Thursday, July 8, 2010

So, What Do You Think About Metrics?

It’s fair to assume that metrics probably came up in some way, shape or form in all of the panel and roundtable discussions at this year’s NASPC. The attendance at the metrics panel was a testament to the importance of metrics in all departments and functional areas. After all, if you can’t measure it, you can’t set objectives, track progress, and ultimately hold people accountable.

Four OEMs were showcased at this panel and all had something in common: they overcame internal resistance by fostering a culture of measurement. Promoting an awareness of metrics at all levels is important in making this cultural shift, even when the calculation is complex. One OEM discussed their Shareholder Value Added (SVA) approach. It was previously employed only by senior management, as the calculation of SVA requires a fairly robust financial system. Now awareness has percolated down to all employees. This OEM has also aligned compensation with SVA to get everyone on the same page. Compensation tied to metrics is a useful tactic to effect cultural change; at one of the European OEMs, compensation for warehouse operators and management is based on performance metrics, which are shared within and across PDCs.

A bottom-up approach to metrics can also be successful. This requires empowering individuals at all levels to solve problems. One of the European OEMs assembles cross functional teams to implement continuous improvement events, while another OEM has installed lean suggestion boxes. Yet another OEM has employed an analytics group to comb through data and identify trends. The intent here is to reduce management workload; they want managers spending their time making improvements, not identifying problem areas.

What about over-measurement? How do you know when enough is enough? For one OEM, it’s important to build composite metrics instead of tracking every detail. They pointed out that they have actually removed metrics on a case-by-case basis. For another OEM, the frequency of measurement should drive the level of detail. For example, daily metrics reports should not exceed one page, or else there is just too much data for people to wade through. While every additional metric could possibly reveal a new insight, it is important to avoid paralysis by analysis.

Using metrics to set targets and evaluate decisions is only half the battle. OEMs who are true ‘Best Practice’ leaders also look at metrics after-the-fact. If a target was not achieved, what were the reasons why? If a decision had unanticipated consequences, what factors were overlooked? One of the European OEMs is a leader in this type of retroactive analysis, recognizing that key knowledge can be acquired by comparing expected to actual.

Bottom Line: The NASPC is all about metrics and methods. Showing numerical differences and explaining what caused those differences. There are stunning examples of companies that have used metrics to dramatically improve performance. Perhaps the best and most recent examples are Volkswagen and General Motors. We have written several blogs telling their stories. That said, talking about “metrics” can be uncomfortable.
  • For the enlightened, it is like talking for a long time about if you have six apples and pick four more, you end up with ten apples. Boring.
  • For the perpetually hopeful in search of the magic bullet, listening to cultural enlightenment, the path to lean, turning off the lights at night, numbers-numbers-numbers, and the come-to-Yahweh awakening … well, this sort of story is a little too come-to-yawn-way.
  • For those “diplomats” among us who know they are right and their numbers support their rightness, other people’s metrics are always wrong and inappropriate. Talking about metrics with them is pure UN-style diplomatic debate.
  • For the metric zealots, talking about metrics is a spiritual experience, where the most pleasure in discussion is only among other zealots.
We don’t talk much about the Ten Commandments simply because this is the longest list of fundamental truths that most people can agree with. Running your business with metrics is, similarly, a fundamental truth. Using best-methods and best practices for improvement is, also, fundamental. If you ain’t got either, hire a zealot (for awhile), and fire a diplomat (forever).

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