Operational Excellence Insider: Issue 10

You are halfway through the year. Most of the business owners I talk to right now are looking at their revenue and asking: are we on track?

Revenue is a lagging indicator. By the time it signals a problem, that problem has been building for months. The businesses that consistently hit their second-half targets are not the ones that wait for the P&L to speak. They are the ones measuring what is happening inside the operation right now, in real time.

This issue gives you five operational metrics that function as early warning signals, things you can measure this week that will tell you where your second half is headed before the numbers arrive.

Managing your business by last month's results is like navigating by reading a map drawn two months ago. The terrain may have shifted, and you would not know until you drove into it.

According to McKinsey's 2026 operational benchmarking research, organizations that actively track operational leading indicators are significantly better positioned to identify performance gaps and course-correct before those gaps reach the income statement. For businesses in the $2M to $50M range, this is especially relevant because the window between problem and consequence is narrow.

Here are the five indicators I build into every operational scorecard I set up for clients:

This is the average time from when a decision needs to be made to when it is actually made and acted on. In a healthy operation, routine decisions resolve within one business day, tactical decisions within one week. When cycle time stretches, it usually means either the wrong person is making the decision, or the criteria for making it are unclear.

What to track this week: Pick one recurring decision type in your business. Time how long it takes from the moment the situation arises to the moment action is taken. If it is longer than it should be, you have found a process gap, not a people problem.

Rework is work that had to be done more than once because it was not right the first time. It is one of the most expensive hidden costs in a service or production business. A 2026 report from the Institute for Operational Excellence found that companies that measured rework actively reduced it within the first quarter of measurement, simply because visibility changed behavior.

What to track this week: Ask each team member or department to flag one instance of rework this week. Not to assign blame, but to map where in the process the error entered. Most rework originates at the handoff point between two people or departments.

This is the percentage of daily decisions your team resolves without escalating to a manager or to you. A low rate means your team is uncertain about their authority, which slows everything down and concentrates the decision load at the top.

What to track this week: Ask your team leads to track how many times they made a call independently versus checked with someone above them. Discuss the ratio in your next team meeting without judgment. The data alone often shifts the pattern.

If you have documented processes, are people following them consistently? If you do not have documented processes, this indicator reveals how much of your operation runs on individual habit rather than shared standard. Low adherence is not usually a compliance problem. It is a signal that the documented process either does not match how the work actually flows, or people were never properly trained on it.

What to track this week: Choose your most critical recurring process (client onboarding, order fulfillment, quality review). Walk through a recent completed instance and check how closely it followed the documented standard. Note every deviation and ask whether the deviation was better or worse than the standard.

This is the difference between what your team's available hours are and what your revenue-generating work actually requires. When utilization is consistently above ninety percent, quality and responsiveness suffer. When it falls below seventy percent, you may be carrying overhead that is not producing. The sweet spot varies by business type, but the important thing is knowing your number.

What to track this week: Estimate your team's available hours this week and the hours required to deliver your current commitments. If you cannot answer within about ten percent, that is the indicator: you are running your capacity on instinct, not data.

None of these indicators require expensive software to track. A shared spreadsheet, updated weekly, is enough to start. The discipline of measurement changes what you see, and what you see changes what you decide to fix.

I worked with the founder of a professional services firm who had every reason to feel confident heading into July. Revenue was up twelve percent over the prior year. Client retention was strong. The team had grown by three people.

Then we ran an operational mid-year review.

What emerged was a picture that looked very different from the revenue line. Rework had quietly climbed to consume roughly one in five hours of production time. The team was escalating tactical decisions to the founder at a rate that was consuming most of her available leadership hours. And two of the firm's most critical service processes had diverged significantly from the documented standard, because three new employees had been trained informally rather than systematically.

The revenue number was real. But it was masking an operation that was working significantly harder than it needed to, and approaching a ceiling it could not see coming.

Here is what we did over the next six weeks.

First, we quantified the rework. Rather than estimating, we asked the team to log it for one week. The volume was higher than anyone expected, and the source was almost entirely in the client intake process, specifically in how project scope was captured and confirmed.

Second, we rebuilt that intake process with clearer scope documentation requirements and a formal sign-off step before work began. The change took one afternoon to design and one team training session to implement.

Third, we built the five-indicator scoreboard described in the article above and scheduled a thirty-minute weekly review for the founder and her two senior team members to go through the numbers together.

By the end of August, rework had dropped significantly, and the founder had reclaimed a meaningful portion of her week from tactical decision-making. The revenue number for the third quarter was higher than Q2 by a margin that reflected a more efficient operation, not just a harder-working one.

The lesson for your business: a strong revenue number is worth celebrating. It is not the same thing as a strong operation. The two usually go together, until the operation quietly starts to fray, and the revenue catches up later.

A mid-year review of your operational leading indicators takes about two hours. That two hours may be the most valuable you spend this month.

Where is waste hiding in your business right now?

If you read this issue and recognized your own operations in any of the five waste categories, the next step is a conversation.

In a free 30-minute consultation call I will help you:

→ Identify your single biggest source of operational waste

→ Estimate what it is costing you in time and margin

→ Give you one immediate action to start recovering that cost today

No pitch. No pressure. Just a focused conversation about your operations and where the opportunity is.

Book a Free Consultation Call

Or if you want a structured, self-guided deep dive: the 30-Day AI Readiness Assessment walks you through exactly how to map operational problems to the right solutions, in four weeks, for a one-time investment of $197.

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Thank you for reading the Operational Excellence Insider. Issue 11 goes out August 1. See you then.

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