When we’re buying a company, they often tell us that next year will be their best. I appreciate their optimism, but it’s their track record that matters the most.
A track record is the best indicator of future performance and extends beyond good intentions. This is not something that can be established in a month or a quarter – it usually takes years.
All organizations have a history of performance – and it can be good or bad. For example, some companies have a good reputation as an employer. Conversely, others struggle to find and keep good people.
The point is, you establish a track record whether you want one or not. It’s much easier to manage if you’re the one keeping score. Here are a few elements that define your track record:
- Financial Performance
The obvious benchmarks for defining a track record are sales revenue and profits. In my opinion, a strong financial track record starts with consistent double-digit revenue growth sustained over a minimum of three years. The profits need to follow. Beyond revenue and profits, every industry has unique indicators of what good looks like. You need to know what those are and perform in the upper quartile.
- Retaining People
Turnover is a good indicator of a company's culture. Some turnover is natural and can be healthy for an organization. We consider an 85 percent employee retention rate to be appropriate for us. I keep pretty close tabs on this. In 2015, our turnover was 14.1 percent and our current five-year average is 15.3 percent.
- Employee Satisfaction
How do you validate the satisfaction level of your employees? It cannot just be hearsay. I find organizations rarely take the time to gather data to demonstrate – or confirm – their track record in this area. But it’s well worth it. At Marco, we have used an internal survey process for the past 28 years to ensure we are on track with employee satisfaction. I would suggest if you’re not using some method to validate this, you may want to consider it. (Comment below if you’d like a copy of our employee survey.)
- Client Satisfaction
Organizations pay more attention to this area, and they should. Client satisfaction needs to be consistently tracked and maintained. We’ve worked hard to consistently survey our clients to establish and maintain a track record to validate our performance. The ultimate survey question for Marco is, “If you had the opportunity, would you recommend us?” A minimum 90 percent satisfaction index is required to meet our strategic objectives. Here again, if you’re not doing something to measure your performance, I’d highly suggest you commit to getting a process in place.
When we acquire a business, the value of the organization is based on the track record they’ve established, not their best intentions going forward. Track records don’t develop overnight. They can be trending in the right direction, but for an organization to be seen as appealing, it takes three years of positive performance.
Track records are developed whether you’re intentional about it or not. So how does your organization stack up?