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The Magic of Metrics

I believe it was Peter Drucker who first said, “What gets measured gets done”. No truer words have ever been spoken. In my 40 plus years in business, I have seen this maxim in action many times.

My first and perhaps most memorable recollection of the power of measurement came in my early days in management consulting. We were working with the leadership team of a frozen food division of a major US food company, trying to improve quality and reduce costs. One of the more cumbersome and odd processes in the main plant was the practice of measuring the temperature in the blast freezers every 60 seconds, and recording the measurement on huge green-and-white striped printout paper (this was the 1980’s after all).

Every shift, reams of these printouts would be gathered up, looked at, and sent upstairs to the division CEO’s office. There were stacks of them every day in his outer office and in the hallways. Being the astute young MBA, I quickly realized that this was essentially a waste of time, and that simpler ways could be found to monitor the freezing processes.

In a subsequent meeting with the CEO, I asked, “Do you really need all this stuff every day? I mean, you don’t actually read all this, do you?”

“No, I don’t really read it very closely” was his reply. “But everybody here thinks I do”.

It turns out that the single most important factor in making good quality frozen food (in this case, frozen breaded fish) was maintaining the temperature of the blast freezers in a very narrow range. Too warm, and the patties get mushy when heated up. Too cold and they come out stiff and cardboard tasting. So the CEO – and everyone else – knew the critical importance of this one measure, and they tracked it religiously. And while we were able to suggest some less laborious ways to monitor the temperature, we made sure we did not do anything to lessen its importance and stature throughout the organization.

Over the years, I have seen many more examples of laser focus on critical measures at many successful companies. The DuPont Company, for example, was legendary in its focus on safety metrics, with incident reports going directly to the CEO who routinely read them and called people to discuss corrective actions. For a company that manufactures and transports a variety of volatile products in large volumes, this was a matter of survival.

I have seen other examples – a CEO who received daily product sales reports, CFO’s tracking daily cash balances, a hospital head who tracked errors in the emergency unit, law firms tracking weekly billable hours, a marketing head monitoring daily inventory levels, and others. The key to successful use of metrics has always been the same – pick a few that are really and truly critical and monitor them fanatically.

But more often than not, companies tend to misuse or over use metrics in ways that can be counterproductive or even destructive. There was a time when “Balanced Scorecards” and “Dashboards” were all the rage in the business world, but they seem to have faded in popularity lately. More on this in the next installment.

© QuakerSmith Capital, LLC September 2016 All rights reserved

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