The headline on this column may be an overworked clich, but only because it is all too true. More significantly, it suggests that developing proper measurement systems poses a challenge for businesses. A friend of mine, Will Kaydos, would agree. He has written two books on the subject, including Operational Performance Measurement: Increasing Total Productivity (1999, St. Lucie Press). In a recent conversation, I asked Will to help me identify a few of the most common measurement problems -- along with solutions to share with readers of this column. Here's what we came up with:
- Measuring what's easy to measure, instead of what's important to measure. Companies must measure what's important to their customers, to the processes they employ to provide goods or services, and to the company itself. However, many companies focus too much on short-term financial measures and too little on metrics related to quality, customer service, and new-product development. They measure direct labor productivity to four significant digits, when that is the least likely thing to give them a competitive advantage.
- Failure to get beyond scorekeeping. Knowing the score is one thing; improving it is quite another. For example, knowing that on-time deliveries were only 65% last month doesn't tell you what caused the late deliveries. They could have been caused by any number of problems. Without going beyond the "score" to more revealing levels of detail, the causes of deviations in performance cannot be determined -- and if the causes are unknown, effective solutions simply cannot be developed.
- Failure to establish accountability for all aspects of a product and its production processes. Consider the following two scenarios, in which a CEO is meeting with his vice presidents. In scenario A, the CEO declares, "Our on-time delivery is awful and we must improve it -- fast. Now let's get out there and make it happen." In scenario B, however, the CEO asserts, "We must increase our on-time deliveries from 65% to 95% or better. During the last month, the following reasons contributed to late deliveries: engineering changes -- 35%, late receipt of customer specs -- 29%, production equipment downtime -- 20%, internal manufacturing quality problems -- 12%, and other reasons -- 4%. "You all have copies of a report providing additional detail about the nature of the problems. What I need from each of you is a plan of action showing how your department can help to substantially reduce the problems affecting on-time deliveries." In scenario A, everyone except the manufacturing VP will probably blame the late deliveries on manufacturing. In scenario B, accountability for each component of the general symptom is quite clear. If no one is accountable for performance, little will be done to improve it. And without good, insightful measurements, there can be no meaningful accountability. Nothing is more unfair, demotivating, or fruitless than blaming someone for performance problems created by others.
- Not choosing relevant measures -- and not providing feedback. Managers want relevant, fair performance measures as well as feedback about their own performance. Unfortunately, very few middle and front-line managers get this. There is an inherent desire to perform well, but managers and employees often don't know what "good performance" means, either because measures are lacking or actionable feedback about their performance is absent.