Tape and Paint

Another not-so-radical view about business metrics: Don't measure "it" if you're not going to do anything with the information. This was usually one of my questions in response to a request to chart the performance of XYZ: "If the performance is low, what will that tell us? Is low performance for a non-essential activity a bad thing? Do people involved with XYZ even care about the performance? If it's high, will we think that they're doing a good job and reward them accordingly?"

Recently, we had a discussion about metrics in a non-profit (church) setting. One church was measuring attendance, service and involvement in a group. People who fell into all three categories were called Big Three People. They were also measuring how many people were Big Three People. The church admitted that they had to spend time auditing the numbers. "Is Ralph really attending your group on a regular basis? Or has he just signed up but doesn't show up?"

We also talked about the effort to make the measurements more accurate, and whether it's worth the effort. It may not be worth the effort if you're looking for relative movement, rather than a precise answer to a question. Instead of being able to answer precisely "how many," instead, without auditing, you can only answer whether it's more than last time.

In business, we've struggled with the same issues. Activity-Based Costing tried to make the answers more accurate by doling out overhead costs more precisely to products and services. However, the effort to track people's time often became more burdensome than the value of the answer.

Likewise, I know some manufacturers try to capture every bit of cost, including the packing tape and the paint on the product...and sometimes the pricing label and ink. The percentage these supplies contribute is miniscule. Inaccuracies abound with regard to the quantity of usage. "Did you use 2.6 feet to seal that package or 2.8 feet?" I was involved with one company that had paint and tape on the Bills-of-Materials. Not surprisingly, the inventory was always off and we either had too much or we were short and production was shut down. When we started treating them as supplies (and zeroed the quantity on the BOM), we had much better experience with regards to effort and outcomes.

With any metric, what will the answer tell you? What action will you take as a result of the answer you get? Is the effort to get the answer worth pursuing in light of the answers to the first two questions?