Metrics That Drive World Class Performance
As shown in the Bates article summary, many departments and functions are working on improving their ability to measure their direct contribution to company performance. In our work with clients we emphasize this very effort: cascading organization goals to the departmental (and eventually individual) level; linking the goals to specific measures; setting standards for work to hold and improve those measures and then monitoring for deviation from those standards.
As indicated by Bates, a normal place to start the search for metrics is the financial statements. We agree, but only to a point. Measures that emphasize flow and waste are often more productive and more actionable too. This is particularly true for "service" departments or functions within a business. Take HR for example, or the maintenance function in a manufacturing organization. Financial improvement for these folks tends to drive in one direction: reduction in headcount. While improved productivity in HR or maintenance is clearly a laudable goal, a simple focus on headcount and costs will lead to a diminished functionality and at some point, a reduced ability of the organization to function properly at the operational level. What is needed is a counterbalancing metric so that the cost for unit improvement can be optimized. In the case of HR, a simple flow metric might be time to hire, or training throughput. In the case of Maintenance, a waste-reduction metric might be operational uptime for the production department and a flow metric might be time to return production to full speed after breakdowns. Because money is lost and made in operations, this linkage provides a better business rationale than HR cost or maintenance cost alone.
Bates' article would not be insightful or necessary if non-financial measures were easy to develop, implement and improve. But the fact is that companies find it much easier to manage direct, functional measures than the cross-functional metrics described above. Don't underestimate the amount of groundbreaking political work that will be required for you to negotiate the metrics maze yourself. This is a case where only a clear vision of your cheese will produce the amazing results you deserve.
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