Master your measures

Tools to make you THINK differently about your business

Have you ever thought about the measures that are most likely to keep leaders, directors and managers awake at night? Have you ever thought about how they know, or otherwise, whether or not their lot is improving?

In my experience the worries at the top of an organisation are usually things like, sales, profit, growth, customer satisfaction, overheads, debtors, cash in the bank and perhaps whether or not the organisation has the resource and capability to deliver on the plans in hand.

At a lower, but no less important, level performance indicators like sales conversion rates, productivity, capacity, yield, on time delivery, first time fix and numerous other operational metrics are used to assess and steer performance.

But how well do we really understand what we are doing when we “analyse” performance? How often do you see in the press, on the news, or in your own board and operational reports one number compared to another, a conclusion drawn and action taken? We were taught at school that you need a raft of data to compute a trend, yet the accountants are telling us that we only need three points of data – this month, last month and the same time last year?

It’s endemic. It’s also simple, obvious and WRONG.

Today’s senior managers don’t have time to analyse performance measurements properly and they certainly can’t do that properly in the tabular manner in which it is usually presented. Even the more enlightened graphical and dashboard presentation of data can steer you in the wrong direction if there is no proper understanding of data.

So, it’s high time we thought about how we think about how we manage performance and our performance measures, so my aim here is to provide you with a different (and to mind better, you will obviously have to decide for yourself) way of looking at performance that:

1) Provides a “movie view” (not a snapshot view) of data, which
2) Adds significant insight, and
3) Can transform the way in which leaders think and make decisions

Essentially, I’d like to challenge the way in which we look at performance measures in order to help us make better decisions with better data.

Given that the purpose of the company has been defined and is focused on the need to deliver value to customers and that the “book of best practice” codifies the methods for doing so, they now need to be connected to a robust set of measures that evaluates how well the company is delivering on its purpose and how well processes are performing. This is the performance measurement system; which should really start with what the customers want and think of the products and services provided.

Link performance measures to processes

Customers are usually interested in what happens at the beginning and the end of your processes; The customer may request a quote at the start of the process and receives a service or takes delivery of a product at the end. These are the parts of the business where you have direct contact with the customer, so the activities undertaken at these stages need to be measured and compared against the expectations.

The remainder of the performance measurement system is built around the internal flow of work through the organisation with the aim of reducing waste and increasing profitability.

All seems eminently sensible so far I hope, the bit where we need a very radical re-thinking of management thinking is how we interpret the data we have. As noted above the accountants would have us (usually) present data in tabluar form when we need to see the whole story. Below is what we call a Process Prediction Chart™ showing on a month by month basis the variation in margin for our example electronics company.

Control chart percentage margin

We’ll be investigating this and other charts in the next blog.

After which you will be able to:

• Predict the future performance of your processes
• Identify “signals” from “noise” in your performance measurement data
• Prove when “changes” you make to processes are in fact (statistically and scientifically verifiable) “improvements”


To find out how Statius can help you deliver:

• Better strategies
• Better systems
• Better measurement and
• Engaged people delivering
• Better results

Call us now on 0208 460 3345 or email sales@statius.co.uk

 

 

 

 

 

 

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