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What's My Critical Number and Why Do I Need It?

Whats my critical number

Right now, there is at least one financial or operational number in your company, something right at the heart of your business that, if improved in the short term, would have a dramatic effect on your business. Does everyone in your organization know what that number is, and how important that number is to the success of the business?

A Critical Number™ is:

  • ‘The One Thing’ that, at any given time, is going to have the greatest impact on your business.
  • ‘The One Thing’ you must achieve – or nothing else you achieve really matters much.
  • ‘The One Thing’ that clearly defines winning!

Critical Numbers vary from business to business and industry to industry. They change and evolve over time depending on business conditions and strategic goals. So how do you know what to select?

‘Isn’t The Critical Number Always the Bottom Line?’

Look, the objective of any organization is to make money and generate cash. This is a universal truth. We must teach our people that if we don’t accomplish these two things, we lose careers, jobs, and the business. No money, no mission.

Profit is absolutely critical to any organization (for profit or not-for-profit), and is usually at least one of everyone’s Critical Numbers. Profit funds everything else.

But before you leap to Net Income, PBT or Operating Profit as your Critical Number, consider this: what is the one thing we need to address in this business, this year, or nothing else matters much?

For example, what if most of your profit comes from one big customer? Is profit still your Critical Number? If they drop you or they go out of business, you might go out of business as well. Here, you may have two Critical Numbers; profit and diversification.

Selecting a Strong Critical Number Will Provide These Things to Your Team:

 1. Focus

Giving people a long list of goals is like not having any goals at all. Having dozens of performance measures and targets and driving hard to achieve them all won’t help you get results—If everything is important, then nothing is important. 

One of the most important jobs a leader has is to set the agenda by communicating the top priorities of the company. We simply can’t do everything. In our experience, those who prioritize with a tighter focus on fewer items will achieve far more of their goals, and far bigger goals.

2. A Common Goal

Give everyone the same set of goals. We don’t want to send people mixed messages on what’s most important. Turn success into a team effort by giving everyone the same big objectives, and be sure they have to work together to achieve them. This way, we either win together or lose together.

3. Education

Your Critical Number is an opportunity to educate your people about the different aspects of business and what it takes to be successful in your organization. In their book, Get in the Game, Rich Armstrong and Steve Baker outline how to choose a Critical Number:

"Remember to emphasize the selection of a Critical Number that keeps people focused on the fundamentals of business: making money and generating cash. A good Critical Number makes a company stronger by eliminating a weakness and supporting strategic growth. The best Critical Numbers also educate people about the different aspects of the business and teach them exactly what it takes to win! The Game is all about opportunities. The Critical Number provides an opportunity to learn and to win that becomes a part of our everyday process of running a business."

Don't forget: HOW we determine the Critical Number is as important as selecting the right one. The process of getting to Critical Number™ is where you get understanding, buy-in and commitment. So, in your quest for your Critical Number, always begin with this mantra: "People support what they help create." That is the magic.

 


Get your copy of Get in the Game to find more on the Critical Number & helpful resources like the Line of Sight Tool & Critical Number Communication Tool. 

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Topics: Critical Number™

Rich Armstrong & Steve Baker

Rich Armstrong and Steve Baker, president and VP of the Great Game of Business are the authors of GGOB's new book Get in the Game: Rapid Financial Results and Lasting Cultural Change. This book was designed with a focus on implementation. The how-to. The cookbook. The step-by-step approach we use every day to implement and sustain The Great Game of Business inside organizations all over the world and in every industry. This book is designed to teach you the principles and practices of the operating system to “get you in The Game” quickly, take you on a deeper dive to make it stick, and, finally, to start you on the journey of High-Involvement Planning™ that will help you transform not only your business, but your people. It's Money. It's People. It's Both.

About The Great Game of Business

Our approach to running a company was developed to help close one of the biggest gaps in business: the gap between managers and employees. We call our open-book approach The Great Game of Business. What lies at the heart of The Game is a very simple proposition: The best, most efficient, most profitable way to operate a business is to give everybody in the company a voice in saying how the company is run and a stake in the outcome. Let us teach you how to develop a culture of ownership, where employees think, act and feel like owners.