The law dictates that you must be able to show financial numbers based on things that are easy to see, count, tax and borrow against. Because financial numbers are ultimately downstream, aggregated symptoms or by-products of your business activity, you won’t find any powerful insights within them or their sliced and diced derivatives.

Why Not Your Measure Your Vital Intangibles in Distribution?

Most distributors keep their vital signs in order with a well-worn set of practices, including leadership, strategy, competent and committed people who are empowered, best service value, operational effectiveness, and incentive schemes (for sales reps).

Other vitals, though not typically mentioned, are a high-performance culture, high innovation capability, continuous learning, customer profitability metrics, and customer-centricity. These are the intangible vital signs, the keys to success. So why not measure your vital intangibles in distribution?

Excuses and Short Answers

Why don’t most companies measure vital intangibles (VIs)? Here are a few reasons they resist, with some short answers on why you should measure your vital intangibles in distribution.

Reason:  “I wouldn’t even know how to begin to measure these factors.”

Answers:  The first step is to break the vague idea into specific observable attributes. Then, you can assign ballpark values and start with simple prototyping of your models. Don’t strive for certainty, which is unachievable. Seek instead to reduce uncertainty in order to make statistically better decisions.

Also, you can research how the best companies are measuring vital intangibles in distribution, just Google “How to measure X” and you’ll see plenty of case studies to get you started.

Reason:  “We don’t have the money or talent to do these models.”

Answers:  Start simple and small. Do a little investigation. Try a few calculations. Build a simple model. Discuss. Tweak it some more. If you can increase your odds of making better decisions by 20%, why not?

For example: A VP of sales might only work with top the 20% reps calling on the top 5% high-profit-improvement accounts. Won’t the return on calls be greater than democratically calling on milk-run accounts with weaker reps who don’t follow through on honcho-uncovered opportunities?

Reason:  “Ranking reps or branch managers by some total value number could be contentious. ”

Answers:  Rank them without names. With permission from the best, you might reveal who they are only if they commit to sharing their best practices to others. You can confront the low performers in private and solve performance gaps one way or another.

New Dashboard Metrics

Too many dashboard numbers are financial output numbers. Why not start measuring controllable, input actions focused on improving VIs?

For example, for this past month how many honcho calls were made on the top 5%, biggest profit improvement potential accounts with competent follow-up resources? Now that’s a number that matters for the present and the future of your company.

Need more?

Catch my presentation at the Advanced Profit Innovation Conference in Scottsdale, Arizona, on April 20-21, and stay tuned for my one-day roadshow seminar on this topic.