5 Basic Measures of Success for Your Company

Profitability, satisfied customers, happy employees, a culture of continuous improvement, and integrity are the stepping stones along the route to a company's success.

By Tom Dossenbach

Often I am asked a question similar to: "How should I measure the success of my company?" I answer, as usual, "It de- pends!" A wood products manufacturing company is a complex entity at best and there are many areas within that can be used as a measure of success depending on the current circumstances and goals of the company.

It is a good idea to regularly pause and reflect on the past, current and future success of your company. Whether you are the owner of a small company or a supervisor of a large company, you can benefit by looking at how your company measures up to what I feel are the five most important criteria for long-term success.

1. Profitability

It is always best to put first things first. Have you ever been asked why your company is in business? As simple as it may seem, this question prompts a variety of answers. Most look at the surface and respond, "to make the best kitchen cabinets in Texas." Or, others will say, "to make the most luxurious upholstered furniture possible." While these may be worthy goals or even a means to an end, they are not why their company is in business.

I hope this is no surprise to any reader, but the reason your manufacturing or service company is in business is "to make money." (Stated differently, "to make a profit.") However, if you have somehow missed this point, don't feel bad - you are not alone. I cannot recall all the times during my 40 years in this industry that I have seen vice presidents of sales focus on a new product introduction even though it did not fit the core competency of the manufacturing company. Lest your production people get big heads, allow me to point out the hundreds of times I have seen a supervisor more concerned about today's problems than on focusing on making a change to eliminate the same problem from surfacing again tomorrow.

One would think that to remove the cause of mistakes or waste would be a no-brainer, everyday objective. Wrong. Even though eliminating the root cause of a problem today would keep it from happening again (and would make the supervisor's job easier), a quick fix is often the chosen strategy. When I see this, I know those involved do not realize the importance of eliminating waste as a way to improve profits.

If a company has a history of generating profits, especially of growing profits, it is a solid indicator that the company is on the right track and doing many things correctly. But, if you want to look at your company in a meaningful way, you must look further.

2. Satisfied Customers

Now that the obvious is out of the way, I turn to longer-term indicators for the future success of your company. It is possible for your company to produce a product and sell it with very high margins to show a profit. This may work for the short term, but for a company to be successful over the long term, it must have satisfied customers who believe they are getting a good value in the products they purchase.

Your company's customer base is an essential ingredient for your company's continuing success. If customers are dissatisfied or disillusioned with your products or service, this is a serious indication that all is not well deep within the company and represents a serious threat to its future success. Thus, a good second measure of the success of your company (in addition to its profitability) is your customers' satisfaction level. This includes their perception of the value or price-to-quality ratio of your products and the sales and support service they are receiving. The combination of profitability and a satisfied customer base at your company is a powerful indicator that the company is on a good, steady track!

However, if there is dissatisfaction, changes must be made to eliminate this threat to future success. Sometimes, it is not apparent that there is discontentment within a customer base because there may not be a viable alternative to your products or service at that time - even if there is just cause to replace your company as a supplier.

3. Happy Employees

Making money and having satisfied customers are great indicators of success, but will these be sustained; indeed, can they be sustained? One of the best ways to answer this question is by looking at those who are making things happen - your company employees. It is through the efforts of these people that the goals and objectives of your company are realized - not by the CEO and not just by your own efforts. It is a collective effort and if that effort is made by a group of happy and fulfilled people, you can pretty much count on repeat performance until something changes drastically.

To the contrary, if your company is making money and has satisfied customers, but has disgruntled employees, the risk is real that both profits and customer satisfaction are about to take a turn for the worse. It takes a happy family of dedicated workers to make a successful company and you (or anyone else, for that matter) would be negligent to ignore this measure of success.

It is, therefore, important to confirm that your company is full of people who are enthusiastically working together to achieve your company goals and objectives. If this is not the case, you need to get together with your human resources staff and your executive leadership and talk about a turnaround strategy. Otherwise, the first two measures of success may be misleading and give you and your company a false sense of security.

4. Culture of Continuous Improvement

We now have looked at profitability, customer satisfaction and employee morale as measures of the success of your company. Most would feel that this is enough, but there is another key indicator. I have written before that a company cannot remain competitive in today's rapidly shifting landscape unless it is constantly making positive changes to adapt. Your company must have a culture of continuous improvement in order to stay on top of these changes. If ignored, profits and customers can disappear almost overnight.

There are two axioms I have shared with clients and at speaking engagements that I want you to note and think about as you ponder the success of your company. The first is: "Continuous Improvement Efforts, Applied Diligently, Generate Positive Results - Certain!" If you challenge me by saying that "Positive Results" is an understatement, I will agree and shake your hand. Can you envision your company five years from now if it makes no efforts for continuous improvement?

If you can't, the second Axiom is especially for you: "Defiance of Continuous Improvement Results In Company Doom - Certain!" Now I probably have your total attention, because this is a tough truism for most to accept. The problem with a company without a culture of continuous improvement is that the other measures of success we have discussed this month are at the mercy of external forces; and that is not a good position for any company to be in.

The culture of a company is established by the example and goals set by the leadership in that company. Placing a high priority on a continuous effort to make improvements in your company to truly achieve excellence is a sure way to success. If you are part of the leadership of your company and this is not part of your culture, discuss this with your peers and the CEO.

5. Integrity

This brings us to the fifth and final measure of the success of your company - Integrity. What is integrity and why do I have it listed as a measure of success?

Integrity is "adherence to a code of values" or "incorruptibility." A successful company is a company made up of leadership that values integrity higher than any other measure of success. Does that sound strange to you? It shouldn't, because all of the previous four measures of success (profitability, satisfied customers, happy employees and a culture of continuous improvement) depend on them being codes of value for the company. Thus, a company with integrity, led by management with integrity, will not neglect those values and will work to maintain them. Therefore, integrity is the foundation of success.

Even if you are just living day-to-day to survive in your business, I hope you will take time to reflect on these pages and, with the leadership of your company, see how your company measures up in these five areas. If you are struggling, start in reverse order: Integrity, then a Culture of Continuous Improvement, then developing Happy Employees, then Satisfied Customers and Profitability will quickly follow.

Tom Dossenbach is the managing director of Dossenbach Associates LLC, a Sanford, NC-based international consulting and research firm. Contact him at (919) 775-5017 or e-mail [email protected]. Visit his Web site at www.dossenbach.com. Past Management Matters columns are archived here.


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