopefully friendly competition like, “Oh, somebody did 9 research calls. I’m at 2. I really need to step up my game.”
Jeremy: Yeah, it does and what you have, you have multiple locations or even multiple sales people. In the example you gave, sure. Everybody wants to win. Whether you like that or not about our society, that’s how it is.
Mark: It’s called capitalism.
Jeremy: It’s called capitalism. It is, and it starts at a young age. I help coach youth sports and the first couple of years they didn’t keep score in the games. The kids did. These are 4 and 5 and 6 years old that are keeping score. It’s whether we’re born with it, or it’s just part of our society, we’re doing that from a young age. That follows through all the way through our professional careers. We like to keep score. We like to know if we’re winning. If we got competitive people in there and they see the guy beside them is doing X, they want to do X plus. That helps drive results.
Mark: You mentioned the communication and I think that’s really key, and I’ll say consistent communication. “Here’s why we’re doing it, here’s how we did.” It’s always in front. It’s not the flavor of the month. “Oh, we’re going to do this and then in 4 weeks we’re going to forget about it,” because there’s just not that consistent communication.
Jeremy: Yeah, it’s really important to have somebody actually driving the process.
Mark: A champion.
Jeremy: A champion of the process, yeah. Whether it’s the CEO driving a big strategic plan, or whether you take parts of that strategic plan and you assign different champions as you say to those parts of the strategic plan, you’ve got to have somebody doing that. That person needs to be communicating. You need to stay out in front of that. The rule of 7 I guess is what I’ve seen where it takes somebody 7 times to hear something before it actually clicks in their head. There’s probably some people you and I know, Mark that it maybe takes 25 times to click in their head. Not you of course, but people we know that you have to hear something a bunch of times for that to click. Yeah, that consistent communication that’s just driving it home until you almost get tired of talking about it. Once you’re tired of talking about it, I think you need to talk about it about 10 times more and then people know what’s going on.
Mark: We did speak to your wife prior to this and she … It’s that rule of 7 times 7 is what she said.
Jeremy: Is that what?
Mark: Yeah.
Jeremy: Okay, yeah that sounds about right. Do you know what 7 times 7 is?
Mark: I’ll get back to you on that. I think, trying to lead initiative you get tired. I keep saying the same message. I’m not getting any traction, and you just need that perseverance to continue on that keeps it, because at some point it just has to take hold.
Jeremy: It does. If you’re going to spend the time and effort to put together a plan, whether it’s a big strategic plan or whether it’s time and effort and money, really, there’s investment that goes into all of these things. That investment can be money or the investment’s time. It’s usually both. If you as a business owner or leader of a business owner are going to spend the time, effort, and money to do that, then you need to be ready and committed to do that communication and to really follow through on that and to make sure it works out.
Mark: I would think that these goal settings and then trying to measure success doesn’t have to be entity wide. We’re going to grow net income by 10%. You could have at a group level at a department at a location.
Jeremy: Absolutely. I think the way to really effective everybody in an organization, unless you’re an organization of 3 people, when you start to get bigger like that to effect everybody in the organization you’ve got to break it down into segments, because if you’re talking about the person answering the phones, you’re talking about the salesperson, or you’re talking about the CEO of the company, they all are going to have part of that plan.
They’re not all going to be able to … Maybe the CEO is, but the others aren’t going to be able to affect every part of that plan. You need to breakdown, “Hey, here this part of the plan applies to you.” This is how you can really effect change and what you can do on a day to day basis. If you can’t break it down into a day to day or week to week basis for people, then that’s a difficult proposition, because they’ve got to think through it themselves. It’s your job as a leader of the organization to really break that down to, “Here’s how it applies to you, and here’s what you can do in your segment. There’s other people taking care of the other parts of it, but you’ve got to do this.”
Mark: Here’s what you can influence.
Jeremy: Exactly. They’ve got to feel like they’ve got control over part of everyday what they can do to influence that. Exactly.
Mark: I’ve seen through my career there people are held accountable for items that they have no control over. You just, wow, how could that be? That’s just crazy. How can you hold me accountable that it rained 6 out of the last 7 days? I can’t control that. It’s such a common mistake that we see in business that I don’t understand why it still happens. Sometimes you see it on … You might be evaluating a manager who has really no control over expenses, but when they’re over budget on a light item, you’re critical. I never see it. I never approve it, so how can I have an influence? Unfortunately we see that.
Jeremy: Yeah, I think that makes me of the authority and responsibility thing. If you’re going to give somebody responsibility for something, if they’re supposed to have control over it, then they have the authority to effect change on that. You really got to be careful when you’re assigning that to people, and make sure that they do have the authority to make and effect that change before you give them the responsibility, because otherwise they’re just going to be frustrated.
