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Steven Ouellette

Lean

Galileo’s Telescope

How to create integrated metrics and a realistic strategic plan across a business

Published: Wednesday, January 27, 2021 - 12:03

What is the most important thing for your business to be working on right now? Would everyone else working there agree? Is everyone working toward the business’s goals? How do you know?

Most businesses in my experience cannot answer these questions. There may be metrics, but they are not translated down to individual contributors or integrated with each other. They may be incomplete. Management may announce every year that this is the year we are all going to work on profit, or customer satisfaction, or some metric they read about in an article, but they never translate what that means for individuals, and nothing seems to change. There is often an idea that we should be doing something as a business, but different opinions as to what that might be. There is internal competition rather than cooperation.

You need a process to not only be able to answer these questions, but also to answer them with data. Everyone in the company needs to be able to show how they contribute to the organization’s goals.

However, data alone cannot lead or manage a business. The piece that is missing is the business itself. Just gathering a lot of data is unlikely to answer your questions. It is like pointing a telescope at some random part of the sky and then trying to see Jupiter. You might have accidentally caught it in your field of view, but it is not really all that likely. Similarly, knowledge about the business is required to focus the data collection and analysis in those areas that are relevant to your business.

The problem is that most businesses also do a pretty terrible job about knowing how the business itself works. So before you start talking about your data system, you have to understand your business in a way you may not have before. You need to have or build metrics that allow you to systematically manage the organization in order to achieve your objectives.


Galileo’s Telescope: How to Create Integrated Metrics And a Realistic Strategic Plan Across a Business

Leading and managing with data

There are two main jobs of management: leading and managing. Contrary to what it might feel like, both of these aspects of management are equal—one cannot exist without the other.

Leading a business is about envisioning a new destination and enabling the business to go there by figuring out what needs to be done in the near term in order to achieve what you need in the long term. This leadership is documented in a strategic plan, but a plan by itself is not enough. Leadership also involves being able to execute to the plan you have created. However, leadership without management is a pretty vision that you never work toward achieving.

Managing a business is about making decisions that allow your people to do what needs to be done to make that business successful. Managing a business allocates responsibility for making decisions to the appropriate individual. Good management is the foundation upon which you can build good leadership.

Problems occur when organizations try to lead and manage without having data to support these activities, so in my new book I will be showing you a way to build a decision support system (DSS) to do just that. A decision support system is a management system that identifies and provides data that support managers in making the decisions they have to make at every level of an organization.

I know that most businesses have a lot of metrics, but very few in my experience have metrics that are actually designed to measure what is important to lead and manage a company. They are not integrated across the company to accomplish the objectives of the company. Most data efforts going on now are tacked onto existing, nonintegrated metrics, resulting in a recipe to measure the wrong things faster and waste more time reacting to them than ever before. That leads to suboptimal, or even outright damaging, management decisions for which you have paid a lot of money.

How do we create the “right” metrics for an organization? Building and managing a business is about people first. People determine why the business exists, where it is going, and how it is going to get there. The aspirations of the business can be turned into business-level metrics that measure its progress in achieving them, and these metrics can be translated into metrics for everyone in the organization.

Incorrect or incomplete metrics drive incorrect behavior and there is no preexisting list of the “right” metrics for any type of business (no matter what those expensive consultants say), so it is the business itself that has to create them.

Equally, or perhaps more important, this process protects a business from spending time and money on metrics that are not really aligned with what the company is trying to do. Following this process tends to reduce the overall number of metrics by focusing on the few that strongly control how the organization achieves its objectives. Managers don’t need 20 metrics to manage an area. Eventually, with data, they will probably find that they only need about 10.

Once identified, the correct metrics should be managed and continuously improved by those performing the work. This is called daily management, and it should be happening everywhere in a company.

However, working only on continuous improvement means that you fall behind your competition, so you also need a plan to close gaps in business-level metrics between where you are and where you want to be. This is the strategic plan. Closing big gaps (breakthroughs) requires a different type of work and management than continuous improvement (kaizen). Breakthroughs require specific teams and resources to go after a few, highly impactful projects. The organization and oversight this requires is documented in a strategic plan. Kaizen requires many small work teams around the company autonomously monitoring their own processes and finding better ways of doing them.

In the beginning, your people will have hypotheses about how metrics they are responsible for are related to achieving organizational objectives. They will be wrong about many of these metrics, but don’t be discouraged. This is a necessary place to start and better than what your competition is doing now. In today’s business world, it is not about getting the best answer, but about getting a “good enough” answer to the right questions more quickly than your competitors.

Eventually, as you gather data, you will be able to discern which metrics really are important to control, which ones are not, and where there are missing metrics. Once you have the right data, you can analyze it for these relationships. This is where big data and analytics can really add value.

My book describes how the leadership of an organization sets the direction of the company, translates those words into metrics, cascades and integrates these metrics throughout the organization, determines the needs for improvement with a gap analysis, and deploys a strategic plan to close those gaps while still doing the day-to-day activities that keep the lights on.

If you are as fascinated by how to do this as I am, check out Galileo’s Telescope: How to Create Integrated Metrics and a Realistic Strategic Plan Across a Business (Alliance Press, 2020). In it, we will build a futuristic business step by step, and have a little historical fun learning from Galileo along the way.

 

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About The Author

Steven Ouellette’s picture

Steven Ouellette

Steve Ouellette, ME, CMC started his career as a metallurgical engineer. It was during this time that his eyes were opened to find that business was not a random series of happenings, but that it could be a knowable enterprise. This continues to fascinate him to this day.

He started consulting in 1996 and is a Certified Management Consultant through the Institute for Management Consulting. He has worked in heavy and light industry, service, aerospace, higher education, government, and non-profits. He is the President of The ROI Alliance, LLC. His website can be found at steveouellette.com.

Steve has a black belt in aikido, a non-violent martial art, and spent a year in Europe on a Thomas J. Watson Fellowship studying the “Evolution, Fabrication, and Social Impact of the European Sword."