KPIs and the Elephant in the Room

trouble in officeJoin up your metrics for added value

One of the challenges of KPIs and metrics is knowing how detailed to get.  There is a natural human drive to understand, and that frequently drives us into the detail, however I am reminded of the Jain parable of  six blind men were asked to determine what an elephant looked like by feeling different parts of the elephant’s body. The blind man who feels a leg says the elephant is like a pillar; the one who feels the tail says the elephant is like a rope; the one who feels the trunk says the elephant is like a tree branch; the one who feels the ear says the elephant is like a hand fan; the one who feels the belly says the elephant is like a wall; and the one who feels the tusk says the elephant is like a solid pipe. Clearly each observation is “correct” within it’sown context, but is not much use in understanding the whole animal.

The same is true of KPIs and measurements, if they do not link up to some important real world outcome of the business they are of limited use.  With a recent client I was posed with the problem that he was sure that every job he made was making money, he did the costings carefully, measured the time actually spent on each job and they pretty well always tied up so he should be making a profit…… but he wasn’t and could not figure out why.  Let’s follow the parable and seek to join things up.  A little bit of joined up measurement revealed that:-

  1. Although the time spent on the job was exactly as costed, only around 50% of employees time was spent making the items – the other 50% was a mixture of hunting for tools, drawings, material and I have no doubt a crafty cigarette.
  2. Again although the material consumed on the job was as costed there seemed to be very regular emptying of the scrap bin, and with some measurement it became clear that over 20% of the raw material purchased was thrown in the bin.

Of course it now becomes clear that by not joining up the metrics to say paid hours, or material to the materials line of the P&L a vital piece of information was missed.  Once identified the situation was quickly taken in hand and a recovery & training process implemented.

The moral of this story is joined up metrics (especially to the P&L) are key in generating no hiding place for waste.

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