Mark: Then another, I’m going to be negative here, another bad example that you see is you’re working with your department manager and their over budget. They’re comment is, “I’ve never seen the budget. I’ve never helped put the budget. This is your budget. I didn’t have any input on this. You’re trying to get me to be responsible for what you came up with.”
Jeremy: Another excellent point, Mark. You did a little research.
Mark: It’s my second one today.
Jeremy: Yeah, that’s two. I don’t know if we’ll have a third, but …
Mark: I doubt it.
Jeremy: Congratulations on two. No, but having that feeling of ownership when you try to put together … It’s not just the leader of the organization saying, “This is what we’re going to do and everybody has to do it.” If you get buy in from people, then they feel ownership and they feel like they’re part of the process, that’s when it’s really going to hum.
Mark: Some business owner likes what you and I are saying here, Jeremy, what would you encourage them to do first? They want to say, “I want to start measuring success. I want to define success and measure it.” What should they do first?
Jeremy: You hit on it a little bit there. First of all, you need to define what success is for you. Take it back to the beginning of our conversation here, Mark. What is success in your organization? If there’s one, or two, or three things, I’d keep it to probably 3 at the most. Make that short list of what is success to me as an owner of this business, or as a leader of this organization? Once you have that defined, then you work down the tree from there, so to speak. I’ve got these three objectives, these three things are how I define success. Who in my organization is going to help me with those? Not one person can’t do all of that.
Mark: Sure.
Jeremy: Who’s going to help me with those? Get those people in the room as part of the conversation, like you and I were in the room earlier last year for our strategic planning process. You get the right people in the room and have them help you drive the process. That’s a really important step.
Mark: That’s a great point. I assume obviously goals change overtime. What might be successful today, here’s my definition of success, could change in six months, a year. I think this is probably not a static documents, probably some sort of dynamic document.
Jeremy: Exactly. You need to be flexible. You’re right. There’s a lot of things that are outside of the business owner’s control that can change in the political environment or the economy or any number of things that they don’t have control over that can change. They’ve got to be able to be flexible and move a little bit within that plan. Yeah, and it’s something you need to revisit at least once a year. Go back to here were my goals. Are they still my goals? Do I still have the right … Maybe a couple of my key people have left or moved on. Who do I plug in? Do I need to include other people? I’ve got an up and comer here that I really want to plug into things. How do I get him or her plugged into that? It is a dynamic thing that you’ve got to look at least once a year and really probably almost rewrite things every two to three years.
Mark: I think you’re measuring things on an interim basis. You’re not just waiting to that year before you measure. You’re measuring as you go throughout that time period.
Jeremy: Right, and you’re measuring those lead indicators that we talked about. Those lag indicators may be on a monthly or yearly basis, but those lead indicators, you can measure a lot of those on a daily or weekly basis right out ahead of those lagging indicators.
Mark: Before we wrap up, sometimes we think about success and we talk about business and we started out by trying to define it. Sometimes success could be feeling comfortable to wear a pink shirt. That could be defined as success, where you have that comfort level.
Jeremy: Do pink socks count, too?
Mark: They do.
Jeremy: Okay.
Mark: We have one last question for you, Jeremy before we let you go. If you could have one superpower, what would it be?
Jeremy: I knew this one was coming, because I listened to all the podcasts.
Mark: Except for Don and Annie’s.
Jeremy: Except for Don and Annie’s, yeah. I’ll have to do that tonight. I try to be original. That’s something I always try. I try to be original. I try not to be the typical accountant. I heard the last two, and the last two are sitting in the room here looking at me. I like both of those. Becca stole mine a little bit, but I’m going to do a … Some of my favorite movies as a kid were the Back to the Future movies. I think the anniversary of the first one was 30 years. This makes me feel old, but was last year was 30 years. I always thought it’d be cool to be able to do time travel, be able to go forward and see what’s happening, or to go backwards and maybe fix something that you could fix. I guess that would be time travel would probably be my superpower. It’d just be neat to do that.
Mark: That sounds neat. Then we can help set our goals. We’d know the future, right?
Jeremy: There we go. Perfect.
Mark: Jeremy, thank you for joining us today. That was certainly an insightful conversation.
Listeners thank you for listening to this episode of unsuitable. It’s a pretty big topic, so if you want some more information I would like to encourage you to reach out to us at podcast@reacpa.com. We’ve also included some great resources on our website at www.reacpa.com/podcast. Don’t forget to subscribe to unsuitable on iTunes or SoundCloud. Until next time, I’m Mark Van Benschoten encouraging you to loosen up your tie and think outside the box.
