| Carpenters have a rule of thumb: Measure twice; | | | | improvement projects in a year. None succeeded. |
| cut once. | | | | At that point, focus shifted to just four high |
| Careful carpenters take that one step further and | | | | payoff programs, none of which was on the |
| measure three times before cutting. | | | | original list of 100 projects. These programs all |
| However, either approach can be inadequate if | | | | succeeded due to focused attention, and the |
| the carpenter chooses to measure from the | | | | company was soon earning high profits. |
| wrong plan. You can't make an eight foot door | | | | Pick Improvements That Help Everything Else |
| from a plan for a seven foot door. | | | | What do you do when nothing works well? |
| In this essay, you'll find out ways to pick the right | | | | Identify how performance in one area affects |
| measurements, ones that will speed you toward | | | | performance in all other areas. |
| accomplishing 20 times as much with the same | | | | Another leading retailer with severe problems |
| time, effort and resources (a breakthrough | | | | learned this lesson by testing a number of |
| solution). | | | | improvement ideas to see how many other |
| All the necessary steps are listed here for | | | | performance areas were helped. What was |
| accomplishing 20 times more: | | | | learned? |
| 1. Understand the importance of measuring | | | | Allowing employees to spend more time serving |
| performance. | | | | customers made both employees and customers |
| 2. Decide what to measure. | | | | much happier. Sales and profits rose as a result. |
| 3. Identify the future best practice and measure | | | | This approach was counter to the retailer's |
| it. | | | | previous instinct to slash employees every time |
| 4. Implement beyond the future best practice. | | | | that profit targets were missed. |
| 5. Identify the ideal best practice. | | | | Measure at the Right Level with the Right |
| 6. Pursue the ideal best practice. | | | | Measure |
| 7. Select the right people and provide the right | | | | Large organizations often confuse themselves by |
| motivation. | | | | over averaging what they measure. For example, |
| 8. Repeat the first seven steps. | | | | tracking the average temperature on a given day |
| First, you have to create an environment where | | | | around the world won't tell a retailer what kind of |
| the value of measurements is appreciated. Your | | | | apparel to offer in a given store. Start looking at |
| next step is to gain the most benefit from | | | | the temperature trends by store, and you may |
| measurements. | | | | begin to improve your stocking. |
| Begin by focusing on a particularly important | | | | STALLBUSTERS |
| process within your organization where you | | | | Identify Your Most Important Processes |
| expect to find a large improvement opportunity. | | | | Ask these questions to begin your search for |
| Then you should determine what measurements | | | | your most important processes: |
| about this process will help you make the fastest | | | | -How long could your organization survive without |
| progress. | | | | each process? |
| If you are a laggard in developing successful new | | | | -How long could your organization prosper if each |
| products in an industry where that skill is critical, | | | | process were done poorly? |
| the new product development process would be | | | | -How long will your organization last if it performs |
| a fine place to start. | | | | each process less well than competitors? |
| Using the experience that you gain in looking at | | | | Having developed a sense of what your most |
| the first process, you can go on to extend this | | | | critical processes are, ask these questions: |
| approach to other important processes and | | | | -If you did the process as well as you can imagine |
| opportunities. | | | | it, what would be the size of the benefit |
| Pick Your Organization's Low-Hanging Ripe Fruit | | | | compared to how well you are doing today? |
| Organizations that make exponential | | | | -If you did the process as well as you can imagine |
| improvements are much more focused than | | | | it, what other opportunities would open up? |
| competitors on this kind of gain. The natural | | | | -What would developing those opportunities be |
| tendency is, by comparison, to measure | | | | worth? |
| processes where progress delivers emotional | | | | Potentially Important Processes to Measure |
| satisfaction to employees . . . whether or not | | | | -Developing new products and services that |
| improving those processes will be very beneficial | | | | provide customers with major benefits over |
| to the organization's success. | | | | competitors' offerings |
| Fight that tendency where the potential benefits | | | | -Marketing for attracting and retaining customers |
| are modest. | | | | with whom you have a profit margin advantage |
| Change Is a Moving Target | | | | over competitors |
| As circumstances change, what you need to | | | | -Shifting your mix of customers, products, and |
