Carpenters have a rule of thumb: Measure twice; cut once.
However, that rule can be inadequate if the carpenter
chooses the wrong thing to measure. For instance, measure
from the wrong end of the board and you'll still make a
mistake.
In this essay, you'll find out ways to pick the right
measurements, ones that will speed you toward accomplishing
20 times as much with the same time, effort and resources
(a 2,000 percent solution).
All the necessary steps are listed here for doing 20 times
more:
1. Understand the importance of measuring performance.
2. Decide what to measure.
3. Identify the future best practice and measure it.
4. Implement beyond the future best practice.
5. Identify the ideal best practice.
6. Pursue the ideal best practice.
7. Select the right people and provide the right motivation.
8. Repeat the first seven steps.
After creating an environment where the value of
measurements is appreciated, your next step is to gain the
most benefit from measurements. Begin by focusing on a
particularly important process within your organization
where you expect to find a large improvement opportunity.
Then you should determine what measurements about this
process will help you make the fastest progress. If you are
a laggard in developing successful new products in an
industry where that skill is critical, the new product
development process would be a fine place to start. Using
the experience that you gain in looking at the first
process, you can go on to extend this approach to other
important processes and opportunities.
Pick Your Organization's Low-Hanging Ripe Fruit
Organizations that make exponential improvements are much
more focused than competitors on this kind of gain. The
natural tendency is, by comparison, to measure processes
where progress delivers emotional satisfaction to employees
… whether or not improving those processes will be very
beneficial to the organization's success. Fight that
tendency where the potential benefits are modest.
Change Is a Moving Target
As circumstances change, what you need to measure changes
too. For example, at one time U.S. auto quality was so poor
that drivers primarily sought cars that wouldn't break
down. Many U.S. consumers bought Japanese vehicles. But
when American quality improved, customers started seeking
brands that offered the best dealer service. That was a
short-lived trend, however, as better new-car quality
reduced the need for dealer service.
Styling again became important. Lexus lost ground because
it did not look much different than much less expensive
Japanese offerings. Next, American drivers went for
minivans and sport utility vehicles. At first, Japanese
companies did not respond because such vehicles were not in
demand in Japan.
As you can see from this example, you will fail if you keep
measuring and focusing on the same thing. As each
shortcoming is eliminated, customer cravings will shift to
something else. The able executive will continually switch
what is measured, how much emphasis is placed on that
measure, and what actions are taken to reflect the current
and potential customer and stakeholder environments.
Find the Suggestion-Box Winners
A large consumer products company found that it lagged all
of its competitors in measures of financial performance.
Stung by this information into wanting to change,
management encouraged employees to suggest improvements.
Tens of thousands of suggestions were received.
Rather than treat all these ideas equally, management
established a review team that included executives from
every functional area. The reviewers looked for ideas that
offered enormous immediate and long-term benefits that were
easy to implement right away.
Another team of fifteen executives was assigned to see that
these top options got enough implementation attention. One
percent of the ideas provided 95 percent of the cumulative
improvement. As a result of this effort, three years later
the organization was the number one performer in its
industry by any financial measurement.
Choosing to pursue those highest potential ideas
aggressively was a good idea. You should do the same.
Less Is Usually More
A lack of focus may mean that no gains occur. A major
retailing company learned this lesson in the late 1970s.
Panicked by sales drooping below breakeven, management
looked to implement 100 improvement projects in a year.
None succeeded. At that point, focus shifted to just four
high payoff programs, none of which was on the original
list of 100 projects. These programs all succeeded due to
focused attention, and the company was soon earning high
profits.
Pick Improvements That Help Everything Else
What do you do when nothing works well? Identify how
performance in one area affects performance in all other
areas. Another leading retailer with severe problems
learned this lesson by testing a number of improvement
ideas to see how many other performance areas were helped.
What was learned? Allowing employees to spend more time
serving customers made both employees and customers much
happier. Sales and profits rose as a result. This approach
was counter to the retailer's previous instinct to slash
employees every time that profit targets were missed.
Measure at the Right Level with the Right Measure
Large organizations often confuse themselves by
overaveraging what they measure. For example, tracking the
average temperature on a given day around the world won't
tell a retailer what kind of apparel to offer in a given
store. Start looking at the temperature trends by store,
and you may begin to improve your stocking.
STALLBUSTERS
Identify Your Most Important Processes
Ask these questions to begin your search for your most
important processes:
• How long could your organization survive without each
process?
• How long could your organization prosper if each process
were done poorly?
• How long will your organization last if it performs each
process less well than competitors?
Having developed a sense of what your most critical
processes are, ask these questions:
• If you did the process as well as you can imagine it,
what would be the size of the benefit compared to how well
you are doing today?
• If you did the process as well as you can imagine it,
what other opportunities would open up?
• What would developing those opportunities be worth?
Potentially Important Processes to Measure
• Developing new products and services that provide
customers with major benefits over competitors'
offerings
• Marketing for attracting and retaining customers with
whom you have a profit margin advantage over competitors
• Shifting your mix of customers, products, and services to
improve your costs versus competitors
• Identifying and implementing your most important
cost-reduction opportunities
• Finding and realizing your organization's largest
opportunity areas
• Reducing cost of capital in ways other than by borrowing
more money and refinancing at lower interest costs
• Adjusting compensation and recognition activities to
reinforce helpful employee behavior
• Obtaining win-win ideas for mutual benefit from
suppliers, partners, and the communities you serve
• For public companies, monitoring of institutional
investor decisions to purchase your competitors' shares and
debt rather than yours
Find the Critical Factors for Your Most Important Process
Once you have selected an important process to focus on,
narrow your attention further to reveal the most important
parts of the process. The following questions will help you:
• Who can help you determine the critical factors in the
process you are investigating?
• How can you measure what may cause or influence the
process's important aspects?
• What's the best way to check your conclusions about the
critical factors of important processes by using
statistical analyses?
Start by Measuring Everything You Can Think of (That Seems
Worth the Cost) Concerning the Process's Output and Its
Influences - and Then Narrow Your Focus
This is a good time to identify which measures are most
available for comparisons outside of your organization. Be
sure to check all your data to see how well they help you
understand your performance. Once you've done that, begin
eliminating some measurements while paying more attention
to others. To make this shift, work with data until you can
statistically identify causes and effects.
In deciding how much to spend to measure and analyze, keep
in mind the size of the potential benefits. Some expensive
measures are well worth the cost. One firm found that a
single measure (which cost more than all of the other
measures combined) provided almost all of the insights into
improving an essential process. Had the company stopped
looking because of expense, the firm's sales would be less
than half and profits below a quarter of the current level.
Copyright 2007 Donald W. Mitchell, All Rights Reserved
----------------------------------------------------
Donald Mitchell is chairman of Mitchell and Company, a
strategy and financial consulting firm in Weston, MA. He is
coauthor of six books including The 2,000 Percent Squared
Solution, The 2,000 Percent Solution, and The 2,000 Percent
Solution Workbook. You can find free tips for accomplishing
20 times more by registering at:
=========> http://www.2000percentsolution.com .
