by Charlie Dietz, CIO at SMB Value Partners, Inc.
I had a very wise boss once, and I still remember his point today:
“Beware of what you reward, as you will get a lot more of it”. Sounds trivial doesn’t it, but this is an important business concept and a corollary to the “you get what you measure”. Check out our popular, first post on this theme HERE
Here are some additional examples on how proper measures support your business goals and drive accountability:
In these examples, we see that measures are important, and they need to cover all the aspects of an operation, and not allow for gaps. Proceed thoughtfully when setting measures for your business goals, and
“beware of what you reward (or allow), as you will get a lot more of it”.
Be sure to see our wide-ranging SMB Value Partners blog posts in our BLOG ARCHIVES by Month FOUND HERE
I had a very wise boss once, and I still remember his point today:
“Beware of what you reward, as you will get a lot more of it”. Sounds trivial doesn’t it, but this is an important business concept and a corollary to the “you get what you measure”. Check out our popular, first post on this theme HERE
Here are some additional examples on how proper measures support your business goals and drive accountability:
- In one large distribution operation, the item picker had an option to bypass picking a particular customer’s order line item. The intent was to allow them to move on if an item wasn’t found. But it also allowed the picker to bypass a difficult pick that would slow down their pick rate and move on to the “easy” picks. (To the detriment of customer service). Once realized, a revised measure was instituted to segregate inventory / location issues from “dropped” picks, and catch anyone “gaming” the system.
- In another organization, an important business objective was to improve customer service, and a “daily orders and shipments” report was being used as the measure. In the first iteration of the report, the numbers looked good month after month, but the company was still getting complaints from the customers. After some re-thinking, the group realized that they were:
a) taking a too high-level view (dollars); and
b) were not taking into account all of the customer’s expectations.
What the customer wanted was 100% on-time, 100% complete first order shipments. In the second iteration of the report, they added new measures that also looked at the percent complete and percent on-time calculated at both the order / shipment and line levels, rolled up into two reports. One report summarized by customer types and regions, and the other summarized by product classes, distribution centers, and manufacturing plants. A separate detail listing of all of the “misses” went to the planners for analysis. The added measures made a big difference in service performance.
In these examples, we see that measures are important, and they need to cover all the aspects of an operation, and not allow for gaps. Proceed thoughtfully when setting measures for your business goals, and
“beware of what you reward (or allow), as you will get a lot more of it”.
Be sure to see our wide-ranging SMB Value Partners blog posts in our BLOG ARCHIVES by Month FOUND HERE
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