I’ve worked with many businesses that live by measurement and KPIs, yet their performance is still below par, and in fact, actually quite a lot worse than what they actually believe it to be! More often than not, companies find themselves measuring EPIs as in Every Performance Indicator they can get their hands on!
As the saying goes, there is always more than one way to skin a cat, however, what is the best way, so that when you do it, you do it effectively, so you get standard and repeatable results that are easy to measure. And when things aren’t going according to plan you know how to react as soon as it happens, that is in real time, so as to correct the error. That is you don’t wait till the end of the process, or even worse, wait till the Customer comes back to you to tell you that your product and customer service sucks!! This is what Effective KPIs will do for your business!
The height of a failure is when something slips through the system so much that a customer tells you your problems
Is that something you want for your business?
Is that happening you now?
In your business, do you receive customer complaints? or even worse you don’t and all of a sudden you don’t have a customer anymore and you are left wondering why!!
This is a common problem for businesses.
You lose a big client and the Management Team are all clueless as to why this happened. No one takes accountability and guess what? When no one does, your business is destined to repeat the same mistakes over and over!
Picture yourself walking on the top floor of your house, you are getting close to the top of the stairs, you have clothes in your hands. Just as you get to the top of the stairs, you trip over a shoe that you can’t see as your hands are full. You fall down the stairs and end up breaking an ankle.
Not a pretty picture is it!
And would you like it to happen again? I think not!
So how can you make sure you don’t fall and break your ankle again? You use FEEBACK! Why because the pain of not using feedback will be greater than the pain of using it and you can be damn sure you are not going to make that same mistake again.
So lets break it down
– Firstly, anytime you are at the top of the stairs, you are going to make sure there are no lose shoes, or anything else for that matter, lying about
– Secondly, anytime you have your hands full you are going to make sure there are no obstacles anywhere and not just at the top of the stairs
– Thirdly, as a preventative measure, you may even get into the habit of ensuring you have a place for everything and everything in its place so nothing is ever lying around
In a nutshell, you are taking accountability for your mistake and doing what it takes so you don’t experience the pain of breaking your ankle again, unless you are one of those strange people who like to break ankles over and over. A number of years ago, playing 5 A-Side football, which I had played for many years, I was running for a ball at full pace. I am very competitive by nature, and playing football is no different. I was chasing the ball against one of the opposition, I was winning. I got to the ball first, however instead of blocking it with my foot and after being shouldered by my opponent (perfectly fair), I slightly misjudged my foot position. So instead of blocking the ball, my foot landed on top of the ball and with the momentum I had, my foot slipped sideways and I fell to the ground. When I looked at my foot, it was facing 180 degrees the other way. It was not a pretty site. Funny enough that didn’t hurt, what hurt was me having to twist it back into place. Vocal chords were stretched to the limits I screamed so loud and that was only the beginning as I had a long journey ahead of me. It took 2 operations and 1 full year for it to heal properly and the bones (excuse the pun) of 6 months being horizontal without being able to do much, including drive. Do you think I went back playing football? Not a chance. I have worked for myself for a very long time and when you are not making money, the business is not making money. So for many different reasons, football was a past memory, which was tough as I loved it and still do.
So why have I told you that? When you experience pain, don’t you want to do everything in your power to avoid that pain again?
It should be the same in business, when you experience pain, don’t you want to make sure that you avoid it in the future? That when you lose a customer, you make damn sure you don’t lose another one? Whatever mistakes your business have made that you take accountability for it, you learn from it and you put processes in place to ensure that the same mistake doesn’t happen again.
Wouldn’t it be even better to ensure that you don’t make those mistakes in the first place?
That you have preventative and detective measures in place so that mistakes don’t happen?
And if for some crazy reason, an anomaly causes a problem, you have a system that can detect at the earliest point possible before the problem snowballs all the way through your process and even on to your customer, which can lead to unrepairable damage!
As you read at the beginning of this of this post
What gets measured gets improved. However what happens if you are measuring the wrong thing? Not only is it not adding any value to your process, you are also tying up resources that could be utilised elsewhere in your business. See measure’s drive behaviours, when you see how bad something is, it’s a natural instinct to make it better. So even when you are measuring the wrong KPI’s, the natural thing is to improve those KPI’s.
Wrong Measurements Drive the Wrong Behaviours!
I worked with a business a number of years ago that fell into this trap. They were working 12 hour shifts and were working from hourly targets. So their KPI was based on hourly performance, as in did they reach their target. Which is fine, there is nothing wrong with that. However, to incentivise their team, once they reached their daily target, they could go home or get a bonus for producing more. As a team they would decide that on a daily basis, should the opportunity present itself.
By analysing the numbers, I began to build up a pattern of what was actually happening. While they had hourly targets, the morning profile would always be slow, it would speed up towards lunch, then after lunch slow again, however towards the latter end of the shift, the yield performance would sky rocket! What you see in the chart is an average performance based over figures taking for a week of performance.
What do you think could be some of the problems with that type of performance?
1. Poor Quality product through inconsistent production
2. Poor Team Work
3. Focus on Yield as number 1 metric at the expense of quality
4. The process was made greedy by giving time and financial bonuses for just achieving what they were supposed to achieve
5. Poor quality was accepted in the process
In fact, the quality of the product was very poor in terms of output. For the line to make 165 over the course of the shift, on average they had to make just over 200 to get 165 good ones, which means they had to make nearly 30 more wasteful products! Can you see what I am getting at?
BECAUSE YIELD WAS THE FOCUS, IT WAS AT THE EXPENSE OF QUALITY, THEREFORE THEY HAD A METRIC THAT WAS DRIVING THE WRONG TYPE OF BEHAVIOR
It’s a common problem when businesses put yield before quality. On the outside you can understand why.
– They want to meet customer demands
– They want to be more efficient
– They want to push their team as hard as possible and reward them accordingly
– People think, if they focus on quality, their process will be too slow and not achieve all the above
However, in reality, all the above is counterintuitive!
Believe it or not, by SHIFTING the focus to Quality, you can very quickly alleviate all the problems of the process.
Simply put, when you have a target of 165 products per / shift and you only have to make 165 to achieve 165 of the right quality.
– Straight away you save yourself the time and cost of making an extra 30
– You didn’t use up the same amount of resources or components, therefore have lower inventory
– You didn’t have to rework or scrap anything
– Customer delivery will improve, therefore payment is more efficient
– Better profits
So as you can see, there are multiple benefits through focusing on Quality before Yield and why you should not only have active metrics, also HAVE THE RIGHT TYPE OF METRICS!
With the right type of metrics: –
– Directors can know where attention is required at the right time
– And know when things are going well or not so well
– To highlight what areas need improvement
– That show trends in performance over time that so teams can be proactive in problem solving
– To measure the effectiveness of improvement processes over time
– Did improvement projects achieve what they were supposed to?
– To align all activities with business and team objectives and success criteria
To ensure at all times, everyone is focusing on the RIGHT ACTIVITIES for the business
Well what I will say, it’s not rocket science, however it’s a journey. It’s not something you will get right at the beginning. Getting it right is not the point, getting it started is and through continuous assessment you can tweak and improve or discard the KPI’s that you need or don’t need, so that overtime your business will have a set of completely tailored KPI’s that are perfect for YOUR business not anyone else’s!
KPI’s are enables for continuous assessment of your business performance against business performance requirements. Every KPI should be directly related to that.
If you are measuring things
– For the sake of measuring things
– You find your KPIs are not telling you what you need to know, or anything for that matter
– Or they are to cover someone else’s a$$
You are wasting your energy, time and resources so DON’T BOTHER!