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"K-P-I's" shmay P-I's ... Compelling Companies got it right
"K-P-I's" shmay P-I's ... Compelling Companies got it right
'Focus on what's most important.' How many times have you said that today?
Sounds like great advice, but let me ask you this: What's most important? How do you know it's most important? You may be surprised by what you find'
Putting numbers to behavior
Next week I'm revealing for the first time in public "How to be a compelling company" with our Client and friend Nick Sarillo of Nick's Pizza. Here is a take away that you can use right now.
You see in my last article, I showed you how to develop Key Performance Indicators (KPIs) to help you improve your company's performance with better measurement systems. Today, I want to show you how to put numbers to your employees' behavior and dramatically increase the performance of EVERYONE in your organization.
Why? So you can discover what really is most important to your business and transform your organization into what I call a 'Compelling Company.'
See for yourself - I'll also give you a tool you can use to create your own KPIs and finally get the behavior you desire'
Compelling Companies can double profit margins
You may recall the story of Nick's Pizza and Pub in Chicago, who transformed his business into a Compelling Company by using this strategy. As a result, his profit margins are around DOUBLE what most restaurants manage to squeeze out (13%-18% compared to 8%-9%).
Employee turnover is just 20% - compared to 60%-120% typically found in most other restaurants. Why? Because everyone in the business understands their role, their purpose and they know what's expected of them.
Like putting together pieces to a puzzle
Figuring out the links between behavior and financial results, however, is like piecing together a puzzle, Sarillo says. Most companies, try to explain big-picture numbers such as a decline in revenue by pointing to other big-picture numbers such as a decline in customer satisfaction. Not Nick's.
I love this example. One of his managers noticed that bar sales had increased. Instead of looking at metrics such as customer satisfaction, he asked, 'What are the behaviors leading to the increased bar sales?' That's the key! Don't assume that one metric (i.e. customer satisfaction) leads to another (i.e. sales).
WARNING: DON'T THINK THAT THESE IDEAS DON'T APPLY TO YOUR BUSINESS (If you are smart you will ask yourself, "How do I apply the idea to my company?")
Instead, study the behaviors that lead to the results. In this case, his operating partner Scott noticed that guests were talking to one another (not to the bartender). Why?
Because the bartender, Mike, took a step or two back when serving the customers so he could carry on multiple conversations. Guests formed conversations with other guests and they stayed longer, which led to higher bar sales. He used a little know technique called 'triading,' in which you stand back and engage at least 2 other people in a conversation. So they added the behavior to training for bartenders and made more connections with guests. Get this! They also added it to the training for barbacks ' employees who typically wash dishes in the back of the bar ' so they too engaged in more conversation with guests.
Nick's created a tracking exercise in which managers checked in with the barback on duty every hour and asked him to list personal facts about 3 different guests. The result:
Bar sales increased even more.
A new approach to tracking metrics that make the most impact
Why is this so important? Because most managers don't try to quantify behavior.Traditionally, we're very good at quantifying number of calls, number of customers served, dollar amount of sales, etc. but we do a terrible job of actually quantifying the behaviors that can make the most dramatic impact.
For instance, as you would expect, food inventory is one of the Big Three expenses in restaurants along with beverage and labor. Most tally the cost of goods sold at the end of each month - but a monthly analysis is too late. Instead, Nick's forecasts its lunch and dinner sales every morning and reviews its inventory in real time. If they have excess inventory, Nick's may run a special on fried mushrooms, offer a two-for-one drink special, or hold a contest among servers to sell mozzarella sticks.
As a result, its liquor expenses dropped to $6,000 per month from $30,000 per month and its food expenses dropped 5%-10% because it had less waste.
What's the best way to track customer satisfaction? And how do you get your employees focused on it? Here's how'
Let me give you another example from Nick's Pizza and Pub. Like most restaurants, they want to make sure customers are happy with their servers. But how do you track something like that? Measure the behavior. Nick and Rudy Miick, a very smart guy developed a special form that captures how many guests request each individual server. And I love this idea. Nick posts that data on its 'fiscal board' for all employees to see to create some competition among servers to see who gets the most customer requests.
Like many restaurants, they also distribute guest comment cards to rate customers' experience. But Nick took this idea to another level. They distribute the comment cards every 6 days so the day of the week is always changing and they get a more accurate reading on service quality such as whether servers were friendly and checked back with the table quickly after the food was delivered (notice the behaviors!). What's the incentive? Cash!
Servers, hosts and team members who complete special in-house training courses are eligible to receive profit-sharing ' if the comment cards for the entire group are at least 99% positive. What does this mean for you? Stop doing "Command and Control" and start using "Trust and Track" to get the behavior you want. This concept was cleverly coined by Bo Burlingham and we love it.
Praise the behavior you want for everyone to see!
He also uses the cards to celebrate desired behavior. When guests go out of their way to write a note praising an employee for outstanding behavior, the comments (as seen above) are posted on the fiscal board for other employees to see!
Bussers rate servers on well they clear away some of the dirty plates as they gave out checks and processed payments to turn-over the tables more quickly. To reduce complaints about mistakes on carry-out orders, Nick began tracking how many orders could be filled without a mistake. Once they reached 800 error-free orders, that number jumped to 1,200 and they even found ways to double check orders and tweak the point-of-sale computer system to reduce confusion on the sales tickets.
Keeping everyone's eyes on the prize
Sounds like a lot, right? It's surprisingly simple once you start. So how do you keep everyone focused on what’s most important?
At Nick’s, managers hold pre-shift meetings before every lunch and dinner. Most restaurants do this too and they’ll talk about the menu specials and wine pairings for the day. At Nick’s something very different happens. They talk about those too but spend even more time talking about the day’s goals, including sales goals, average customer check goals, labor cost goals and any events in the community that may impact sales. Why? Because they have a shared purpose and goal. How about your team? Are they aligned, pulling in the same direction or is each person or department focussed on themselves? If it's the latter make sure you download this free KPI LAUNCHER TOOL.
“Even as our people are paying close attention to their behavior, they always – always – have the bottom line in mind,” he says.
How much better off would you be?
Think about it. How much better off would you be if EVERYONE in your business – not just YOU – is paying attention to the behavior that will have the most dramatic impact on your bottom line? How much better off will your business be?
Remember, don't just measure traditional metrics such as customer satisfaction ratings, turnover rates, etc. Instead take a hard look at the behaviors and activities that are driving the desired results. Then, measure the behaviors. You’ll be amazed at the results.
If you want to create a company where your employees feel compelled from within and customers feel compelled to do business with you check out our amazing event on "How to create a Compelling Company" for May 30th GO HERE. If you just want to download the FREE KPI Launcher GO HERE.
Always taking you from where you are to where you want to go,