Part ONE of TWO

“Nothing requires a rarer intellectual heroism than the willingness to see one’s equation written out.” — George Santayana, American philosopher, poet, and novelist

  • Far too many measures are designed to meet internal needs. They may satisfy management’s command-and-control paranoia for “snoopervision” or they’re designed to serve accounting information technology, human resources or other support departments. Numerous measures are also highly technical, production or product.

    What’s often missing from these inward measurements, is the customer. High performing organizations measure from the outside in, along the customer-partner chain. They begin by measuring what’s important to customers and pinpointing the performance gaps. Next on the measurement pecking order, are the needs of those external and internal partners serving customers. Then attention turns to the people producing products or serving the servers. The measurement needs of managers and support departments come last in the customer-partner chain.

  • Most managers rely far too heavily on financial measures. They’re clearly an important vital sign of the organization’s health. But the bottom line is history. It shows today’s consequences of yesterday’s management decisions. However, these lagging indicators can be very unreliable predictors of how today’s decisions will affect tomorrow’s results.

    Results are the outcome: They can’t be managed any more than we can turn back time. We can’t manage results, we can only manage the causes of those results. Organization improvement starts by identifying and measuring the vital areas that have the biggest impact on results. If we’re driving through the rear-view mirror of bottom line results, we won’t see the swamp until we’re sinking in it.

  • As important as what ‘s measured, is how the information is used. In many organizations, team members and managers resist measuring accuracy rates, cycle times, rework, customer satisfaction levels, wait times, and the like because they’ve been beaten up with this information. Despite the mountain of evidence showing that 85 – 90 percent of errors and mistakes originate in the organization’s structure, system, or process, all too many managers still look for who, rather than what, went wrong.
  • Micro or local measures need to flow out of organization-wide, macro measures. To counter growing complaints from their distributors, one manufacturer began measuring their rate of incomplete orders. They discovered mounting back-order levels, wrong parts shipped, and many clerical errors. Over 60 percent of the “pick orders” didn’t match the distributor’s invoices. Management’s solution was to replace the shipping department manager.

    The new manager promptly disciplined, fired, and “motivated” clerks and shippers to “shape up the department.” After a temporary improvement, error rates settled in slightly below their previous level. Only when measurement, root cause analysis, problem solving, and improvement activities focused across the entire sales, order entry, picking and packing, inventory control, accounting, and invoicing process, did error rates plunge by nearly 300 percent.

  • Measurements should never be used in isolation. Effective measures provide vital links between Focus and Context (vision, values, and purpose), strategy, improvement, and higher performance.

    Weighing myself ten times a day won’t reduce my weight. No matter how sophisticated our measurements are, they’re only indicators. What the indicators say, are much less important than what’s being done with the information. Measurements that don’t lead to meaningful action aren’t just useless; they are wasteful. Measurement is an essential and very important tool for transforming and improving organization effectiveness. Choosing the right tool is the first step. How skillfully the tool is used determines its ultimate effectiveness.