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You Get What You Measure!

As a business person you need to have goal clarity.  One of my B2B CFO® partners, Rick Daigle wrote a great blog on the importance of goal clarity that I strongly recommend (Osprey parenting).  In his blog, Rick points out that the male Osprey knows that he has to catch six fish every day to support his mate and hatchlings.

In business, too often, the CEO may not know what information is really important and key for their business to succeed.  As a result, they may jump from one really exciting piece of information to another without consistently looking at the data that really matters.  Fortunately, after going through this struggle they may find that as long as this activity is happening, everything is going well.   Once this becomes important to the owner, president or CEO it is easy to get other members of the company to pay attention to the same data. 

One of the most telling experiences I ever encountered occurred when I was leading an MRP II implementation (today we would call it an ERP implementation).  For MRP to be successfully implemented, you need 98% bill of material accuracy, at least 95% routing accuracy and at least 95% inventory on hand accuracy.  When we started the project, our accuracy was abysmal, hovering around 35%.  We had a long way to go.  We made changes in our processes, felt that we had the accuracy necessary in routing and the bill of material, and should see a dramatic improvement.  We took a full inventory and our accuracy had improved but was still only around 70%.  We continued to count but had no improvement in our accuracy.  We needed to do something different.

First, we chose one afternoon and almost all members just under the “C” level of the company went into our stockroom and started counting.  I imagine it was embarrassing for the folks who ran our stockroom to see us out there on their turf.  We set a date to repeat the action in a week.  When we returned seven days later, the stockroom had already counted the parts and made it pretty clear we would not need to repeat the effort in the future.

The second thing we did was to begin graphing our results and posting the results in the cafeteria.   Each week, we would update the information and management paid attention to the graphs.  It did not take long before the pride of the individuals in the stockroom took over.  They wanted to succeed.  They offered a number of suggestions to help improve our processes and they became determined that they would achieve the goal of 95% inventory accuracy.  Almost immediately, the numbers started to improve; within 30 days we saw 95% accuracy for the first time and the numbers stayed there.  The real key was making the goal visible. 

Some years later, I was working for a company in the automotive industry that was attempting to implement QS-9000.  Like ISO, QS-9000 requires that a company set goals and then measure the ability to meet those goals.  This requirement forces companies that want certification to set goals that can be measured.   But another truism becomes obvious when you follow this requirement: if you want a specific outcome, measure it, graph it, and change it.

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