In sports, everyone knows what winning looks like: it’s reflected in your score, plain and simple. In many businesses, however, it’s hard to define a win without a single key number. What makes a number “key”? A good one meets three conditions:
• It’s directly connected to the financials. Improve the key number and you get better financial results.
• It’s not imposed from on high. Open-book companies consult with managers, employee teams, and other stakeholders to develop their key numbers. They ask: What are the biggest challenges we’re facing this year? The biggest opportunities? How can each unit best measure its contribution?
• It’s for now, not forever. Companies’ situations change. Sometimes revenue growth is the top priority; other times it’s profitability or cash flow. When a company makes progress on one objective, it may want to set its sights on another the following year.
Adapted from “A Winning Culture Keeps Score” by John Case and Bill Fotsch.