Now that you have set up The “5 Things” matrix with all the appropriate metrics, how do you know how well your company is doing? It is now time to determine the Purple / Green / Red coding scheme.
The color scheme is meant to show how well the company is doing at a glance. The metrics will have little meaning if there are no parameters to give them context. These parameters are the assumptions and the necessary outcomes that are laid out in the business plan.
Let’s take two different companies with a sales force that make face to face appointments. One business plan may call for the sales force to make 600 appointments a year while the second company's business plan calls for 1000 appointments a year. The coding system must be set up to reflect these different needs.
Now it is time to do year over year budgeting. While we recognize the usefulness of financial budgeting, this is not that (though your financial budgeting will play into the matrix). This is business plan budgeting. Look at your metrics and look for ways to increase them every year. When you budget an additional 5000 aggregate sales appointments in a year management is now forced to figure out how to make that happen (ex. new salespeople, additional back-end support, new territories, etc).
This is also a great way to implement a Big Hairy Audacious Goal (BHAG) (2). This is a ten year goal that creates a target for management to pursue. Budget out for the next ten years what your business plan would have to look like to get there. The “5 Things” will help you achieve your goals.
(1) Goldratt, Eliyahu M., Jeff Cox, and David Whitford. The goal: a process of ongoing improvement. Vol. 2. Great Barrington, MA: North River Press, 1992.
(2) Collins, James Charles, and Jerry I. Porras. Built to last: Successful habits of visionary companies. Random House, 2005.