Performance measures aid good management
At the heart of every business is the management process known as marketing, which generates profit by anticipating and satisfying customer demand. All marketing activities require the investment of money and resources, so chief executives will want to assess and measure the return on that investment. Commercial managers, responsible for producing income from marketing activities, must now not only deliver a return on the investment, but also be seen to do so and be able to prove it.
“If you can’t measure it, you can’t manage it” said Peter Drucker. However, the statement does not say that “If you can measure it, you can manage it”. Measuring marketing performance does not guarantee good management, but is an indicator of management performance.
The danger with marketing performance measurements, metrics, score cards and the like, is that they tend to be prescriptive, and can stifle innovative and creative thinking. Concentrating on numerical outcomes and standard processes, while important, tends to encourage the idea that so long as certain actions are carried out, success is assured; - it isn’t. The only thing that counts in a business is its ability to make profits, for the benefit of its shareholders and employees by satisfying customers, which is the sole reason for its existence. The importance of customer relations, product satisfaction, and employee relations are that collectively they are mutually supporting and contributory to the development of sustainable long term profit.
In Dr James Rieley’s book “Leadership” (Daily Telegraph/ Hodder and Arnold), he points out that a pre-occupation with numbers can blind the manager. Metrics and measurements provide an excellent guide to the immediate past performance of all the marketing activities, but their future performance is dependent on the staff involved who have to deliver them. The objective of the commercial manager is to maximize profitable revenue while minimizing costs and the use of assets. To achieve this objective, the commercial manager must often manage a team of marketing specialists, and ultimately be responsible for a variety of delegated tasks, including planning, market research, selling, advertising, distribution, and many other customer related activities. Success requires the commercial manager to inspire, motivate, direct and encourage the staff in order to deliver the required performance, while measuring and monitoring performance to ensure resources and assets are used to best effect.
For the commercial manager, statistics, metrics and measurements provide information on the business situation as it was up to the time of the data collection, but it is not a statement of future performance. The current indicators of present and past performance may not be relevant in the future, when a changed business environment, may require different performance criteria for the sustained production of profits. Performance indicators can gain a false importance, if altered circumstances have reduced or changed their significance. When reviewing performance indicators, the first question should always be “So what?” If the data collected does not contribute to positive management action, then either the indicators or the management must be changed. Marketing must always be looking forward to try to anticipate the future changes in the business environment.
For the marketing organisation, the most important measure of its contribution is the amount of profitable revenue generated, the second measure is that of the efficiency with which resources are used to generate that revenue. However, these measurements when taken over a period are only a guide to the possible future performance, but they are not a guarantee. Forecasting and planning are dependent on market knowledge and experience, and to some extent luck. Setting targets of necessary performance is based on knowledge of the market, and experience of the past performance in the use of resources.
The importance of performance indicators is not in their individual values, but in understanding their meaning, how they inter-relate, and what questions should result. Measurements are not there to prove that performance is on target as predicted, but to prompt questions about the ability to maintain and improve future performance in the achievement of profits. Fundamental to good management is the ability to understand the significance of performance indicators and to initiate positive action as required.
When the Chief Executive asks, - How well are we doing? Are we doing well enough? How do we know? -the commercial manager must provide the answers. Check lists for procedures and performance measurements are aids to successful management, but slavish adherence to them without thought to the relevance of the outcome can also be a serious distraction from the ultimate objective of generating income.
Like all business statistics, marketing measurements should therefore be used selectively according to their relevance to effective management. Whatever, scorecard, process or measurement is used, the commercial manager must always ask, “Is this relevant to effective management of the marketing function, or is it an unnecessary distraction?” Results must be sustainable. Too close adherence to checklists and score cards can lead to short term thinking and a failure to sustain long term results.