What are the three most important things to look at to determine the health of any business? Is it income? Return on Investment? Book value? Revenue? If you could only look at three measurements what would they be?
Jack Welch, former CEO of General Electric, was recently asked that question. These are his top 3 which he says apply to any size organization:
1. How satisfied are the customers?
Do the customers want to come back? Do they like my stuff? Are they willing to refer me. Learn by doing surveys and get out of your office to talk with your customers. Become known as the person that always wants to know.
2. How satisfied are the employees?
Is my message getting through--is it in their blood? I need the most engaged energized people in the world.
3. How much free cash flow is available?
It's simple. You need more cash coming in than cash going out. Net income is for accountants, it is full of assumptions. Cash has no assumptions. It gives you true flexibility and is the one thing that frees you.
I really like Jack's list. I've been involved in organizations that have lacked one or more of the three. They didn't last long. If your employees aren't satisfied, it is doubtful that your customers will be. And if your customers aren't satisfied, the free cash flow can't be positive for long.
The real question is do you know the answer to each of the three? I'm betting you are very familiar with your cash flow situation. Every month those bills come due and you have to pay them some how. But what about employee satisfaction and customer satisfaction? Are you systematically and regularly getting a read on how your customers and employees feel?
You can listen to Jack's comments on the topic by downloading a podcast he and his wife (former editor-in-chief of the Harvard Business Review) produce called "The Welch Way." It is free and available on iTunes.