By Tyler Dawson
Today with so much emphasis on measurable results you see metrics, dashboards and scorecards abound in many businesses. These metrics sets are built into presentation slide decks and posted in the meeting rooms and hallways.
Zombie Metrics Or None At All
Often, the disappointing truth is that within these organizations, few understand and even fewer take responsibility for improving these elaborate metric sets. The metrics are updated and reviewed periodically, but are not really used to improve the business. They live on, providing little value, becoming zombie metrics that cannot be killed.
On the other hand in small enterprises, there may be no established metrics at all. The senior leadership team / business owner wants to, and often needs to instill a sense of ownership and continuous improvement culture within the organization. But the lack of staff, time and data collection systems makes establishing metrics a daunting task that is too far down the priority list.
One Vibrant Metric
Consider an alternative. Identify one key metric that can be used to align and focus the entire organization; for example, one broad-reaching, easy to understand metric: On Time Delivery (OTD). Here OTD is simply the measurement of the percent of the deliveries made that were exactly what the customers requested, delivered when they needed it.
If you think holistically about this measurement, every function within the organization has the opportunity to impact, positively or negatively, the OTD measurement. In manufacturing and order fulfillment operations, the impact of each function is fairly obvious. Sales and/or order entry must document the order. Operations must fulfill the order and assure it is delivered to the customer. Materials must be forecasted, planned, and purchased up front to assure the proper supply of goods is available. Less obvious however, the marketing group must coordinate promotions and new product announcements with the materials and fulfillment group to assure adequate supply for the expected increase in demand. Engineering must meet the new product schedules with producible products that are coordinated with market launches, and finance must assure that payables and receivables do not impede the other processes. Just about everyone plays a role.
Further, almost every business delivers something; a product, a service, a document, or a project that the customer wants at the time the customer needs it. There are few parts of any organization that do not enable, support, or potentially constrain these deliveries.
Communicate First, Then Improve Something
In most organizations, OTD is treated as an operations measurement that other groups within the organization cannot impact. However taking this broader view, senior management’s role is now to communicate and explain how every function and department relates to and can impact OTD. After all, if you focus primarily on one measurement the communications can be very specific and consistent.
Once the message is clearly understood that OTD is of key importance and the entire organization is dedicated to improve it, then it is time to reinforce the words with actions focused on improving the measurement.
In organizations with a basic understanding of process improvement, tools such as pareto analyses and fishbone charts can be used to analyze the data and identify the initial high impact process improvements opportunities. Select one, focus the necessary resources to solve it, and repeat.
In small businesses the data and process improvement know-how may be limited. Even so, OTD can be used as the focal point for improvement. Analyze a few of the late, incomplete or incorrect orders, and identify where the process broke down. Then lead the efforts to fix that part of the process for good.
Measurement Pitfalls
Narrowing the focus to one unifying metric can be powerful, if done properly. However it is critical to avoid a few frequently encountered pitfalls.
- Do not fall into the never-ending debate of whether to measure OTD against customer request date or delivery commit date. Capturing accurate request dates is often a futile task. Many smaller systems do not capture both customer request and commit date, and all too often the customer request is “ASAP.” Measuring to commit is usually an adequate starting point for identifying problems and improving the processes, as long as you do not fall into pitfall number two.
- Determine if customer commit dates are consistently longer than your competitors or what your customers need. If this is the situation, set a goal that reflects customer needs, or best in class. Drive to achieve those goals, but initially focus process improvement efforts based on real data from actual orders.
- Establish a narrow range for the pass/fail criteria for OTD. Real-world examples of overly forgiving ranges would be where customers expect next day shipments, but deliveries are considered “on-time” if shipped within four days; or deliveries are counted as complete if 95 percent of the order is filled.
One Living Metric Is A Start
Admittedly one metric is no panacea. But this metric does provide a measurement that everyone in the organization can relate to, impact and own. It can become the starting point for developing a data-driven continuous improvement culture, where none exists. It can also act as a renewed focal point to revitalize organizations with too many zombie metrics haunting the hallways.
Tyler Dawson is an independent consultant specializing in business process and operations performance improvements. He can be contacted at tyler.dawson@att.net.