Knowing Your Numbers (Traction Toolbox Part 4 of 8)

If you're leading an organization and aiming to stabilize, grow, or transition effectively, one essential principle stands out: you must understand the key numbers that drive your business. These numbers—known as Key Performance Indicators (KPIs)—help you assess business health and make informed decisions.

Gino Wickman, author of Traction, introduces the Entrepreneurial Operating System (EOS), which highlights two critical tools for managing data:

• Scorecard: A set of 5 to 15 leading indicators tracked weekly.

• Measurables: Each team member accounts for at least one performance-related number.

     Imagine flying a plane through fog without instruments—dangerous and reckless. Yet many business leaders operate without clear metrics. By identifying and tracking the right numbers, you eliminate guesswork and base decisions on objective data. A business is a system that can be measured, tested, and improved through numerical feedback.

     Examples of useful metrics include weekly revenue, cash balance, receivables, payables, qualified leads, customer satisfaction, project status, and production output. Each business should develop a scorecard tailored to its operations. Importantly, this scorecard differs from traditional financial reports like balance sheets or profit and loss statements, which are lagging indicators—they reflect past performance. In contrast, scorecard metrics are leading indicators, showing current activity that can be adjusted proactively to prevent issues.

     Each scorecard metric should be assigned to a responsible leader who tracks, reports, and troubleshoots that number. The leadership team should review these metrics weekly. Over time, this practice reveals trends and flags potential problems before they escalate.

     A thriving business operates objectively, with decisions and accountability rooted in measurable actions. Every team member should own at least one number that reflects their most vital contribution. This fosters a culture of performance-based respect and enables leaders to focus on improving systems rather than blaming individuals. Personal measurables create strong, objective accountability.