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  • Sam Decker

How Measurement Leads to Money — 6 Steps

A mid-manager came up to me after a recent conference presentation and asked me how to convince his people – and even some executive management – why measurement was important. He was aiming to change the culture, and I applauded him for that. To get there he had to reach the intellect and the heart of people.

Here’s how I suggested he might explain it…

First get agreement that the mission is to ‘make more’…

In all seriousness, business is a collection of policies, processes and people who operate them to create value — and as a result, achieve more profit. The goal is to develop marketing machine where you know what you’ll get out is more than what you put in.

We can explain the marketing machine, and its benefits, in 6 steps…and why measurement makes more…

1. Measure the inputs (to processes) A company is a system of people, processes and policies. The inputs to these systems are measurable. 2. Measure the outputs (from processes) Every process should have an output that produces some value to the company – otherwise it’s called spinning wheels. For example, you can measure what it takes to put content on the web site (input), and you can measure the impact (A/B split test). 3. Leads to Accurate micro-forecasts Over time, measuring your inputs and outputs (maybe even testing), you get a sense of what kind of output to expect. Which makes forecasts –- at an individual, team and division level — more accurate 4. Leads to management confidence in macro-forecasts As a result of accurate forecasts at a micro-level, management has more confidence in making sales and profit forecasts for the business. 5. Leads to Investor confidence After a series of accurate management forecasts, investors have more confidence to invest in the company…broadly speaking. This could be VCs invest more in a company, or investors buy more stock, or even management invests more earnings back into the company. 6. Leads to more money for everyone! As a result of this investment, and measurement rigor from which drives out costs and grows revenue and margin, the company is making more money. Everyone’s teams and careers grow (including salary, profit sharing, equity).

It starts with a simple equation (which is the easiest way to explain Six Sigma): Y=f(x) where Y is the measurable output and x is the measure of inputs (processes). Follow this methodology at the individual level all the way up to the CEO and you should get the output from the process I describe above!


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