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# The Basics of Creating a Metric

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THE BASICS OF METRICS*
*METRICS = Measurements That Mean Something
**Eight characterisrics of good metrics and why most other metrics fail**

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### The Basics of Creating a Metric

1. 1. THE BASICS OF METRICS* By: Romains Bos * METRICS = Measurements That Mean Something
2. 2. EIGHT CHARACTERISTICS OF GOOD METRICS <ul><li>Actionality  Inputs that affect the metric are under the direct hands-on control of the people who are responsible for the performance of the metric </li></ul><ul><li>Proximality  Nearness in time and distance between the people that are responsible for the metric and those that take action to change the metric </li></ul><ul><li>Immediacy  The time between a change in a micro-process input to a metric input and a change in the metric itself </li></ul><ul><li>Causality  The degree to which a micro-process metric is a cause of change in a “higher” metric rather than an effect </li></ul>
3. 3. EIGHT CHARACTERISTICS OF GOOD METRICS <ul><li>Proportionality  A high correlation between the size of a change in the performance of the individual, work group or site metric and the size of a resultant change in a “higher” metric </li></ul><ul><li>Atechnology  The ease with which a metric can be updated and understood by the people responsible for improving it </li></ul><ul><li>Teamness  The degree to which a metric engages intact work groups (or change teams) in meaningful, focused improvement efforts more than it engages individuals </li></ul><ul><li>Customer Focus  The degree to which a metric reflects performance relative to internal and/or external customer requirements rather than “business” concerns </li></ul>
4. 4. REALLY, REALLY BAD METRIC
5. 5. A POOR METRIC
6. 6. A GOOD METRIC
7. 7. ANOTHER GOOD METRIC
8. 8. FIRST FOUR AREAS
9. 9. SECOND FOUR
10. 10. ANOTHER SIX MFG . CAP. EMPL. TRAIN. PLANNING MORALE CUSTOMER SERVICE COMM. SERVICE
11. 11. ALL THE AREAS
12. 12. FINAL SET: HYPOTHETIC CEO METRIC AREAS Business Success PLANNING CUSTOMER RETENTION CASH ROI CUSTOMER RETENTION ROI QUALITY EMPL. TRAIN. CUSTOMER SERVICE CASH QUALITY MORALE SALES
13. 13. STARTS WITH A SIMPLE C&E DIAGRAM Man Machine Materials Measurement Method Successful Business Effect Employee training Cash Community service Sales Quality Customer retention ROI Technology Capital equipment Planning Capital (\$) Assets Manufacturing capacity Morale Customer Service
14. 14. EVALUATE AT EACH LEVEL
15. 15. FINAL CEO SET OF METRIC AREAS
16. 16. METRIC MAPS ARE MADE FROM CAUSE &EFFECTS DIAGRAMS Man Machine Materials Measur’nt Method ROA INVENTORY ASSETS CUSTOMER RETENTION CASH SALES CYCLE TIME COMMUNITY SERVICE CAPITAL EQUIPMENT MORALE YIELDS PROFITS Effect
17. 17. EACH DEPARTMENT/SECTION THEN DOES A C&E ON THE KEY CAUSES OF THE FIRST EFFECT Man Machine Materials Measur’nt Method CUSTOMER RETENTION LATE SUPPLIER SHIPMENTS POOR RESPONSE ON CALLS MORALE POOR QUALITY 12 WEEK LEAD TIME DEPT: SALES POOR VOLUME SALES DEALS NO ORDER HISTORY ON COMPUTER CAN’T TRACK IN-PROCESS ORDERS
18. 18. THE PROCEDURE IS REPEATED AT EACH LEVEL, IN EACH DEPT., FOR EACH OF THE METRICS CEO LEVEL: SALES V.P. DEPT. HEAD METRIC: CUSTOMER RETENTION ROA SALES TEAM % OF CUSTOMER INQUIRIES HANDLED IN TWO DAYS % OF KEY CUSTOMERS CALLED EACH WEEK
19. 19. LEVEL BENEATH CEO (VP SALES FOR “SALES METRIC AREA”) Man Machine Materials Measurement Method Man Machine Materials Measurement Method Sales Effect Well - trained sales reps Better tracking of orders No computerized pricing Need hard - hitting brochures Too little print media No cooperation between territories Slow order input Poor quality Small travel budget No auto - tickler file on customers Poor follow - up on complaints Customer relations Poor advert. Customer service Panel A: V.P. of Sales
20. 20. LEVEL BENEATH CEO (VP MFG. FOR “SALES METRIC AREA”) Man Machine Materials Measurement Method Effect Panel B: V.P. of Mfg. Ship From Stock Agreements Sales Throughput Speed Quality Warning On Specials Timely delivery on custom orders Breakdowns Returns hitting later month’s sales
21. 21. ALL THE WAY “DOWN” FOR ONE METRIC Customer Relations Catalog Materials Effective Advertising Product Positioning Phone Follow Up Customer Service Throughput Speed Quality Communications Between Customers And The Plant Warning On Specials Ship From Stock Agreements Major Accounts Called Each Week Survey Results Order Accuracy Assignment Of People To Specific Accounts Order Input Accuracy Customers Know Order Status Data Unplanned Maintenance Changeover Time Lot Sizes Scheduling Accuracy Last Minute Emergencies Preventative Maintenance Skills Unplanned Downtown CEO METRICS Customer retention Sales Quality Employee training Customer Service ROI Cash Planning Morale MFG. V.P. METRICS SALES V.P. METRICS SALES MGR. METRICS MFG. MGR. METRICS SALES TEAM CELL TEAM
22. 22. CREATING A METRIC MAP
23. 23. METRIC MAP IN PROGRESS
24. 24. METRIC MAPPING COMPLETE
25. 25. A GENERIC METRIC MAP FORMAT President Vice Presidents Directors Managers Supervisors Percent On-time Cycle Time Work In Process (WIP) Costs Per Unit Output Defects/Yields These Metrics Can Be Applied With Minimal Customization By Any Work Group At Any Level Every Work Group, Every Employee, Every Manager Focused On A Similar Set Of Metrics For Their Own Processes Micro-process workers