"Hope" Is Not a Strategy - Trigger Points Provide the Key to Changing Your Company's Performance Levels
By Lee Froschheiser
There's nothing wrong with having "hope," but clearly "hope" is not a
business strategy, a fact that's become very evident in recent history,
given these tough economic times. Nationwide, company owners who've casually
relied upon "hope" as a viable way to manage or turn around business have
suffered serious professional consequences. Some have faced cutbacks in
terms of services, products and staff; others have closed their doors for
Fortunately, there is still "hope" for countless other leaders who are
looking for a simple but powerful way to measure the health of their
business. The strategy is based around setting "trigger points," which are
measurements specifically created to signal important changes in critical
performance levels. Trigger points are established to align with a
company's Vital Factors, the specific, key indicators of a business' health.
By monitoring trigger points, leaders can take immediate corrective action
and avoid the serious consequences of not acting quickly enough.
So what do trigger points look like, and how do they work? There's a perfect
example in the story of what happened to a prominent Big Ten football coach
a few years back. After a miserable losing streak, the university had some
decisions to make about whether or not to keep the head coach on board, so
they brought in an interim athletic director to help. At this point, there
were four games left in the season, so the interim athletic director set
performance triggers in place. If the coach won all four games, they would
move forward, keeping him in charge. If he lost one game, corrective action
would be necessary. If he lost two out of four, he could expect serious
consequences in terms of his job security, and if he lost all four, the head
coach would need to get his resume together immediately.
Under the leadership of this Big Ten coach, the football team lost the final
four games of the season. When the coach was fired, the interim athletic
director held a press conference, at which a reporter asked him if the coach
had been surprised about being let go. The answer was "No." The process of
setting these performance triggers in place had removed the subjectivity out
of the issue, established expectations, and made it very clear what
consequences there would be for either success or failure.
When a company follows this lead, it's the management's responsibility to
develop effective corrective actions attached to the trigger points. Doing
so eliminates the emotion that can come when goals are not met. Companies
should set five to seven performance triggers that are focused on the most
vital areas of their business. Examples of company triggers include
revenue, profit, cash flow, customer satisfaction and employee retention.
For instance, a manufacturing company wanted to set up trigger points, and
one of those trigger points was related to revenue. So the CEO decided that
if revenue fell below $2.5 million two months in a row, the trigger would
"turn on," alerting everyone in the company that immediate corrective action
was necessary. In the case of this particular financial shortfall, the
options for corrective action included increasing sales goals, cutting
overhead or a combination of the two. After two months, the benchmark was
not achieved, so corrective action was taken to increase sales goals. Then
revenue suffered a third month, so the CEO eliminated overhead by cutting
back on staff. As a leader, this CEO had to look for solutions that would
protect profits and maintain business viability. Of note, he could have
opted to take no action - a decision that's an action in and of itself -
however, this can be the riskiest decision that a leader makes.
While many companies may set expectations around their Vital Factors, where
they fall short is putting in place these important trigger points, which
put the leadership on alert and force a decision point. Yet without trigger
points, it's impossible to know when to be proactive and how your company is
truly performing. Running a business without trigger points in place is also
highly stressful because when the "hope" fails, which it will at some point,
the floor drops from under you. That's scary to say the least, and everyone
knows that the biggest mistakes are often made when you're fearful, under
intense pressure, or facing major time constraints.
While the economic downturn has exposed the fact that countless companies
have used "hope" as a strategy for operating business, it's also been a
major game changer. Savvy business leaders are modifying company systems and
management behaviors, putting tools in place that really work. As mentioned,
performance triggers should correlate to major Vital Factors, but they
should also be designed to work on the micro level, such as with specific
projects and programs.
Like the alarm system you "wished you had installed," performance triggers
may have been something you've overlooked in the past. And you're not alone
if that's the case - many other company heads haven't recognized the need.
But now you know why they're crucial to a company's livelihood. Putting
trigger points in place today could be the best small action you might ever
take to save your business from crisis and drive it into a permanent
position of success.
Six Steps to Establishing Trigger Points
1. Establish trigger points that relate directly to your company's Vital
Factors, specific measurements of your business' health.
2. Set no less than five, no more than seven, trigger points for entire
company, aligned to your Vital Factors.
3. Have your trigger points reflect "stop gaps," the minimum thresholds.
4. Base trigger points on a two-month trend (three months, if possible), for
o "Cash flow is negative two months in a row."
o "Revenue misses goal by five percent two months in a row."
o Backlog drops below $__ amount of dollars two months in a row."
5. Have triggers that are both lagging and leading. For example, revenues
over the past two months would be a lagging indicator of your company's
health while backlogged work would be a leading indicator of your company's
6. Set the target for taking corrective action passed on the number of
triggers being pulled.
o Two or three triggers are "pulled" two months in a row; or
o Four triggers are "pulled" within a month.
Note: Your company can also define a "trigger" as a single event - e.g., it
could be the loss of a major client.
Lee Froschheiser, president and CEO of Management Actions Programs (MAP),
works with premiere business leaders and companies nationwide. Lee is also
co-author of the best-selling book, "Vital Factors, The Secret to
Transforming Your Business - And Your Life." For over 50 years MAP has
helped 160,000 leaders and 13,000 organizations create sustainable results
using the powerful combination of the unique MAP Programä, business coaching
and consulting services. For more information, visit http://www.mapconsulting.com
or call 888.834.3040.