Customers for Life

HPMD Quotes & Sources

Accounting for more than money

Think about what happened the last time you went out to play tennis. How long did it take, after you had been rallying for a while, for someone to say, "Want to play a set?"
What they were really saying was, "Let's keep score." We all, whether we're out on the court or on the job, like to know how well we're doing. And the only way of finding out is by keeping score.
Counting the number of things we sell is one way of keeping score. It gives us an overall picture.
That's good, but it's not enough. It's not, for example, anywhere close to what's done in baseball. While you are watching a ball game on television, you'll see flashed up on the screen how this batter does against lefthanded pitchers at night, playing on Astroturf. Everyone knows how he hits with men on base and whether he has a higher batting average during the first part of the game or in the later innings.
At work, we are nowhere near as sophisticated. But we should be. We should know exactly how we're doing, so we can find out where we should improve. The only way we are going to find that out is by measuring everything that we possibly can. And we do.
Some people think that's wrong. They don't measure much of anything. They just tell people, "Do the best you can."
That's silly.
It's silly because doing the best you can may not be good enough. It's just like sports. Say we are talking about running the 100 meters. If the very best a runner can do is 15 seconds, then sorry, folks, it just ain't good enough. He's just not going to win, no matter who he knows or how smart he is.
We all compete in some kind of marketplace --be it the Olympics or business-- and doing our best is not what's required. We've got to be better than the competition. We've got to be the best.
That's why we measure performance --of everybody including me. (My report card is the company's P & L.) We want to know how everyone's doing and, equally important, we want to know what it's going to take to be the best. If the record for the 100 meters is 9.9, and someone's running 15 flat, then we know his time must be cut by at least 5.1 seconds.
Management consultant Steve Mulvany has been instrumental in improving our productivity. He's helped me understand the importance of measurements, feedback, and recognition.
Steve came to understand the relationship between measurements and performance when he was still in school. Let him tell you about it.

When I was in college, I worked in a cannery each summer

during tile

tomato crop season. My job was twofold: first, to turn off the machine, if something went wrong. That was easier said than done, since tile machine ran at a rate of 650 cans per minutes If I didn't hear the problem, the machine would suddenly jam, causing 190 degree tomato juice to squirt right at my belly.

The second part of my job was to put lids into the canning machine --real boring. In fact, I knew if I didn't make my job more interesting, I was going to go nuts --the fellow next to me was nuts.

I began to keep score of my performance. The company counted the number of cases, total fluid ounces, operating minutes, downtime, and maintenance costs on my machine.

I counted lids.

I could see

and touch lids, In fact, every day I kept track of how many cases of lids I completed, multiplied cases by 3,600 (the number of lids per case) to reach the total lids run that day through my machine. Daily, I would write my score on a lunch bag.

After four days of keeping score, I found myself trying to beat my best day, and figuring out how many lids I would leave to load an hour to achieve a record pace.

The company didn't know I was counting, still my machine achieved the highest production of any in the plant.

Everybody counts. Whether the person is making sales calls, typing letters, repairing automobiles, mining coal, or canning tomato juice, he is keeping track of a score. Management's challenge is to create a measurement and feedback system which is interesting and relevant for the individual or the team.

We liked Mulvany's ideas, so we asked him to help us set up a measurement system that made sense.
He started by giving us a choice of things we could measure.

I. Quantity

A Dollar amount of sales
B Number of units completed
C Orders shipped
D Calls completed

II. Quality

A Number of items completed correctly
B Percent of retained customers
C Ratio of positive to negative letters
D Service feedback scores (customer satisfaction index)
E Employee retention/turnover

III. Cost

A Total cost per unit sold
B Labor cost
C Budget vs. actual
D Accounts receivable
E Costs per square foot

IV. Timeliness

A Average turnaround time to process orders
B Percentage of on-time delivery
C Percent of items completed within 48 hours

Having figured out the kinds of things we wanted to measure --we'll talk about them in a minute-- Mulvany gave us four questions to think about before we put the performance measurements in place. Again, we'll let Mulvany explain:

IS THE MEASUREMENT IMPORTANT?

Will the employees relate to the indicator? Are the data available at least every two weeks? (Data posted less often are not effective for performance feedback.) If you stopped tracking the data, would anybody care? If improved, will this measure have a significant impact on the company or department?

IS THE MEASUREMENT EASY TO TRACK?

