For organizations to prosper measuring business activity has become a fundamental task – measuring and monitoring that not only financial targets are met but operational policies and objectives are flowed down and adhered to.
Indeed many businesses are flooded with metrics – these can range from cycle time, inventory levels, quality, costs, delivery adherence, lead times, defects per batch, cash flow, performance against budget. It could be argued that no company should be without something to measure. However a word of warning – Businesses consume valuable resources in the development and implementation of business metrics and as such need to ensure that they are drawing value from their production.
Measures can provide guidance and targets to operational managers who are trying to drill into their business issues and as such it could be argued that measures should be distilled into those that are most important. There are a variety of models which can be utilized in the development of business metrics as described by Feld in the book “Lean Manufacturing” namely
1/ Du Pont Model
2/ Output based measures
3/ Process driven measures
To simplify things businesses should also consider applying the QCD (Quality – Cost – Delivery) ethos in metric development and focusing on a smaller number but more appropriate list of measures.
The real key in developing metrics is to bring about an understanding by the workforce of the cause and effect of day to day activity and the results shown by the metric. Through involving the workforce in the production of the measures there is a higher likelihood that results will be owned and the understanding of cause and effect will be driven home.