Wither the yellow brick road?

Blogs Bill Wade October 2, 2013

Why do the same names show up time after time in things like the Distributor of the Year program?

What do the Ryans, Pardos, Stones and Maclamores, Minors, Bass, Leffels, Betts, Burkes, Settles, Franklins or Ogburns know that we don’t? (I know I missed some, but you get the idea).

It strikes me that a lot of our industry’s efforts may be misguided in the search for a formula for growth and success. Should we add service, remain parts only, sell on the Internet? Wither the yellow brick road?

Performance Measurement (PM) has been getting a lot of press lately. After all, Peter Drucker preached the invulnerability of ‘process.’ Performance measurement has become one of the pillars of organizational success. We all know how challenging it can be to get right but often we’re not really sure why it is so tough.

I believe that W. Edwards Deming had this in mind when he said that 97 percent of what matters in an organization can’t be measured. He added that the unintended consequence of conventional measurement was tampering, or manipulation without genuine understanding. He seemed to recognize that many of our deepest frustrations come from an “inherent sense of the natural way of life, lost in the process.”

The Obvious Is Not Always Apparent

In looking at a number of case studies of distribution super stars, I see four deadly sins that were successfully avoided:

They never rely just on financial statements or look only at this month, last month, year to date – profit and loss, revenue and expenses – these are measures of important things to a business. But this is information that is too little and too late. Too little in the sense that other results matter too, such as customer satisfaction, customer loyalty, customer advocacy. Too late in the sense that by the time you see bad results, the damage is already done.

Wouldn’t it be better to know that profit was likely to fall before it actually did fall, and in time to prevent it from falling?

Most financial performance reports summarize your financial results in four values: 1) actual this month; 2) actual last month; 3) Percentage variance between them; and 4) year to date.

Bill Wade is a partner at Wade & Partners and a heavy-duty aftermarket veteran. He is the author of Aftermarket Innovations. He can be reached at bwade@wade-partners.com.

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