10 actions for operations performance.
Operations management for any business is critical for cost control and value contribution. Improving operational effectiveness is key for most CEO's to lift performance to levels of excellence and up the company game. If you seek considerable increases in profit and efficiency then lock down your effort to improve the companies operational metrics.
The business culture for a performance management business knows how to define and vision a winning scenario in each of its business areas from sales to procurement. Stretched targets and connection to the big picture at every staffing level helps establish the basis for improved results. The continual need and importance of communication through storytelling and celebrating success helps create the path for this journey of operational excellence.
Metrics vs KPI
The choices today for measuring almost every function is very attractive. I help many companies understand the difference between their metrics and KPI's. These elements are not the same. A KPI (Key Performance Indicator) is a high value business aligned measure to help the strategic goals of the company. Metrics are "all the others" of measurement areas that may or may not be offering true value in their measure, management and control.
Where possible I suggest making use of solid data gathering systems to automatically gather data for your metrics. Metrics should be low cost measures and independent of bias systems where possible.
Beware of the ICE
Managers are tempted to fall into what is commonly known as the ICE trap. This stands for I=Identify what is easy to measure C=Collect, measure and report everything that is easy to measure and E= End up confused about what to do with all this data.
Analytics in operations
For many companies analytics in operations is becoming more critical and influential within management decisions. The days of an experienced manager needing to rely on gut instinct, experience and scant facts is rapidly passing away.
A scan on the analytics market offers an array of solutions available and capable to absorb different sourced data sets, data visualization tools and templates offering basic and advanced standard analytics possibilities. This helps remove the personality bias from positions and arguments when dealing with challenges.
So far we have addressed the what and how of operations performance management. Now is the time to address some clear action areas.
10 Action Areas For Operations Performance Management
- Review the current mix of metrics used in operations management and decide on a key top 8 metrics to form your KPI's. - Which metrics relate to behaviors that effect the corporate vision at the highest value?
- Define the clear strategy for the business to lay the reference foundation stones of important measures. - Ask the CEO and board to review their corporate vision and share with them the steps you are taking.
- Operations management deals with the front line employee's. The process of selection for your top 8 metrics to become KPI's should come from these staff members where possible. - Share the corporate vision and mission and where needed offer your initial draft as a guide.
- Ensure adequate training of metrics and decision making skills and authority is structured within the operations team. - Do not hold back on quality training in this area. Poor training produces less value and may increase costs!
- Require target setting to come from the employee staff members themselves. - This often highlights higher ambitions and generates ownership of the future KPI's.
- Where possible agree on agreed monetary levels of performance. Nominal values are OK as estimates and guides but they need to be as realistic as possible. - The language of money resonates very well with most people at all levels so this is a clear method of communication.
- The frequency of measurement is important to reflect the data gathering rate, activity rate and reporting expectations from the leadership. Ensure statistical sampling is maintained and represented in graph or other data visualization tools. - Relevant frequency and accurate measuring is critical to provide the basis of correct decision making.
- Periodic review of performance and each element of the performance is important for continual improvement. Some external bench-marking information may be available. - Be clear and firm with review dates and do not allow them to slip. Trade associations are good sources of benchmark data.
- Do not shoot the messenger! The performance metrics and KPI's should be treated as challenges and celebration triggers, not quests for or against personality types. - Fear by employees and correct levels of authority for decision making improves employee engagement.
- Review the overall data, decision making process and amend your organization to be more accountable for its actions. - This should be from CEO level all the way through to each member.
The above steps cover some broad elements of more commonly known and applied models including the Plan Do Check Act and balance score card elements.
The 10 action areas require strong leadership and acknowledgement that some change management principles will need to be respected and considered. Keeping and open mind and addressing employee questions is important to retain support for the full implementation.
Why 8 KPI's ?
My list above suggests a maximum number of 8 operational KPI's. I have seen companies with none to too many to count. The performance management world agree that between 3-8 KPI's is enough to retain priority of behavior and actions to the long term strategy of the business. The increasing capabilities of analytics may offer more opportunity to include a higher number of specific metrics and shape the selection of the correct KPI's over time.
Special Note for Asia and India
Asian and Indian business cultures are changing and embracing many management styles from outside origins. My experience is that the process proposed in this article is a difficult change for successful implementation not at leadership level but at operational staffing level. The expectation of management is often different than those experienced in western nations. The opportunity remains across all regions and is simply a matter of communication, style, education and culture to ensure it's success.
- We are committed to make as many positive changes with as many companies as possible so feel free to share this article and provide me some feedback on your experiences after your actions are taken. You are welcome to contact JAMSO directly for a FREE 30 minute discussion where we can tailor this article more specific in implementation for your business.
Further Reading and Reference
- Responsibility and accountability
- Selecting the correct KPI
- Reports by exception
- The data in metrics with secret powers
- Project and change management Pinterest board
JAMSO creates value through goal setting and KPI management training and advise to companies wishing to improve their performance management.