5 essential questions to evaluate a company's performance

This week, I took my car to the garage for its annual service. When I picked it up, I discussed with Chris (the mechanic) the checklist of inspections he completed and the repairs done. One by one, we ticked off the different items on the checklist.

As I drove back home, I wondered: What items should be on a checklist to help leaders understand the health of their companies?

Often, we come across companies that should be very successful but struggle to execute. Common symptoms include: Lack of clarity in priorities, incoherent decision-making, wasted resources, and people churn.

So, let’s imagine there was an “annual check-up” for businesses. A quick way of checking if the company has the focus, talent, and speed to deliver whilst identifying areas that require fixing.

Maybe the checklist of questions would look something like this:

1- A CLEAR STRATEGY WITH HARD CHOICES

A strategy is – and should be – about making clear choices on how to use your resources. However, most companies think of strategy as an all-encompassing motto; an umbrella for everything they are currently doing; a marketing exercise with great intentions but poor value.

Checklist question: Is your strategy explicit on what the company WILL and WILL NOT pursue? I.e. Can you provide examples of initiatives that were shut down because they didn’t fit the strategy?

2- A SHARED UNDERSTANDING OF BUSINESS MODEL AND UNIT ECONOMICS

Most companies accumulate products and initiatives over the years and lose track of what pays the bills. Financial and management reporting should provide this clarity but often falls short. For example, profitability reporting is usually set up to follow country-level P&Ls or business unit P&Ls but does not provide a true understanding of product-level profitability and unit economics.

Checklist question: How many people in your company understand the profitability at the product level and the unit economics behind that profitability?

3- A CLEAR LINK BETWEEN PRIORITIES AND BUDGET 

Talk is cheap and writing a report about the exciting new initiatives a company is doing is even cheaper. What is actually hard, though, is allocating funds to new initiatives and sticking with them. One way to ensure the company is truly taking the priorities seriously is to “follow the money” in the budget.

Checklist question: Are you putting your budget where your mouth is?

Step 1: Write down a list of what the company considers to be “high priority” initiatives. Step 2: Go through the budget and org chart meticulously and identify how much money and how many people are assigned to these initiatives as a % of the overall budget and staff size.

4- A SIMPLE WAY OF KNOWING WHO IS IN CHARGE OF EXECUTION

This is probably the hardest thing to get right. You have to consider your ability to attract and retain the right talent, to make agile decisions with the right information, and the need to balance team autonomy with “command and control” structures. There are, however, ways of knowing whether you are on track in this area or need to dramatically improve.

Checklist question: If you go through your list of priorities for the year, does your team all understand and agree on the 2 key names against each initiative? I.e. Who is accountable (the one who “owns” the ultimate decision) and who is responsible (the one who “does” the actual work)?

5- A FEEDBACK LOOP

Companies need to adapt to thrive. A culture that welcomes internal and external feedback will always adapt faster.

Checklist question: How often do your executives listen in to help desk calls or read customer feedback (NPS verbatim comments are great for this)?

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These are just some thoughts on the basics of business efficiency. Obviously, there are other considerations like a company’s market positioning, financials, and approach to talent.

Would love to hear your perspective. What would be on your checklist when you “kick the tyres” on the health of your organisation?