mandag den 17. december 2012

How to use KPIs for navigating your business(in progress)

.. in progress

It seems KPIs are everywhere. Every company has to have KPIs and every unit manager, vice president, team leader, CEO within every company have to have his own KPIs! But how do you make sure the KPIs you use in your business are the right ones and how do you make sure, that once they are in place, you actually benefit from having them in your company?

If we start with the latter question - then you need to know that the main purpose of having KPIs is to measure behavior and more important subsequently alter behavior. Is your organization prepared to make decisions based on the performance measured in the KPIs? if not, you might as well save ressources and leave out KPIs of your business.

Twitter: @nyenstad

lørdag den 15. december 2012

Analyzing your manufacturing business

When analyzing your business start with the overall numbers - look at the P&L and its development over time - identify trends and start asking why, thereby digging deeper and deeper into the core of the business to locate specific activities/behavioral changes that have influenced the P&L.

1) Compare fixed costs with revenue over time!
Did the fixed cost base increase whilst revenue has been at a standstill? Or did it merely increase at a faster rate than your revenue. What is the percentage of fixed costs vs. revenue? 

1.a) Identify cost drivers! 
Why have fixed costs increased faster than revenue - is it a strategically considered move from which we expect revenues to increase in the future? Or could it be that changes in our behavior (whether it be different product mix, different customer mix or different sales behavior) have caused an increase in complexity, which in turn generate increased activities and with that an increase in costs. Analyze customer mix, product mix - number of active customers, number of active products, changes in strategies in particularly sales etc. 

2) Analyze your direct costs!

2.a) What has happened to the gross margin? Did it decrease over time? Four factors influence gross margin: Sales price development, Price of direct materials, Price of direct wages and Productivity. The last three in combination constitute cost price development and should be compared with sales price development. Both almost always drop over time - but have sales prices dropped faster than cost prices? Why? Compare with competitors - what has happened to their sales prices? Did we not invest enough in increasing our productivity?
What about prices of direct material? Did we optimize our production/product portfolio so as to increase volumes of particular purchased components thereby reducing purchasing prices? Have we spread our raw materials across more vendors than necessary - could we pool our components with fewer vendors?

Feel free to comment!

Twitter: @nyenstad

Newtown - Same old story

Here we go again...

Another gun-related school tragedy in the States - another debate between gun-owning, Heartland-living, NRA-loving, Second Amendment-protagonists and liberal, hippie-looking, weed-smoking Hollywoody antagonists. The incident however, ignites more than an internal debate in the US - It is also another incident widening the gulf between Western Europe and USA.

For me, as a European, and perhaps more importantly, as a Scandinavian, today when I hear of such a travesty, the initial feeling, besides that of obvious heartbreak, is not one of surprise or shock, it is rather the typical superficial feeling of "stupid Americans". This feeling is no stranger to me - I have always been confronted with this feeling among other Western Europeans but never had it myself. On the contrary, I have always found myself defending American identity and society, because I felt I had a deeper understanding of America than that.
Then I hear the debate (and we've heard it a million times before) between the two trenches and I start feeling a sense of disconnection with American society. You hear the ridicule of Hollywood actors and other typical left-wing people towards the other end of the spectre, and you can almost sense the arrogance and smirkness in their comments, and you are left with the sense that they have never in their lives met an honest hard-working Midwestern kind-of-guy let alone done any hard work of their own - but then you hear counter arguments from the right wing with their "Second Amendment, Constitutional, guns-don't-kill-people-people-kill-people"- bullshit, and you think to yourself: "Jesus - this is not 1795". And the debate, at least the one that is dominant to the public, seems to lack a voice of reason, a voice of compromise, which could help bring the debate closer to a working solution. And this lack makes you want to turn off the tv (or social media in today's world).

And I am certainly not your typical Anti-American Bush-hating European - on the contrary, I love most of what the US stands for and has to offer. I have lived there on three occasions - hell, I even got married in Vegas, for God's sake. I love the openness of the American people, the beauty of its land, the cities, the open road, the way of life - yup, most everything. I have of course always felt that there was a gap between where I come from and America, but at the same time this gap has also been what has intrigued and drawn me there. Nonetheless, even I feel that the increase in these massacres like Newtown along with the widening gap between left and right in American society or perhaps more accurately, the lack of a common middle ground with its almost inevitable common sense, is enhancing the gap between where I come from and where I still want to be drawn to, namely America.