Run the company on statistics

I did a video about finding hungry people and rewarding them when they do better, and a follow-up question came in right away: how do you actually gauge that? How do you see when somebody is doing better?

Guys, there is this thing called statistics. You can build them in a spreadsheet, you can buy software for it; I have been using the same management-by-statistics approach for forty years. The tool does not matter. The idea does, so let me give you the idea with the silliest example I own.

The cup of coffee

I have a cup of coffee in my hand. I asked for it, it came, I sip it: perfect. That is a stat. I got the thing I wanted, done properly, once.

Tomorrow I ask again, and I will tell you something, they do not all come out perfect. Two perfect cups today is one number. Three cups tomorrow with one bad one is a different number. I can put a statistic on how well my coffee is being made.

It sounds like a weird example, but that is the whole system. Every position in my companies has a product: the thing that position exists to produce, properly made. My coffee maker's product is properly made cups of coffee. If you are clever enough, you can put a countable product on anything, and once you can count it, you can manage it.

What normal means in my companies

Picture the arms of a clock. A statistic can be steeply down, slightly down, level, slightly up, or steeply up. What I want is slightly up or steeply up, and here is the part I need you to hear: slightly up is what we call normal.

You should be able to do a little more this week than you did last week. Did you hear that? It is expected. I expect it of myself and I expect it of my staff. Do one more, fifty-two weeks in a row, and Decembers look nothing like Januaries. Small, relentless increases are the whole magic of the thing.

Now every employee has a stat, and the people who manage them have a stat built on those stats: what percentage of their people did more this week than last week? Think about how valuable a person is who can keep the majority of your staff rising, week after week. I think the word is priceless. That is the one you reward.

This is also what keeps the training side honest. The people responsible for training my staff, for hatting them on how the job is done, have their work show up in everybody else's numbers. If the stats across the company are rising, the training is real. If they are flat, no amount of beautiful manuals changes the verdict.

Numbers first, then handling

The statistics also tell you where to look when things are not moving, because there are only two reasons somebody is not doing their job: they do not know how, or they do not want to. Training handles the first. Straight, honest correction handles the second. We all have bad days, me included, but as a rule most people show up intending to work, so the numbers usually point at a missing piece of know-how rather than a bad heart.

And here is the discipline that makes the whole thing honest: I reward the people whose statistics are up. When they are down, they do not get more. Rewarding a down statistic is rewarding decline, and once you start doing that, you are training your best people to stop trying.

Measure the product of every position. Expect a little more each week. Reward up. Handle down with training or with truth. Take it to the bank: that is the management style, and it works in a kitchen, a call center, and a company that spans an ocean.