Analyzing the Causes of Measurement Failure and Developing a World-Class Measurement System for Outs

Understanding the Causes of Measurement Failure

October 25, after leaving the Task-Force Meeting “Paul, before you leave, could I talk to you for a moment?” David asked. “Sure, David, what’s on your mind?” Paul responded “Your approach of ‘taking out the trash’ was quite novel. You dispelled false ideas and put the tough issues on the table. We really do not speak different languages and we view Information Technology’s role differently. Acknowledging those facts set the stage for us to confront the brutal facts about IT enablement of order fulfillment and customer service. Thanks for that” David said. Hesitating, David continued “anyway, as long as we are speaking bluntly, I’ve been losing sleep over Doug’s first visit to Diane. When Diane called you to check on our delivery performance, you told her we were hitting on all cylinders. I’ve dug into the last two years’ metrics. The metrics say your assessment was dead-on accurate. Our delivery is best in class. Monster’s and Doug’s reaction to missed delivery window really rattled our world. Went from heroes to zeros in a single morning.” “That was painful for all of us” interjected Paul. “That’s my point. How could we be so naïve? We had no idea how ticked Monster was. We take pride in our metrics-driven decision –making – and we were beating all of our targets.” “Yes, David, but we weren’t hitting the customer’s targets. I know where you are going with this. Measurement systems, like IT systems, are tools – they only do what we tell them to do. In this case, even though we’ve been tracking to industry standards, we simply haven’t been measuring the right things. I guess that’s now our job to figure out what the right things are.” November 1: The Conference Room “Good morning everyone,” David greeted. “Today, our task is to begin to discuss the role of measurement in supporting world-class delivery performance. You’ve seen the agenda. We want to start off conducting a blameless autopsy. The issue at hand is simple: we were caught totally by surprise by Monster’s harsh criticism of our delivery performance. Our culture is to measure everything, and we thought we were hitting the right targets. So, how is it that our measurement system failed in such a painful – and potentially costly – way? As we conduct the blameless autopsy, there are two rules: No Holding Back No Finger-pointing “I’ll be the scribe, if I can start,” Lise said as she stepped to the whiteboard “In the spirit of brutal honesty – and taking out the trash – let me plead mea culpa. Over in Finance, we put a lot of pressure on you guys to hit short-term, financial metrics.” “You sure do, agreed David,” “You’re always asking, ‘What’s the P&L impact?’ Sometimes, we just don’t know. A lot of what we do simply doesn’t translate to P&L impact – at least not in the time frame finance seems to want. I hope that doesn’t sound like finger-pointing.” “You’re okay, David” Lise replied. “Let’s be honest, we have distinct world views. In finance, we answer to shareholders. But, our focus on the bottom line probably does handcuff you.” “It does! Of course, it doesn’t help that we are managed as a cost centre,” David agreed. “It’s tough to innovate and build new capabilities when we are always driving to reduce costs to keep top management happy. New capabilities cost money up front. The payback takes time.” “That especially true if we don’t get it right the first time – and we seldom do. It takes experimentation and a lot of changed behaviour across functions. That takes time.” Paul added. “Lise, you mentioned world views. So far, we’ve voiced three different views. Let me add a fourth,” Trina noted. “As a customer-facing profit centre, marketing sees the world uniquely from each of you. Order fulfillment is a cross-functional process. Yet, if we all make decisions based on our local measures, we are going to create trade-offs and maybe even conflict. The resulting chaos can cause us to lose sight of the customer and drop the ball.” “Fantastic,” David exclaimed, “Your points are all on target. From a blameless autopsy perspective, they tell us that how we measure is ‘killing us’ – forgive the pun. When Diane asked me to head up this task force, I was convinced our problem was the ‘how’ of measurement. Until Doug dropped the hammer on us, I thought I understood why we measured – to document our performance. Right now, I’m not so sure about the why. Despite hitting our targets, we were failing to keep our most important customer happy. We really don’t understand the ins and outs of our processes. Shouldn’t measurement prevent this failing?” “That’s an astute observation,” Paul chimed in. “after reading the agenda, I did a little out-of-the-box scanning. Do you know the story of the steam engine?” Blank stares prompted Paul to proceed, “The steam engine is the product of precise measurement. Only after finding a new way to measure the energy output of engines could inventors show that their ideas delivered better performance – you know, more power, less coal consumption. Without the micrometer, dubbed the ‘Lord Chancellor’ – which could gauge tiny improvements – the feedback needed to build better engines would have never emerged.” “Let me jump even further afield. Did you know that Bob Beamon’s long jump record of 29 feet, 2 ½ inches set in 1968 stood for almost 23 years? Mike Powell beat the mark by two inches in 1991. Nobody has come close since. Other track-and-field records come and go, but better jumping techniques appear to be as hard as mastering order fulfillment. However, measurement is changing the science of jumping. BMW, as part of its London Olympic Games sponsorship, designed a camera system to give jumpers the immediate feedback to improve technique. Before the jumper leaves the jump pit, he knows his horizontal and vertical velocities as well as his flight angle. While the memory of the jump is still fresh, he finds out how what he did affected his performance.” “Paul, where do you find time to read about steam engines and long jumping? Your point, however, is prescient. If measurement is going to help us build an outstanding order fulfillment capability, it must help us better understand and improve our processes. We should take a closer look at each of the issues on the board to see how accurate each point really is. I’ll put my team to work on this, but that will take some time. For now, maybe we should turn our focus to addressing the question, ‘What should a world-class measurement system look like?’ Lise, would you put that on the board? So, what do you think?” Cause of Measurement Failure A World-Class Measurement System Should… Short-term emphasis on financial measures Tough to document unique value creation Too cost-focused– sacrifice capability building Different world-view; that is conflicting measures Lose sight of customer; internally focused Poor understanding; no learning             Four questions to Consider: (worth 5 marks each)     Based on your experience, which of the causes of measurement failure hinders outstanding order fulfillment and customer service the most? How can you apply Paul’s analogous discussion of steam engines and long jumping (learning) to improve the design of your measurement systems? How would you respond to David’s final question: What should a world-class measurement system look like? Complete the World Class Measurement System chart (above) with your takeaways from analyzing the DWC case