Out of desperation, I sent an email to the author of an article that I found that had somewhat touched on my topic. He is a lawyer in California that specializes in the particular field I was researching. I realized it was a long shot but I was stuck! Now keep in mind, this is someone I have never met, who literally lives across the country from me, and who had every reason in the world to just ignore my request (after all, it’s not as if he was going to receive anything from me in the way of fees or referrals).

To my surprise, I received a call back from him within 20 minutes. Not only did he walk me through the issue on the phone, he also did some research for me and had complete instructions on how to best handle the issue in my email box the next morning. This attorney went above and beyond to help someone he had never met, without any expectation of anything in return, and couldn’t have been happier to do it. Keep this story in mind next time someone tells you a bad lawyer joke!

HAHAHAHAHAHAHAHA. Not funny.

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!

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!

As I mentioned in my last post, the new wave of general managers in professional baseball (and all of sports really) are using advanced statistics and analysis to help them manage their teams smarter. This is extremely important for smaller market teams, since they do not have the budget to compete with the Yankees and Red Sox of the world in terms of signing players to large contracts.

Base runs is one of these measurements. Base runs (BsR) is a baseball statistic invented by sabermetrician (a general name for people who study these advanced statistics, it sounds better than “nerd” ) David Smyth to estimate the number of runs a team “should” have scored given their component offensive statistics, as well as the number of runs a hitter/pitcher creates/allows.

Typical Sabermetrician

What does all of that mean? Basically BsR looks at all of the little things that happen in a sample of games, all of the hits, the errors, the balls, strikes, etc. and determines how many runs a team is expected to score given all of that information. So, in a nutshell, it is a way to measure the actual results (actual runs scored) versus expected results (BsR)

So why does this matter? BsR allows these nerds (sorry, sabermetricians) to see how changing one or more players on a team would change the results over a group of games or even an entire season. It allows managers to spot inefficiencies and work to correct them. See how this might be useful to a business owner?

The equivalent to BsR for a business owner or manage is an activity-based budget. This is a report that shows what profit can be expected given lots of different variables (sales, returns, expenses, taxes, interest, etc.) An activity-based budget is a powerful tool if done right, because it will allow a business owner or manager to explore the relationship between sales, costs and profits, as well as give a benchmark against which future performance can be measured. This is what I mean by managing to expectations. By analyzing the variances between what is expected and what actually happened you can identify areas of your business that need improvement.

Notice I said “when done right”. Many managers or owners treat a budget for their business like a budget for their home and set a goal of breaking even. Trust me, no general manager of a baseball team starts the year with the goal of going 81-81. If he (or she) does, he won’t be around very long. An effective budget should be created with a specific profit number in mind, preferably an aggressive number. Set your goals high and motivate your employees to reach it!

Want to get started setting goals and measuring performance in your business? Contact us today to see how we can help!

This is what Billy Beane looks like. No slouch, but no Brad Pitt.

So what does this have to do with accounting? A lot, actually. Objective analysis boils down to using data to help make decisions in addition to prior experience and “gut feelings”. A large part of my practice is devoted to helping business owners stop managing solely by feeling and start managing by knowing. It’s amazing how much easier  smart decision making gets when you actually have data in front of you to study.  And smart decision making levels the playing field, in sports and in business, so that it is not always the team or organization with the most money that wins.

The next few posts will continue with this Moneyball theme by outlining some of the numbers and metrics you should be looking at as a business owner. These numbers will help you make smarter decisions, which will in turn help you compete, even if your competition is bigger, richer or better looking!

Until the next post, I would recommend this article from Daryl Morey, the general manager of the Houston Rockets. Houston was one of the first teams in the NBA to use advanced metrics to study players and Daryl is often regarded as one of the brightest GM’s in the league. The article is about the proliferation of objective analysis in sports as well as other industries. He gives some great examples, definitely check it out!