Page 132 - Finance for Non-Financial Managers

Siciliano07.qxd 3/20/2003 11:23 AM Page 113
Critical Performance Factors
Have You Tried to Get
Broadband Service Lately?
When DSL first became available for broadband Internet 113
access, prospective customers waited weeks and often months for
their telephone companies to get around to filling their orders—
sometimes only to be told they were unable to provide the service
because they were out of reach by 50 feet.As competition developed
for DSL from cable and satellite service, the wait times got shorter
and phone companies built capacity and became more responsive in
order to keep their backlog from disappearing.
may lose customers. This will tend to hamper the Sales
Department’s continued success in overwhelming Production,
but for all the wrong reasons.
The objective of Sales should be to continue to build the
backlog, while the objective of Production—and this includes
the salespeople and drivers in the distributors’ offices as well as
the service providers of service businesses—should be to deliver
on orders faster than Sales can bring more in. The role of top
management, then, is to beef up either side that is falling behind
in this tug of war, so that backlog is where they want it to be.
Where should that be? It all depends. I suppose you could say
backlog should be measured by how long on average it takes to
bring in an order and to fulfill it, in relation to the customer’s
expectations.
In reality, I can’t recall ever hearing a company say its back-
log was too high. Too old, maybe. Too difficult to fulfill, sure.
Too unprofitable to fret over, unfortunately yes. But too high?
Nope, never. Companies use backlog to measure the success of
their sales efforts. I recommend to clients they build it into the
incentive plans of their top sales and marketing executives and
that they track it regularly and visibly.

Order Processing Time
Another metric that doesn’t require any complex calculations,
but that can have a huge impact on a company’s success, is
the time to process an order. This one isn’t for everyone, but