Metrics Should Be Everywhere Part 1

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Information about Metrics Should Be Everywhere Part 1
Business & Mgmt

Published on November 21, 2008

Author: tomstocker

Source: slideshare.net

Description

Business Metrics need to be shared throughout the organization in order to have true implact.

Metrics Should be Everywhere (Part 1) by R. Thomas Stocker Everyone uses metrics. You, your condition of these five categories of metrics. management team and your employees. They are: (Yes, even your employees at the lowest • Customer – “on time and complete” is level). But many in management don’t the most common and important realize it or believe it. Some folks really measure. Some also break this metric don’t think much about metrics, or only down to complete, on-time or some equate them to financial indicators. But other variant. I like to keep it simple to non-financial metrics can be more effective understand. Did I give the customer and powerful than the financial scorecard. I everything they wanted when they don’t mean to minimize the importance of wanted it? This is one of the most financial metrics. At the end of the day they important indicators as it touches the are the ultimate scorecard and measure of customer directly. It can indicate how business success. But in many cases, more well your delivery process is, what your than you would think, they are useless in sales force spends their time on measuring your business’s effectiveness, (firefighting or selling) and can be a identifying and correcting problems or pretty good indicator of how happy your getting your workforce to help make customers are (given you ship them improvements. quality product with good value and It is all too common for management to service). ignore their employees when discussing metrics. Most consider metrics management • Productivity – includes throughput, tools and don’t share them with line linearity, efficiency and other measures workers. Many managers indicate they of work center or company (service or don’t use non-financial metrics while, in manufacturing) product delivery fact, they have metrics in use all around effectiveness. Many of these indicators them. Most think their employees don’t work in concert with each other such as understand metrics and many don’t think throughput and efficiency. Getting the about how powerful metrics could be if they right number of product through the took the time to tailor metrics for their process with the right number of workers employees to use and understand. is much better (and cheaper) than not getting enough through the process with There are five categories of metrics I too much labor. recommend for all companies, service or manufacturing to use. In fact, most do use • Inventory – (mostly manufacturing, but all or most of these categories in some form, can be adopted by service companies.) and there are countless measures used within The most obvious measures are each. When used in concert with each other inventory value, turns or days (weeks, and within a work center or company, you months) on hand. But a more important can tell how well a center or company is measure is number of inventory outage doing with a high degree of accuracy. In instances, a very powerful metric and most cases, the financial results reflect the one that affects every employee in a 10 Larkspur Road, East Greenwich, RI 02818 401-451-9799 www.boardroomadvisorygroup.com

profound way. If they don’t have So, how do employees understand these something they need in order to finish indicators? It depends. Not all categories fit building or delivering something, they in every operation. And the indicators must can’t do their job. It is easy to see how be in the form germane to how the employee the more instances of outages, the more works. If an employee works with units per out of control the manufacturing process hour, dollars per unit is not a good indicator. may be and downstream, the potential Likewise, material outages expressed in for disappointing customers. dollars does nothing for an employee who is trying to figure out why she always runs out • Quality – warranty is the first indicator, of bolts. Number of outages would be more and although after the fact, indicates appropriate. how often unacceptable product or Once effective measures are put in place, service reaches customers. This can also they must be communicated regularly indicate whether your sales force is (daily?) with the workforce. Employee proactive and out selling or spending involvement meetings with a focus toward more time on damage control. Inside problem solving and reaching daily quality measures sometimes don’t exist requirements are a very powerful tool. and warranty is the only indicator. Metrics provide the people closest to (doing) Others have various metrics along the the work with a tool to see how they are entire product cycle or at the end. Each doing against goals, ways to find has a use and can provide early suggestions for improvement and the sense indications of issues, or at least catch of empowerment they may never have had problems before the product reaches the before. In many cases that empowerment customer. also increases pride and a sense of • Employee welfare – indicates how well contribution. you pay attention to your employees’ No one likes to fail. Human nature is to be safety and well-being. Common competitive. Providing your employees indicators may be reportable accidents, with a scoreboard will automatically OSHA incidents or other such safety increase productivity IF you provide the measurements. This category is most proper communication about what you are common in manufacturing and measuring, why and the expectations for distribution operations. A safe and clean improvement. And yes they do use metrics environment is key to employees feeling in their every day lives. They follow sports, they are an important part of your focus. gasoline prices, balance checkbooks and have stock portfolios. They understand. To comment on this or other topics important to private business owners, access my blog at www.boardroomadvisorygroup.com. About the author; Tom is a Principal of Boardroom Advisory Group, LLC, an owner advisory and consulting firm. Tom serves on the Board of Directors for the RI Economic Development Corp’s Small Business Loan Fund Corporation (SBLFC), the finance arm of the RI EDC. He writes a monthly article for the RI EDC’s Every Company Counts initiative. His articles focus on areas that can add significant value for business owners. Contact Tom directly at 401-451-9799 or tstocker@boardroomadvisorygroup.com. Boardroom Advisory Group, LLC is a business advisory and consulting firm specializing in helping business owners resolve day-to-day systemic issues that interfere with cash flow and profitability attainment. The Firm works with both growing and underperforming small to mid-market private companies. The Firm’s team of hands-on senior professionals find and implement solutions to improve top-line and bottom-line growth, increase cash flow, reduce costs, improve process, structure, and use world-class metrics to keep the business on track. The team also has extensive experience working with troubled companies through business restructures and recapitalization. Boardroom Advisory Group’s core focus on developing strategies to drive and measure performance has resulted in a history of sustainable top and bottom line growth, healthy cash flow and increased company value for their clients. For more information about how we can help you build a more valuable business visit our website at www.boardroomadvisorygroup.com.

©2008-09 Boardroom Advisory Group, LLC All Rights Reserved. No part of this document may be reproduced without the express permission of the author. All registered trademarks mentioned in this document are the property of their respective owners. Additional articles written by Mr. Stocker include: Start Forecasting Now! Do You Have Contingency Plans? I’m Out of Compliance. Now What? Have You Thought About Your Future Lately? Are you in a Foxhole? Metrics Should Be Everywhere (Part I) Are You an Octopus? Metrics Should Be Everywhere (Part II) What is Value? It’s All About Growth These articles can be accessed at www.boardroomadvisorygroup.com/pages/pubs.php. You can also request to be added to his email list to receive his latest articles on a monthly basis on the Company website. Contact Tom at tstocker@boardroomadvisorygroup.com.

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