Business Excellence Quotient (BEQ)
Measuring Business Excellence --
By Pete Lorins
Business Excellence is often not readily measurable since many businesses use different models and reach cabability maturity levels at different points in different markets. However there are five metrics that we at LorinsPOST will be using in order to measure what we call the Business Excellence Quotient score of a business:
BEQ Metric #1: Customer Satisfaction Level (CSL)
An organization tends to have both internal and external customers with internal customers being the different departments of the company, which have to rely on the services that they provide to each other, and external customers being regular customers. The CSL is the the primary objective of knowing how well the organization/function is serving its customers and its trends over time helps the functions that need the most attention.
BEQ Metric #2: Company Productivity Level (EPL)
An organization's EPL measures its actual output per performance unit. It is based solely on the organization's current goal and see how close the actual output comes to the ideal output.
BEQ Metric #3: Employee Satisfaction Level (EPL)
When employees are not satisfied, attrition rate increases. Attrition hurts both the the top and bottom lines. There is great correlation between an effective corporate culture and a reduced attrition rate. Employee satisfaction surveys can be used to measure how satisfied an organization's employees are with the overall culture of the organization.
BEQ Metric #4: Cashflow Level
Cash to an organization is analogous to what blood is the human body and thus cash is one of the most critical aspects of the performance management of an organization. Two important metrics are what we'll call Account Receivable Collection Turn-around Time (ARCTT) and Account Payable Payment Turn-around Time (APPTT). The longer it takes an organization to collect on its account receivables (higher ARCTT) the lower the company's cashflow will be especially especially if its APPTT either remains the same or decreases.
BEQ Metric #5: Gross Margin Level (GML)
This is viewed by most as one of the most important if not the most important metric(s) as it can be the best indicator of level of business performance excellence. The higher the gross margin, the more indication an organization will have on the fact that it is are on the right track in every operational aspect. There is no need to wait for any quarterly or annual financial results to determine profitability, productivity and customer satisfaction. Regularly monitoring and managing the gross margin goes a long way in reducing unpleasant surprises in the long run and also in deciding critical strategic initiatives for pricing, investments and sales efforts.
LorinsPOST will be using the above five (5) metrics to calculate an organization's Business Excellence Quotient (BEQ) using the following scoring system:
1) 1/5 = 20% = F (one of the 5 metrics are met by the organization)
2) 2/5 = 40% = D (2 out of the 5 metrics are met by the organization)
3) 3/5 = 60% = C (3 out of the 5 metrics are met by the organization)
4) 4/5 = 80% = B (4 out of the 5 metrics are met by the organization)
5) 5/5 = 100%= A (5 out of the 5 metrics are met by the organization)
Dr. Pete Lorins is the Chief Editor of LorinsPOST.com. This article was sponsored by LORINS.biz a multi-industry consultancy firm providing services in engineering, law, education, business, and medicine.