SMART METRICS
A metric is a standard measure to assess performance in a particular area. Metrics are at the heart of a good QMS and any program directed at continual improvement
Measure the right things
Clearly, one needs to measure ones financial performance. However one needs to assess other aspects of business too. Measurement system should cover the following areas as a minimum:
CUSTOMER a. Performance against customer requirements
b. Customer Satisfaction
PROCESSES a. Cycle times
b. Product and service quality
c. Cost performance (could be productivity measures, inventory, etc.)
SUPPLIER a. Performance of suppliers against oner requirements
FINANCIAL a. Profitability (could be at the company, product line, or individual level)
b. Market share growth and other standard financial measures
EMPLOYEE a. Employee satisfaction
Give a complete, or at least an adequate set of current measures - remember; only the organization can judge the completeness of the measures.
Type of metrics
Metrics fall into two general categories: performance metric and diagnostic metrics
Performance Metrics are high-level measures on what is being done; that is, they assess ones overall performance in the areas one is measuring. They are external in nature and are most closely tied to outputs, customer requirements, and business needs of the process.
Diagnostic Metrics are measures that ascertain why a process is not performing up to expectations. They tend to be internally focused and are usually associated with internal process steps and inputs received from suppliers.
A common mistake is to start first with diagnostic measures - measuring internally, rather than beginning with an external focus, namely the customer.
Metrics should be simple. If they require a lot of explanation and definition, then collecting data and translating that data into actions becomes difficult.
Common pitfalls that are to be avoided are:
- Developing metrics for which one cannot collect accurate or complete data.
- Developing metrics that measure the right thing, but cause people to act in a way contrary to the best interest of the business to simply "make their numbers."
- Developing so many metrics that they create excessive overhead and red tape.
- Developing metrics that are complex and difficult to explain to others.
Create metrics that are SMART
Metrics needs to be Specific, Measurable, Actionable, Relevant, and Timely or SMART objectives.
"Specific" in that the metrics are specific and targeted to the area one is measuring. For example, if one is measuring customer satisfaction, a good metric would be direct feedback from customers on how they feel about the service or product. Metrics like number of returned products or number of customer complaints indirect measures of customer satisfaction and, as such, can be misleading and therefore poor metrics and are not very specific.
"Measurable" in that one can collect data that is accurate and complete.
"Actionable" in that the metrics are easy-to-understand, and it is clear when one charts the performance over time which direction is "good" and which direction is "bad", so that one know when to take action.
"Relevant" simply means don't measure things that are not important. A common downfall of process professionals or standards groups is to measure everything, which produces many meaningless measures.
"Timely" metrics are those for which one can get the data when one need it.
The metric areas of time, quality, cost, and customer satisfaction are generic across organisations & industries. Examples are:
Quality
1. Reduce internal rework to 100 ppm from the present 1000 ppm in 12 months for a manufacturing unit.
2. Answer the incoming calls in not more than 2 rings 98 % of the time for a Call centre.
3. No rework on Facials for a Beauty Parlour.
4. Achieve an average waiting time of not more than 10 minutes to attend to the outpatient for a Hospital.
5. Produce at least one national level player in Tennis in this year for a Sports Club providing coaching.
Cost
1. Reduce purchasing cost of meats by 5 % for a Hotel
2. Cost of training a fresher to be reduced by 3 % in next 6 months for a Call Centre.
3. Reduce cost of supervision of Guards by 10 % for a Security services provider.
4. Increase the earnings per KM from the present Rs.8 to Rs.8.50 for a Transportation service provider.
5. Achieve a reduction in final price of the product
Time
- Reduce the cycle time to produce Radar to 30 months.
- Reduce the time taken to complete the security check per passenger for Airport Security.
- Increase the average speed of all Trains being run to 70 KMPH.
- Improve the average time taken to issue the Certificate to 15 days.
- Demand Draft to be issued in less than 15 min for a Bank
- Achieve a satisfaction index of 98 %
- Achieve a minimum of 95 % monthly performance rating from the customer
- Apply for national quality award this year.
- Get a letter of appreciation/recommendation from each customer.
- Achieve zero complaints from customer.
How Good Are the Metrics?
Once metrics are defined one should step back for a sanity check by asking "Whether these metrics will help improve the processes?”
When the evaluation of the metrics is over, put them in place, gather data and track progress - typically a run chart - a graph with time along the "x" axis and the performance measure on the "y" axis. As data is gathered over time and charts are updated, one will get a trend over time. The trend lines or charts are simple and very powerful indicators of performance and for identifying areas of and opportunities for Continual Improvement. Trend line will also help in benchmarking oneself with others in the industry.
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