It has been my observation that companies that are successful year in and year out have a knack for relentlessly focusing on those things that make them successful and avoid getting sidetracked into unsuccessful endeavors. Setting goals and tracking progress toward those goals is one of the proven ways to be successful. In business today, it has become a cold hard fact that continual improvement is required just to survive.

Given this, it is more important than ever for a company to focus on the most important goals and ignore the many trivial issues that can distract us from success. I call the key issues Vital Factors. Vital Factor tracking is a tool that can help a company focus on key performance issues.

Pick important business function areas and track only the key success indicators for each function. Try to select no more than four success indicators per business function.

There are many sources that can help you identify what to track. Among them are the STAFDA PAR report, professional advisors such as your banker or accountant, and peer groups or advisory boards. Additionally, your own controller, sales manager, operations, or warehouse manager probably know more than anyone else what items are key success indicators.

Once you decide what the Vital Factors are, the next step is to develop a quick, concise tracking and reporting system. We have found that monthly reporting is an appropriate balance between timeliness of information and information overload.

Identify important business functions, such as sales, customer service and inventory. Second, select three or four key success indicators for each business function. For the sales function, you may want to track "plan," "actual," "gross margin percentage," and "new business revenue." Lastly, we'll build the columns that will be reported.

In addition to monthly reporting, we include data from last year to show trends quickly. We also have a year-to-date and a goal column.

Once the tracking tool is in place, the real power of using Vital Factors comes from taking action. Meet monthly with your key management team for a focused meeting to review progress in each area.

Everyone can see at a glance how the company is doing against both last year and this year's goal. This allows you to quickly identify where problems have arisen and what corrective action is required. Each problem area is discussed, and assigned to the appropriate person. This person then takes action and reports back to the group at the next meeting. The impact of the action taken will be immediately apparent on the Vital Factor report at that same meeting.

Reviewing Vital Factors every month and acting on them ensures that they become a key tool for running the company. The annual setting of Vital Factor goals helps a company stay on a path of continuous improvement.