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Metrics Gone Wild

One of my early consulting assignments was on a project at a major US retail bank that was instituting a companywide productivity and quality improvement program. Managers at every level in every department were instructed to define and track a handful of key metrics around quality, cost, and productivity. I was assigned to one manager in the check processing department who supervised a team of 24 people across 2 shifts whose job was to manually enter data from checks that the automatic machines could not read.

The manager welcomed my help and gave me a tour of the operation. He then showed me the charts and graphs that adorned the walls around the open floor where the workers sat at stations typing in data from crinkled checks.

“I am really struggling here”, he confided in me. “I have to report the numbers to my boss every week, and every week it is the same problem.”

I looked at the charts, and they did show some improvement (small to be sure) over the last several months. “So the boss wants faster improvement?” I asked.

“Yes!” was the reply. “And I can’t seem to make much progress. Half my people are below average every week!”

Judicious use of metrics in business can indeed be “magic” (see blog post #4). But, as with most good things, they can easily be misused or over used. I once worked with a company that decided to implement “Six Sigma” in every corner of the company. Everyone had to measure their output quality – secretaries (that is what they were called back then) measured typos per page. Accountants tracked errors per spreadsheet. The mail room monitored incorrect deliveries.

Six Sigma is a quality control program invented by Bill Smith (no relation) in the late 1980’s and made famous by Jack Welch at General Electric in the 1990’s. Six Sigma was an outgrowth of earlier techniques pioneered by the people like W. Edwards Deming and Joseph M. Juran. I actually studied these methods in college, and there is no question that they have had a tremendous positive impact on thousands of companies across hundreds of industries worldwide.

But somewhere along the way, it got co-opted by neophyte zealots who ran amok in many companies measuring anything that moved. Are typos a critical business problem? They may be important in a law firm, but not in most typical businesses. And lo and behold, the secretaries proudly displayed their charts with zero errors. When I asked how that happened, I learned that only “self-errors” were tracked. Typos caused by being unable to read handwriting for example were not counted.

People will often try to “game the system” even under well managed measurement programs, but when things get out of hand, they get really creative. And that creates a culture of deceit that is completely counterproductive to the aim of any quality or productivity improvement effort.

So pick one or two things that really matter and track them closely. And don’t worry about the tipos.

© QuakerSmith Capital, LLC December 2016 All rights reserved

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