Don't Waste Your Metrics

June 18, 2012
Four keys to making metrics a better part of your evaluation process.

Most every company has metrics permeating every meeting, discussion and decision. Metrics are as ubiquitous as email and problem solving and taken for granted to an equal level. Here are some keys to making them work for you.

1. Be consistent and balanced. Bob Smillie, vice president of Nemak who led the organization through its lean transformation after its Ford spin-off, believes in the value of consistency. He states: "We know the culture is catching on and is stable and sustainable because we do not change our objectives year after year. We are currently working on next year's objectives. We only have five, and four of those are a carryover from prior years. No one is confused about what is expected or what he or she should be working on to satisfy what is expected."

During Chrysler's transformation in the 1990s, we learned from Toyota the value of consistently measuring QDC: Quality, Delivery and Cost. We asked, "What about safety?" And they responded, "Safety is first; it is assumed that you always get safety first." We took that lesson, and for various reasons added Morale, and the mantra became SQDCM. That pattern of measurement and balanced decision-making entered at every level: shop floor teams, plant-management daily meetings, executive reviews. Instead of making isolated quality decisions, or cost decisions, all were important, all the time.

2. Keep it understandable. A food-processing company used a very elegant metric: ROTA, or Return on Total Assets. It incorporated all assets, whether capital or inventory, instead of looking at those buckets separately.

The downside was that of all the sites I visited, I only found one to three people who understood the metric. They had charts on the wall, but most people couldn't even tell me if an upwards direction on the chart was good or bad. A metric that people cannot understand, digest and take action on is quite frankly a useless metric.

3. Don't be limited to metrics. Albert Einstein acknowledged something we seem to have forgotten in management: "Not everything that counts can be counted, and not everything that can be counted counts." We believe that if we can't measure it, then we can't grasp it, improve it or manage it. Yet we do this all the time. Do you evaluate your children on grades (metrics) alone? Certainly not.

Metrics are a tool; evaluation is the objective. But in the pursuit of evaluation, of understanding current reality, there are many methods we can employ, from value-stream mapping to direct observation to pictures and stories. The point is, we must change the question from "How will we measure it?" to "How will we evaluate it?"

Tom Johnson, author of important books such as "Relevance Lost" and "Profit Beyond Measure," believes that we should take the accounting out of management. He believes we need to understand the system at work and that accounting systems in particular are a barrier to doing so. His vision may seem unattainable, but directionally we must follow the path he has laid out. Metrics are like lawyers -- we should use them to inform and counsel us but not to control and govern us in our decision-making.

4. Know your decision, then your metrics. A quote I saved, although I don't think it comes from anyone "quotable," is: "A problem without data is complaining; data without action is waste." Through the incredibly steep drop in computing power and data storage cost, we can store and process almost everything. And sometimes we try to do exactly that. We collect and store data and generate reports before we determine how we would use it.

Instead, first ask what decision you are trying to make. Second, ask what data, facts and observations will help inform you in that decision. Third, determine the right method, form and timing to package that information to help you. Don't generate reports just because you can.

Data can be incredibly useful, but it can also be a hindrance, all depending on how we use it.

Contributing Editor Jamie Flinchbaugh is a co-founder and partner of the Lean Learning Center in Novi, Mich., and the co-author of "The Hitchhiker's Guide to Lean: Lessons from the Road."

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