If the score takes anyone more than 15 minutes per day to track, it's

probably not feasible

do it. The

easiest way to

set

up a tracking system

to look at the data you are already collecting. Think about how you might set up automated collection systems on your micro, mini, or mainframe computers.

WILL THE EMPLOYEES UNDERSTAND THE MEASUREMENT?

There are some management measures (return on investment, inventory turns, days receivable outstanding, etc.) which would not be commonly understood by nonmanagement staff. The most effective measures are simply stated. Putting things in terms of units is best, dollars are second best, third best would be percentages. Ironically, management usually relates to things in exactly the reverse order --percentages, then dollars and, finally, units.)

IS THE MEASUREMENT STATED IN POSITIVE TERMS?

If you can measure absenteeism, you can track attendance. Instead of scrap, report yield. Don't measure late deliveries, track on-time shipments.

People would much rather shoot for a goal than avoid making a mistake.

More important, if you only report what's undesirable, people may not be sure what they are supposed to accomplish.

After Mulvany had explained all of this to us, we sat down and tried to figure out how we should create our measurement goals. It turned out to be a five-step process.
First, we had to determine what was the right thing to measure. For a salesperson it would be the number of cars he sold in a month. For a receivables clerk, it might be the average number of days it takes her to collect a bill.
Second, having figured out what to measure, we needed to find out what the industry average was. Everybody has a trade association, and most of them track those kinds of numbers.
The average becomes the minimum score we will find acceptable. Our goal always is end up in the top 5%. Our salesmen are a good example of how this works.
Back in 1957 when we began tracking the number of cars each salesperson sold, our people were selling 6 cars a month, and that was about the national average. So we set our first goal at 8 cars a month. Once we reached 8, we raised it to 10, and we've steadily increased it ever Today, nobody feels like they've had a great month unless they've sold 20 or more. We expect them to sell 15.
Over the last thirty-three years the nationwide average has also increased --to 8.
Why do we keep raising our expectations?
So we don't get complacent. It's easy to get sloppy once you've achieved your goal. To ensure that that doesn't happen, you always need to find a bigger mountain to climb. You have to keep continually raising your standards --both to keep your people sharp and to stay ahead of the competition. Once you're satisfied, you can be sure that someone is going to pass you right by. You can never, never stop raising your standard of performance.
It's a funny thing about goals. Initially, when you announce them, a lot of people say they're impossible; there's no way that anyone will ever be able to reach them. But it's like what happened with the four-minute mile. For the longest time, people said no one would ever be able to run that fast. But once Roger Bannister did, the times just kept getting faster and faster to the point where the record is now 3:46 (Steve Cram).
The same thing happened in the high jump. Everybody said no one would be able to jump 8 feet. But then Javier Sotomayor, a Cuban, did it in 1989, and all of a sudden we had a whole bunch of people jumping 7 feet 11 inches. It won't be long before they'll be over 8 feet too, but somebody had to break that barrier first.
It's no different with selling cars. In 1989, when we first set the goal of selling 20 Hyundais a month, everyone said it couldn't be done. And it is hard, because for every sale you actually make you probably have to close two or three. Many Hyundai buyers have a hard time qualifying for financing. Usually the Hyundai is their first new car and they don't have much of a credit history. So 20 cars a month is a challenge, one that many of our Hyundai salesmen thought would never be met.
But then Mel Warren, one of the most professionally competitive human beings I have ever met, came along and sold 20 Hyundais in a month --in fact, he sold 26. So now a bunch of our other salespeople are saying, "If he can sell 20, I can sell 20. [Three did it recently.] But what I'm really going to do is break Warren's record."

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People are naturally competitive. They'll try to exceed what ever goals are set for them, whether or not they're paid more for doing so. Since that's true, the secret is to set goals that are in the best interest of the business.
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And that's an interesting thing about setting goals. People will play to them --even if they don't get paid anything extra for meeting them. (Chapter 20 explains how we pay folks.) People are naturally competitive; they'll try to exceed whatever expectations are set for them.

Short Quote:

"We should know exactly how we're doing, so we can find out where we should improve. The only way we are going to find that out is by measuring everything that we possibly can. ...We want to know how everyone's doing and, equally important, we want to know what it's going to take to be the best." --Carl Sewell

Author:	Sewell, Carl
Title:	Customers for Life
Periodical:
Volume:
Number:
Publisher:	Doubleday Currency
Place (City):	New York
Publication Date:	1990
Pages:	81-85
Source Type:	Book
Quote Number:	30
Categories:	Customer Service, Measurement