Metrics: Do You Measure Up?

Ah, the fourth quarter! Warehouses are burgeoning with merchandise, temporary employees are staffing the store registers at every store imaginable, catalogs are filling up our mailboxes, and an armada of containers are afloat in the China Sea filled with gifts for every good little boy and girl (sans lead-based paint, of course).

Meanwhile, every chief financial officer, manager, buyer, forecaster, and marketing guru clamors over this information, hoping to transform it into good numbers. What do these numbers mean, and more important, what do they do with them?

We have all heard the old saying, “…data rich and information poor.” Most companies collect and warehouse copious amounts of data, including inventory levels, time-in-transit, fill rates, margin, and the list goes on. These data, however, evoke little change for most companies, as the amount of data collected tends to be overwhelming and clouds the real issues that impede success.

To use our data wisely, companies need to become metric-centric organizations. A metric-centric organization is one that has a comprehensive yet concise plan to capture, classify, and communicate important data elements, and more important, act upon it. There are five common “Cs” shared by metric-centric organizations.

Critical data
Every organization should have a hit list of items that are critical to its success that should be incorporated into its strategic plans. The list should be succinct, meaning no more than five or six key topics; These issues should have metrics that are easy to measure, and contain firm, but achievable goals. This same concept applies at the department level of the company. The metrics for a department should be limited to its interest, e.g. marketing, transportation, distribution, etc., but should be aligned with the strategic plans of the organization.

Metrics that are not deemed critical should be scrutinized. A few valid questions that should be asked include: Why do we measure this? Who reviews the metric? Who owns this metric? And most important, how does this evoke change?

Classify the metrics
Metrics should be classified into two categories: key performance indicators (KPIs) and tactical metrics (TMs). KPIs are long-term in nature and should be closely related to the organization’s strategic plans. Since KPIs are typically historic in nature, they are slow to evoke change, and their target audience is usually upper management. A few examples of KPIs include inventory turns, annual sales, and market share.

Conversely, tactical metrics are more succinct in nature, provide immediate feedback, generate more frequent change, and have a target audience of individuals, small groups, and line-management. Examples of a few good TMs include employee productivity levels, department accuracy, and throughput of a given shipping machine.

Clean data
If your data stinks, so will you. All too often managers and analysts will make decisions based on the data at hand to later find out that the data was inaccurate or tainted. When it comes to data and metrics, be mindful of that great concept bestowed on us by former President Ronald Reagan. “…trust, but verify.” Every organization should have an anointed “data czar” who is responsible for the accuracy of the data stored in its business intelligence tools, reports, etc.

Communication is the thing we do most often, but execute most poorly. Every company captures metric after metric, but fails to convey this information to those that matter — typically the employee. For example, we provide performance feedback to our employees usually once a year; and that is during a brief, hour-long review. How much more effective would employees be if they received feedback, both positive and constructive, on a daily or weekly basis? Would it not help drive change in the employee’s behavior?

Change behavior
The power of a TM is to provide pinpoint feedback to those affected and garner change. Those affected should know the goal, and understand how the metric is measured or calculated, and the rewards and consequences if the goal is not achieved.

TMs can even be used to reinforce positive performance. For example, if your metrics indicate that an employee was extremely productive yesterday; use it to thank and recognize the employee’s effort, and ask them how they achieve such success. Perhaps their tips can be shared with others!

Feedback for TMs should not be limited to employees. Carriers, vendors, and other business partners should know the metrics you use and should receive frequent feedback.

Once your metrics indicate that a goal is being consistently achieved, it should be evaluated to determine if the bar should be raised to increase further improvement. So here is the challenge for you. Review your metrics for this fourth quarter, determine what is critical, check for data hygiene, communicate the metrics as often as possible, and see if you can drive change through your organization.

Randall Brough is supply chain manager for Nashville, TN-based LifeWay Christian Resources, which sells Biblical books and videos through print catalogs, online, and in more than 130 stores nationwide.