Our material and labor costs are fluctuating wildly week to week, making our historical profit margin targets on our leadership Scorecard completely outdated. How do we adjust our targets on the fly without losing the integrity of our weekly tracking?

Question

Tyler Smith · Accepted Answer

When costs are volatile, keeping static historical margin targets on your Scorecard will lead to constant red numbers, team frustration, and decision paralysis. However, changing your targets every week destroys your team's baseline and makes long-term trend analysis impossible.

Instead of changing your target numbers weekly, transition your Scorecard to track spread metrics and dynamic ratios. Your Finance Director should own a weekly metric for raw material cost to pricing spread, which measures the gap between what you pay and what you charge. Additionally, track gross profit percentage per unit or per project on a rolling four-week average, rather than a single-week snapshot. This smooths out short-term spikes while still highlighting dangerous cost trends.

If your cost-to-pricing spread drops below your required threshold, it serves as an immediate trigger for your leadership team to implement dynamic pricing or renegotiate vendor contracts. Reviewing these dynamic ratios during your Level 10 Meeting allows you to protect your margins proactively, ensuring your business stays profitable and attractive to potential buyers even during periods of rapid macroeconomic instability.