I know baseball season is over, but let’s keep the baseball analogies going for a bit. It’s easier to write an accounting blog if you can mix in something a bit more interesting to talk about (not to mention easier to read). This post will focus on WAR, or Wins Above Replacement.
Not the band, the statistic.
Yes, WAR the band is responsible for the song “Low Rider”, which is now stuck in your head. And maybe one day I will devote a post to them. But not today. Did you know they have been around for forty years? The can take some solace in that.
Back to business. Wins Above Replacement is a great statistic that sabermetricians use to figure out what kind of impact a player has on his team. Basically it measures how many wins a player contributed to a team by comparing him to a replacement-level player. Imagine the player in question was injured, and the team had to play someone from the bench or call a player up from the minor leagues to replace him. That’s a replacement level player. The more wins a player contributes to his team, the more valuable he is.
Let’s use a real life example. Justin Verlander is a pitcher for the Detroit Tigers. He’s pretty good. In fact, he won the Most Valuable Player award this year, the first time a starting pitcher has done that in 25 years. He led the league in wins, strikeouts and earned run average, traditional statistics that are used to judge a pitcher’s performance. So by all accounts he had a great year. But the award is the Most Valuable Player, not Most Best Player (I’m trademarking that award name, btw). So how do you judge his value to his team? That’s where WAR comes in.
According to Baseballreference.com, Justin Verlander tied for the league lead in WAR with 8.5. That means his performance contributed 8.5 more wins than a replacement player would have. Pretty good, right? Well now keep in mind he only plays every 5th game, or 32-33 games. So Justin Verlander is worth 25% more wins to a team over the course of a season than an average player. That’s an MVP!
Ok, enough about Justin Verlander and my love of all Detroit sports. What does this have to do with business? Well, just as smart baseball owners are using new method to measure how valuable their players are, smart business owners are using new methods to determine how valuable their employees are. One method of doing this is an employee scorecard.
In the past managers and owners would rely on qualitative analysis to determine who the best employees are (managing by your gut). As a business owner I’m sure if I asked who your star employees were you could tell me. But could you tell me why? And more importantly, could you tell me exactly how much more they contributed to your success than another employee in the same position? And even more importantly, could you tell me exactly where the rest of your staff needed to improve in order to reach to your star’s level and by exactly how much? That’s what an employee scorecard does.
An effective scorecard contains the key metrics that measure each employee’s contribution to your bottom line. This allows you to have quantifiable data in order to provide feedback to your employees on where they are excelling and where they can improve. While you may have a hunch who your top performers are, a scorecard can help you identify them easier and set goals to help your under-performers rise to new levels.
Let’s use a simple example, a salesperson. Most salespeople are measured by one simple metric: their sales. And that’s a good metric. But what could you be missing without looking at other information? How about gross margin? After all, sales are great, but profitable sales are better! How about revenue per lead? Or even better, profit per lead? Aren’t these great ways to measure how effective a sales person is and how much they contribute to your bottom line? An employee scorecard when properly constructed will give you a complete picture of that employee’s performance, particularly as it relates to your bottom line!
This is just the tip of the iceberg as it relates to scorecards. And if you think that there are some jobs that can’t be measured in numbers, you are absolutely wrong. Even receptionists and admin support staff can be measured. You just need to get creative!
If you want more information on how you can manage your team smarter using employee scorecards, contact us today to find out!
#OWS
I am going to take a break from the sports-themed posts to talk about the whole Occupy movement. I was in New York last week and visited the Occupy Wall Street site. Being someone who works in the “financial” realm, I am often asked my thoughts on the protests and the financial system in general. I have to say I was impressed by the size of the encampment and the dedication of the protesters:
This guy was pedaling a bike to charge a battery. He also played a flute, which I am sure provided little to no benefit in terms of generating electricity.
There was also a large protest that marched from the encampment and led to 15 arrests:
The front of the march. Some of the signs were very clever, most were not family friendly.
Ultimately, regardless of your politics, you can’t deny that there are some people who have a right to feel that their chance at the American Dream has been taken away. Do they have a right to be upset that a large bank was bailed out while that same bank foreclosed on their home? Probably, depending on circumstances (I’m looking at you, Bank of America) . Do they have a right to believe that special interests including Wall Street have hijacked our government? Hard to argue that they don’t. Ultimately they believe (and believe passionately) that the system has failed them.
So where do I stand? Well, being a CPA usually comes with a bit of a conservative stance on fiscal matters. I tend to believe that hard work and perseverance can overcome most obstacles on the road to a successful life, however you define it. However, I do believe that this movement is not just a passing phase. Technology has made it possible for people to spread ideals faster and more effectively than ever, and it is obvious that a lot of people agree with the ideals of the movement. People are upset, and right or wrong Wall Street and bankers are the target of their anger.
So what does this have to do with accounting and CFO-on-demand services? One thing I took away from the experience was the theme of supporting local small businesses, banks and credit unions. These are ideals that I think everyone can agree on. Think about it, as a business owner, do you want to work with a bank, a vendor, or a CPA firm where you are little more than an account number, a faceless voice on the telephone, or a once-a-year meeting? Wouldn’t you rather know who you are dealing with on a personal level? I know I would. Building strong economic communities is a tough thing to argue against, whether you lean left or right.
So get out and support your community. Consider switching to a local bank. Use a smaller, local service provider when possible. Buy from a local vendor if you can. While you’re at it, source your growth management to a local CPA firm. Here’s a good one!