Checking your business matters, and not every check helps. According to the source, the right inspection starts when a number moves. Checking everything, constantly, ahead of any sign of trouble slows the business down, and that slowdown costs more than the mistakes the checking prevents.
What an indicator is
The source defines the term in one sentence. An indicator is something that “signals an approaching change,” ahead of the moment when the change is present and confirmed.
So a number's job is to warn you ahead of time. A number used only to record the past comes too late to help, and that changes when you should look at it.
Suppose an owner follows his monthly revenue. By the time it drops, the cause is already six weeks old. When he sees it, it is a fact.
Now picture the same owner after he starts counting the enquiries that arrive each week. They fell a month before the revenue did.
That is the difference between an indicator and a report. Revenue tells you what happened. Enquiries tell you what is about to happen, while there is still time to act. Anyone who watches only revenue discovers every problem late.
What to do when the number drops
The source also describes what happens when a number starts to fall. A good executive does not wait for the area to collapse before inspecting it. At the point where the graph begins to dip, he goes over the plans, the traffic and the dispatches of the area that is going down, and looks for the real reason it dipped. If the matter needs a minor remedy, he corrects it.
If the graph still dips after that, he has already inspected, so he knows what has to be done on a larger scale.
Look at the sequence this contains. A number moves, you inspect, you find a cause, you correct, and you inspect again. According to the booklet, the last step is the one everybody skips.
Suppose a garage owner sees fewer jobs coming in. He inspects, finds that nobody answers the telephone at lunchtime, and fixes it. He never checks whether the fix helped.
Now picture the same owner checking again three weeks later. The number has not moved, and the real cause turns out to be something else.
Without that second look, he would have kept a fix that seemed sensible and changed nothing. The booklet returns to this in its next chapter: the source says that sometimes a correction is carried out and nobody makes sure it corrected anything. A fix unrelated to the cause you found repairs something else.
The flaw in checking before anything happened
Here the source warns in the opposite direction, and the warning matters just as much: “The basic flaw in organization is inspection before the fact.” That means inspecting before anything bad has happened.
The reasoning touches every business. According to the source, an organization's prosperity is in direct proportion to the speed at which its goods, its people and its papers move.
Every check that happens before something went wrong interrupts that movement. Check everything constantly and the whole business slows down, and the slowdown costs more than the mistakes the checking was meant to prevent.
Suppose an owner requires every quote to pass through him for approval. Response time rises from one day to four, and deals are lost on the way.
Now picture the same owner after he limits what comes to him for approval to the large quotes only. The quality stays the same, and the whole process takes a quarter of the time.
A few numbers, and deeper only when one moves
A simple rule follows. You do not check everything all the time. Keep a few numbers in view, and look deeper only when one of them changes direction.
The movement of a number starts the inspection, and the calendar has no say in it. While the numbers hold steady, let the business move fast. When one of them changes direction, stop and look.
Make sure the movement is real, too. The source says not to go looking for the cause of a situation that does not exist. Suppose an owner investigates for a whole week why one month was weak. On the annual chart, that month turns out to be inside his normal range, and the investigation was unnecessary.
The two halves of the chapter fit together. The indicator tells you when to check. Giving up the unnecessary checks keeps the business fast the rest of the time.
The booklet gives this chapter two short exercises, called choose and cancel. The practice section at the end also has one called the verification.
If you find yourself checking everything and still being surprised by every drop, you may be checking the wrong things at the wrong time.