Risk & Business Magazine Reider Insurance Fall 2015 | Page 10

Like the tradeoffs between the balance
sheet and the P&L; it’s this reputation/
productivity balance that is the essence
of business. We want to make our
customers, employees, and shareholders
increasingly happier, which should lead
to a more valuable company; but we
can’t give away the store in the process.
“We want to make our customers,
employees, and shareholders increasingly
happier, which should lead to a more
valuable company; but we can’t give
away the store in the process.”
this one), etc. In turn, the customer group
represents all those who pay you. After
you subtract one from the other, what’s
left over, hopefully, is some cash to pay
back the bank, investors, and the owners.
It greatly simplifies how you view a
balance sheet if you look at it through
this three-stakeholder lens. If you
think about the balance sheet, it lists a
bunch of people and organizations with
whom your business has a monetary
relationship, telling you who owes
who and what cash, if any, remains
– hopefully a significant amount
of cash(flow) if you’ve structured
the business model correctly!
Process/Activities
These three groups of people, in any
business, are then engaged in only
three main activities or processes:
making or buying stuff; selling it; and
keeping track of the transactions. I
refer to this as the “process” or “activity”
side of the business where the focus
is on doing things better, faster, and
cheaper (less costly, for those that cringe
when they hear the word “cheap”).

It’s these three fundamental activities
that determine the profitability of
the business. Simply put, making and
buying stuff generates costs. In turn,
selling this stuff generates revenue.
And, again, if you’ve structure the
business model correctly, you’ll have
quite a bit of profit left over when
you subtract one from the other.
“Simply put, making and buying
stuff generates costs. In turn, selling
this stuff generates revenue.”
Like with the balance sheet, this
triumvirate of basic processes provides
you a greatly simplified lens through
which to understand and view your
income or profit & loss (P&L) statement.
The Juggling Act
What you’re left with is a model of
business where you have three groups of
people with whom you have to maintain
a positive reputation; and three groups
of activities you have to keep productive.

PRODUCTIVITY

REPUTATION
Employees

10

Customers

Shareholders

Make/Buy

Sell

Recordkeeping

# of suggestions

Net Promoter Score

Cash Flow

Quality

Pipeline

Accuracy

Retention

On-Time Performance

ROI

Cost

Sales Cycle Time

Timeliness

Utilization Rate

Brand Promise Metrics

Equity

Speed

Close Ratio

Usefulness

RISK & BUSINESS MAGAZINETM FALL 2015

What the firm needs, then, are some
key metrics that measure reputation
and productivity on a daily or weekly
basis. This brings us back to the six
main areas of business we need to
juggle and the challenge of finding
easily measurable key performance
indicators (KPIs) that let us know how
we’re progressing. Below are a few
suggested KPIs for each of the six areas.
And once you have KPIs for each of the
individual areas, you can create formulas
that let you combine the “people” metrics
into an overall Reputation Score; and
combine the “process’ metrics into an
overall Productivity Score. With these
two numbers, you’ll be 90% ahead of
those driving their business without
a proper set of gauges – a key (and
balanced) competitive advantage.

Verne Harnish is founder and CEO of
Gazelles, a global executive education and
coaching company, Verne has spent the
past 30 years educating entrepreneurial
teams.  He’s the author of Mastering the
Rockefeller Habits which is endorsed by
over 100 CEOs of mid-size companies and
is published in ten languages.
As a Certified Gazelles International
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