If You Measure It, You Can Improve It
Measurement is the First Step in Building Business Success
In sports, that scoreboard will report the runs, hits, and errors. In business, the scoreboard maybe a financial statement or a sales report. In a non-profit, it may be the number of people served or the number of programs run. These scoreboards reflect the end result of the business’ activities, but these types of measurements are difficult to use in defining a specific problem or developing programs to make improvements.Most businesses or organizations could not exist without a scorecard.
Let’s use the analogy of scoring in baseball, in which a team is yielding an unusually high number of runs per game. Is this the problem or is this just a manifestation of the real problem? A well-defined problem is a critical starting point in the development of an effective solution. It is a manifestation that requires further analysis. For example, the cause of the high numbers of runs could be a poor infield defensive plan, or too many passed balls by the catcher, or the pitching staff giving up too many home runs. Now we are getting to the heart of the issue, the real problem, a key measurement, and the potential for corrective action. If in measuring the short stop position, it is found that there are an excessive amount of errors, we can to begin to measure the errors per game and then work on plans to reduce their occurrence. We might decide to increase the daily work a short stop does on fielding ground balls. There might be another player who could be substituted. There are now a number of possible plans to begin to address this issue and then produce the resultant reduction in the opponent’s runs.
As we work with many businesses, there always seems to be the need to setup a measurement system related to the issue they wish to address. If they wish to address employee morale, there may be no measurement of employee turn-over or absenteeism. If they wish to address sales, there may be no measurement of quotation activity or closing rate. Here are some examples of simple measurements that lead to solutions and improved performance.
A well-established manufacturing company was concerned about productivity in the machining department. Machine downtime seemed well above expectation. As the plant manager toured the plant one morning, he realized that many of the operators were not starting their operation until 5-10 minutes after the start of shift. When the whistle blew to start the shift, many operators would then be leaving the lunchroom, walking to their machine and then beginning their operation.
Over the period of two weeks, he began to manually record the percentage of employees starting operations at the start of their shift. He plotted the results on a graph which indicated that only 50 % of the operations were starting on time. One could also project that the habit exhibited at the start of the shift also occurred after break and lunch periods.
The manager held a meeting with the employees showing the two-week graph with the 50% mean. The graph was posted on the wall in clear view of all the employees. He explained the importance of productivity to the security of their jobs and discovered that this was a habit which has been in place for years. He found that supervision had only occasionally expressed a mild complaint. He asked that the employees help with this issue and noted that he would continue to maintain the chart.
So, what happened? The next morning 95 % of the machines started on time. The line on the chart went vertical. That performance level was maintained over the coming weeks, months and years and productivity soared. Just providing the measurement and giving feedback to employees made all the difference.
Business managers always want to improve sales. Sales may have been flat for too long a period and in need of a boost. It is possible there has been an unexpected decline causing a profitability crisis. Very few businesses fail to measure sales on a daily, weekly, or monthly basis, but what measurements can be used to know that sales will be declining in the near further, so that corrective actions may be taken.
One possible measurement is the level of quotation activity. Many businesses prepare quotations for prospective customers to be considered prior to the placement of an order. A decline in the total number or total value of quotations is an indicator that sales will be moving downward. Charting these activities over a longer period of time will provide for an indication of normally expected fluctuations which might occur in anticipation of a season or holiday period. Upon observing a decline in quotation activity, sales plans can be put in place to increase contact with past customers and other prospects with the hope of uncovering additional opportunities. It may also signal the need to more closely control expenses and inventory through an unavoidable downturn in profitability.
Many capital equipment or construction businesses have a long lead-time and, therefore, have large backlogs. There are several simple ways of measuring that backlog, but the concept of filling the monthly buckets might be considered. Consider each month in the future to be a bucket that needs to be filled with business. Divide the backlog into months in which the work on the project must be done or the item shipped. Look to see which buckets are partially filled and focus sales planning into those areas. Most of these businesses carry a heavy overhead, so quoting with lower markets during slack months has an economic benefit. Better some work with lower margins than no work at all.
All businesses want to have loyal customers. These are customers who return to your firm to place additional orders and refer others to you. Loyalty is important in a wide range of businesses. There are many methods used to gather data for this purpose. Consider the last time you bought a new car, stayed at a hotel, needed technical support, or visited a hospital.
Remember what happened the day after you bought a new car? Someone from the dealership called to thank you for your business and, more importantly, asked how you found the experience at the dealership. There may have even been an email or call from the car manufacturer. These calls may seem to be the polite thing to do, but they also help to obtain measurable data.
Within a few days of visiting a hotel, an email can be expected from its management with detailed questions about the condition of the room or the courtesy of the staff. This information provides data for the evaluation of services and personnel. It is the basis of corrective action and reinforcement planning for the facility.
Have you recently had an issue with computer software and had to call technical support. After the usual waiting period, a technician comes on the line and quickly provides a solution. Within minutes of the termination of that call, an email from the software company will arrive in your inbox with a survey of your experience. This is an example of a product company understanding the importance of service and measuring its performance.
Many other measurement techniques can be cited but consider one simple question. Do your clients or customers return over and over again because they like doing business with you? If you only see them when there is a sale or promotion, they are not loyal customers. Many just measure the number of times a customer returns and frequency of their visits.
As business coaches we provide our clients with a process which leads to a higher level of business success. That process needs to start with an understanding of the current situation. That understanding includes critical measurements. This is the starting point on the road to business success.