Provide the Key to Changing Your Company’s Performance Levels
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 good.
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
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
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.
Sidebar: Six Steps
to Establishing Trigger Points
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
• “Cash flow is
negative two months in a row.”
• “Revenue misses
goal by five percent two months in a row.”
• 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
6. Set the target
for taking corrective action passed on the number of triggers being
• Two or three
triggers are “pulled” two months in a row; or
• Four triggers are
“pulled” within a month.
Your company can also define a “trigger” as a single event — e.g.,
it could be the loss of a major client.
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