Wasteful Metrics

Many years ago, I angered a few corporate officers by asking this question: "Since 60% of our cost is related to materials, and only 4% is related to labor, shouldn't we install this system to track our materials rather than our workers?" I had just sat through a four-hour meeting describing the implementation plan for a new system to be installed in our factories. The system would record which individuals were working on which assembly lines. The system was going to cost 4% of our revenues to track 3% of our revenues. The response to my question: "You may be right, but we've already made the decision."

After the system was implemented, we would have had a preponderance of data to show us that somebody was helping on an assembly line at $13/hr when the budget was $12.25/hr. If the system had stayed in place, and fortunately it never did work well, we would have expended more time (and money) creating "policies to police" these "mistakes". We would have focused a disproportional amount of management effort on 4% and had less time to focus on efficient utilization of the materials that comprised the largest cost category.

One of the lesser known wastes (muda) in Lean is the wrong use of metrics that take you in the wrong direction.

Today there's news coming out of Italy of a food chain piloting a new safety system that has some people worried that it's more a productivity system. This system is a microchip in the bracelet that will send an alarm if the employee leaves the premises or is stationary for 90 seconds. There are some anecdotal information that shows the alarm was activated when the employee was in the bathroom. Some say it's a way to spy on their employees and make sure they're productive (i.e. moving). The official line is that it's meant to alert officials in the case of an accident or a robbery. My prediction: it'll be scrapped as they continue to get false alarms from employees in the bathroom, or forget to remove the bracelet as they leave for home, or take it off to do some heavy-duty cleaning, or whatever.

Suppose it is a metric for productivity. Is moving the right measurement? Goldratt, the founder of Theory of Constraints, shows one analysis that says an emphasis on efficiency creates all kinds of non-profitable efforts for a steel mill. I've seen the same thing in many manufacturing companies. Efficiency measures are somewhat arbitrary. (How well are the standards developed? How much do they take into account variations in skills, materials, external factors?) The employees in Italy will develop ways to avoid the alarms that won't necessary be productive. They might start break-dancing when there are no customers to serve. They might start doing laps along the interior of the restaurant.

On second thought, maybe it's a system to improve the health by reducing sedentary moments in the workday. Bravo, Italia!