What’s Next 1 talked about cost per dollar raised (CPDR) and how processes and systems will help keep costs down, and left off with the statement to “Start tracking a metric related to what you do”. We called up some of our partners and talked to them about tracking metrics. Answers came back about so many metrics, but the driving input was pick a metric that is easy to measure, like transactions, quantity produced, dollars, etc.… The financials will provide CPDR, return on working capital, profit percentage, and those type of numbers, but the key performance indicators (KPI) should be something the team can rally behind. Using KPI that the team can see, drives engagement and allows the team to feel like they are part of the solution.
Let’s look at an example: A team that managed a fulfillment program was struggling. There were too many people working on the program, processing errors took up a lot of time, manual processes allowed too many errors, and infighting (on purpose – contact me if you want to discuss why) slowed decision making and prevented growing the program. Key indicators were identified, performance metrics that applied to what this team did that impacted the profitability and potential growth of the team. The KPI to start with were tied to how the team’s performance is judged, inventory days. By keeping the right amount of inventory the programs were able to fulfill needs, and avoid waste. Additionally the team’s management identified that processing errors were creating non-value add work for several members of the team. Both number of transactions and number of errors were added to the KPI.
Setting these three metrics as the primary KPI allowed the management team to rethink their approach to the team’s success. The team also was motivated to achieve targets. The work was re-evaluated and determined that no longer did the team need a multiple people looking at how much material to keep onsite. One person was able to manage both the forecasting of how much each site wanted, and how much the main office wanted to put out there (in this case food could spoil). Additionally working on transaction numbers, and error numbers drove the team to automate their process, alleviating errors, and eliminating the need for an entry level data entry person. The team in pursuit of achieving goal numbers streamlined processes and drove waste from the program. The group started as 2 site facing, 1 data entry, 1 ops, 1 inventory, and a manager… In the end there were 2 people to manage the sites and supplier relationships and make decisions on inventory levels, and 1 operations and 1 manager. The same amount of work was achieved and a baseline of number of materials vs. location was identified.
KPI allowed the team to see results of changes they made. They were able to communicate to management the impact of changes, and they were able to monitor and engage in the results. This group went from a moderately successful program to one of the examples used across the organization on how to implement continuous process improvement (CPI). All of this started by simply identifying some metrics that could be tracked, and related to the success of the program.
If you would like more information or to talk about how to implement these ideas (or if you just want to share ideas) please contact me at justin@caidynamics.com