Metrics are important in any business setting. There’s another old business adage that states “What gets measured gets done.” While I believe this to be true, there are two issues that I feel are important when discussing performance measurement.
1. Determining What To Measure
2. Properly Establishing the Metric. Defining these two items is critical to the long-term success of any performance measurement system. Let me explain why.
Friend or Foe?
Metrics are primarily utilized to define performance targets – # of orders processed per hour, average handling time (AHT), on-time shipments, etc. While these are all important for measuring performance, one must remember that there are real people being held responsible for meeting these targets.
These real people are dependent upon the proper setting of performance standards. Believe it or not, your metrics will receive either “friend” or “foe” labels from those whose job it is to perform to the metric. This is the primary reason to properly develop your organizational metrics. The health of your organization and the level of service received by your customer is dependent upon your ability to get this right.
Determining What To Measure
Now I’m a big proponent of measuring what’s important to the customer. I like to say I have two sets of metrics – external and internal. External metrics are based on what the customer says is important. Determine what your customer feels is required for a great customer experience.
Spend time asking your customer what’s important. Spend time asking the people who service the customer what’s important to the customer. Check your industry to see what others are measuring. Is anyone measuring what’s important to the customer? Internal metrics are based on processes and procedures that contribute to the external metrics.
If your customer states that on-time shipments are important, then look at what processes impact on-time shipments. Create metrics for the processes; perhaps in this case the percentage of error-free orders for example. Should your customer state an easy check-in process is important, what internally impacts the check-in process? Remember to ask the customer what’s important and develop metrics accordingly.
Properly Establishing The Metric
Now, this is where the people part of your metric system begins. In the old days, I actually witnessed production workers timed via stopwatch to establish a performance standard for their particular production operation.
While this may seem a bit antiquated today, this method left no doubt as to the amount of time required for process completion. The production worker was allowed to provide insight as to why the production equipment was operated in a certain manner.
The production analyst was provided with the pros and cons of pushing the equipment to the limit versus operating the equipment for long-term output with less downtime for maintenance.
When developing measurement standards, it’s my opinion that the inclusion of the people who perform the job must be included in the process. Their “up close” perspective provides valuable insights that are crucial to properly establishing the metric. Getting their input goes a long way in preventing the “foe” label from being stamped on the metric system.
When workers can see that measurement standards are created from real-world scenarios, they are more inclined to “believe in the system” which results in a better experience for the external customer. It’s crucial to be able to communicate how the metrics were created. Be open to questions on methods utilized to determine the proper metric number.
It’s important to utilize metrics to determine how well your operation is performing. In order to make sure your metrics are considered as a “friend” by both customers and employees, Determine What To Measure and Properly Establish the Metric.