Loughborough

# 16 – 8th April 2008

Trend Tracking

We often talk about measures, metrics and key performance indicators. No business can be run effectively without the right measures. Once you have established a balanced set of measures for your business, you then have the challenge of using them to drive continuous improvement. The challenge for many businesses is that of knowing when things are getting better or worse. This is because in real-life, we do not have graphs with smooth curves or straight lines. We get variations and exceptional differences between the measures we review this month and the ones we looked at last month.

If this happens in your business, in addition to looking at the raw numbers (your accountant can help you with these if you struggle), plot them in a graph. Use the graph to more easily determine what is changing, in which direction and over what time period.

Now your review can look at:

• The absolute number
• The number compared with plan
• The number compared with prior year – always a good check when possible
• The trend in the number

You are in a much better position to make a judgment on the nature, urgency and priority of any corrective action.

Are things getting better?

	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec
Sales	80	90	100	70	72	74	70	100	110	120	115	120
3 Month Rolling Average			90	87	81	72	72	81	93	110	115	118
Budget	100	100	100	100	100	100	100	100	100	100	100	100
Prior Year	64	72	80	56	57.6	59.2	56	80	88	96	92	96



3 Month Rolling Average

Always a useful measure if the indicators that you are tracking can be a bit erratic – it smoothes out the peaks and troughs and helps you to spot trends – especially if you plot it on a graph. It has the added advantage of being easy to include in a spread-sheet.

Things are improving



Imagine the graph as raw data. Most of us would struggle to work out what is happening. Adding comparisons to last year and budget helps us to spot the consistency (or otherwise!) of any changes in our business. Including 3 month rolling average lines helps us to see the trends. If you are a wiz with spread-sheets, you can add the Microsoft trend line too.

In this example, sales are growing month on month as well as in comparison with last year, even though the last two months have been a bit inconsistent, the growth is easy to see in a graph.

Discipline

None of this has any value unless you sit down and spend the time to understand what lies behind the numbers. You might have a single, one-off, order in a month which distorts the figures. If this is the case, you may need to plot your graphs with this element shown separately or removed – so that you can see the underlying business performance. It really helps to spend some time understanding your metrics and using them to help you navigate future months and weeks.

Measured Actions – Based on Facts and Data

Only by understanding the root causes behind your numbers will you react correctly and take appropriate action. Beware one-off actions triggered by a blip in your numbers when a tweak to the ongoing actions may deliver the required change.

 

Paul Fileman MIET CEng MCIM
Chartered Marketer
paul.fileman@talktosps.com
Tel:  01509 854447
Mob: 07969 188820
www.talktosps.com