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Following the Numbers: Making the Most Out of KPIs

There is much value in creating a culture that relies on KPIs/metrics to measure organizational productivity and accomplishments. However, doing so is potentially fraught with danger, as we've seen through the various experiences shared above.

There is much value in creating a culture that relies on KPIs/metrics to measure organizational productivity and accomplishments. However, doing so is potentially fraught with danger, as we’ve seen through the various experiences shared above.

With so much already written about the basics of metrics creation and implementation, this article will instead take a different approach. Using real life experiences as the catalyst, I will share some best practices that I believe are fundamentally critical to achieving success in the world of metrics.

Be True to the Numbers

My client, an aerospace and defense manufacturer, has determined that keeping track of on-time delivery is an essential KPI for their company. Every day the staff gathers to review open orders, to identify what can ship that day and what orders are likely to miss the promised shipping date.

As the group is reviewing orders one day, it is clear that a particular order will not ship on the promised date. From a metrics perspective, it is either all or nothing. Meet the date, receive a 100% grade. Miss the date and it is a zero. Nothing in between. So imagine my astonishment when I heard the “relief” question -- the manager asking the rep, “Can we call the customer and ask for some relief?”

If the customer is asked to extend the shipment date . . . “relief” . . . and agrees, and now the manager is able to meet the revised, extended ship date, does that now constitute an on-time shipment?

Not in my book. If the customer had proactively called and extended the time frame, then yes, it is timely. But this manipulation . . . there really is no other way to describe what was happening . . . is just not acceptable. Who is being fooled here? Senior management, for sure. When they get their reports, the on-time numbers will be artificially higher than reality. How can they properly manage with inaccurate data?

I cannot stress this enough. Live with reality. Do not fudge numbers to meet expectations. Doing so hurts everyone involved.

Key Best Practices

There is much value in creating a culture that relies on KPIs/metrics to measure organizational productivity and accomplishments. However, doing so is potentially fraught with danger, as we’ve seen through the various experiences shared above.

For best practices, implement KPIs/metrics that are . . .

  • Designed with forethought,
  • Defined accurately and clearly,
  • Aligned with corporate goals and objectives,
  • Quantifiable, measurable, achievable, and
  • Evaluated consistently and modified where necessary.

These key best practices will ensure that you and your organization will have a productive and successful KPI program.

Lee Schwartz, former CEO and president of manufacturing and distribution companies, is principal of the Schwartz Profitability Group (SPG) that, for almost 13 years, has uncorked the operational bottlenecks of manufacturing and distribution companies, boosting their bottom line results. Lee’s clients range from smaller family-run companies to Fortune 500 firms across a multitude of industries. His consulting and operational turnaround work helps clients find solutions related to process improvement, supply chain management, inventory control, workflow design, and operational performance. Lee can be reached at [email protected] or at 310-450-2628. More info can be found at www.schwartzpro.com or his LinkedIn profile.

More about KPI Best Practices on IndustryWeek.

IndustryWeek is an NED companion site with Penton’s Manufacturing and Supply Chain Group.

 

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