| measure changes too. For example, at one time | | | | services to improve your costs versus |
| U.S. auto quality was so poor that drivers primarily | | | | competitors |
| sought cars that wouldn't break down. Many U.S. | | | | -Identifying and implementing your most important |
| consumers bought Japanese vehicles. | | | | cost-reduction opportunities |
| But when American quality improved, customers | | | | -Finding and realizing your organization's largest |
| started seeking brands that offered the best | | | | opportunity areas |
| dealer service. That was a short-lived trend, | | | | -Reducing cost of capital in ways other than by |
| however, as better new-car quality reduced the | | | | borrowing more money and refinancing at lower |
| need for dealer service. | | | | interest costs |
| Styling again became important. Lexus lost ground | | | | -Adjusting compensation and recognition activities |
| because it did not look much different than much | | | | to reinforce helpful employee behavior |
| less expensive Japanese offerings. | | | | -Obtaining win-win ideas for mutual benefit from |
| Next, American drivers went for minivans and | | | | suppliers, partners, and the communities you |
| sport utility vehicles. At first, Japanese companies | | | | serve |
| did not respond because such vehicles were not in | | | | -For public companies, monitoring of institutional |
| demand in Japan. | | | | investor decisions to purchase your competitors' |
| As you can see from this example, you will fail if | | | | shares and debt rather than yours |
| you keep measuring and focusing on the same | | | | Find the Critical Factors for Your Most Important |
| thing. As each shortcoming is eliminated, customer | | | | Process |
| cravings will shift to something else. | | | | Once you have selected an important process to |
| The able executive will continually switch what is | | | | focus on, narrow your attention further to reveal |
| measured, how much emphasis is placed on that | | | | the most important parts of the process. The |
| measure, and what actions are taken to reflect | | | | following questions will help you: |
| the current and potential customer and | | | | -Who can help you determine the critical factors in |
| stakeholder environments. | | | | the process you are investigating? |
| Find the Suggestion-Box Winners | | | | -How can you measure what may cause or |
| A large consumer products company found that it | | | | influence the process's important aspects? |
| lagged all of its competitors in measures of | | | | -What's the best way to check your conclusions |
| financial performance. Stung by this information | | | | about the critical factors of important processes |
| into wanting to change, management encouraged | | | | by using statistical analyses? |
| employees to suggest improvements. Tens of | | | | Start by Measuring Everything You Can Think of |
| thousands of suggestions were received. | | | | (That Seems Worth the Cost) Concerning the |
| Rather than treat all these ideas equally, | | | | Process's Output and Its Influences -- and Then |
| management established a review team that | | | | Narrow Your Focus |
| included executives from every functional area. | | | | This is a good time to identify which measures |
| The reviewers looked for ideas that offered | | | | are most available for comparisons outside of |
| enormous immediate and long-term benefits that | | | | your organization. Be sure to check all your data |
| were easy to implement right away. | | | | to see how well they help you understand your |
| Another team of fifteen executives was assigned | | | | performance. Once you've done that, begin |
| to see that these top options got enough | | | | eliminating some measurements while paying |
| implementation attention. One percent of the | | | | more attention to others. To make this shift, |
| ideas provided 95 percent of the cumulative | | | | work with data until you can statistically identify |
| improvement. | | | | causes and effects. |
| As a result of this effort, three years later the | | | | In deciding how much to spend to measure and |
| organization was the number one performer in its | | | | analyze, keep in mind the size of the potential |
| industry by any financial measurement. | | | | benefits. Some expensive measures are well |
| Choosing to pursue those highest potential ideas | | | | worth the cost. One firm found that a single |
| aggressively was a good idea. You should do the | | | | measure (which cost more than all of the other |
| same. | | | | measures combined) provided almost all of the |
| Less Is Usually More | | | | insights into improving an essential process. Had |
| A lack of focus may mean that no gains occur. A | | | | the company stopped looking because of |
| major retailing company learned this lesson in the | | | | expense, the firm's sales would be less than half |
| late 1970s. Panicked by sales drooping below | | | | and profits below a quarter of the current level. |
| breakeven, management looked to implement 100 | | | | |