Transformation Tuesday

Encouraging Each Other

Eliminate the Unnecessary so that the Necessary May Speak

Performance metrics acts as leading indicators and as pointers to changes needed in strategic direction specially when monitored or tracked over a period of time. Focus needs to be shifted from those things which are easy to measure. Performance targets are usually set on the metrics of revenue and target. And if performance targets are not achieved, it is often too late at that stage for corrective measures.

Excellence and metrics programs have an interesting relationship. Without excellence initiatives that establish the corporate culture and a common management system, it is very difficult to enable continuous improvement.

Many companies are striving to institute some type of excellence or continuous improvement initiative. Below are the key excellence metrics:

Customer Satisfaction

Many companies use the customer satisfaction score by various metrics like VOC (Voice Of Customer), CSAT (Customer satisfaction), NPS (Net Promoter Score) etc. It is quite essential to measure customer satisfaction in each and every organization. It is applicable for both internal and external customers over a brief period of time. It helps in gauging the areas where gaps are present and helps in identifying the functions that need the most attention.

Productivity

This is a versatile metric which can be aligned with the strategic goals of the organization. Strategic objectives typically focus on a combination of areas, including finance, operations, quality, manufacturing, energy management, and health and safety. The goal may differ for different organizations. The possibilities of measurement are many here – it is vital to work on goals which the organization is measuring and is directly related to the business strategy and productivity improvement.

Cash Flow

It is the most important lifeline, the oxygen of business organization and hence one of the most critical aspects of performance management. Financial freedom can be achieved by any business if they work and spend money on revenue generating projects. There are a number of operational inefficiencies that can be pin pointed based on the trend of these two metrics which are DSO (Days Sales Outstanding) and DPO (Days Payable Outstanding).

Gross Margin

Gross margin is the mother of all business metrics and the best indicator of a business’s health. The higher the gross margin, the more the indication that organization is on the right track in every operational aspect. Organizations do not require waiting for the quarterly or annual financial results to determine profitability, productivity and customer satisfaction.

Employee contentment score

Although businesses may be moving towards a more automated manufacturing and industrial environment, but, without people at the base, all of the technology in the world would be useless. Strong leadership and executive support are critical for any excellence initiative. Attrition damages the top line and bottom line – everybody knows this now and there is increased focus to build more contented workplaces and organization culture.

However the choice of key metrics needs to be reviewed periodically – as business is dynamic so why should the metrics remain constant? No metric is useful unless there is an action plan that arrives out of it and is communicated and implemented with urgency. Otherwise, a metric becomes just another number on a report that nobody pays attention to till it is too late.

Written By Faber Devna chaturvedi

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