Biggest Mistake Number 6

The people running operations – making the product, delivering the service, handling the materials – really are world class when it comes to measuring how well their business is performing. They’re all over all the important details of how much, how well, how often. If the operation is performing well, they can tell you why; if it isn’t, they know all about the problems. It’s all part of running the business.

It reminds us of world-class athletes like Tiger Woods, and how well they understand exactly what they’re doing.

It’s not exactly a coincidence that the sophistication and level of intensity of performance measurement we see in operations matches the measurement regimen of world-class athletes. It wasn’t always that way. In the last thirty years – the working career of our generation of managers – business operations and competitive athletics witnessed a revolution in the practice of performance measurement.

For most of the 20th century, competitive athletes learned how to play the game by copying what others did. They would improve on that by the combination of their own natural talent, conversations with other players, and trial and error during practice.

By the 1970’s, technology began to enter the equation. Most would think that the most revolutionary technology was the equipment itself. Sure, equipment plays a role – in sports like golf and the pole vault – but not in baseball, swimming, or track. The more interesting – and we would argue more powerful – effect of technology on athletic performance has been in measuring, evaluating and training.

High resolution, slow motion video has given coaches the ability to discern the fine movements and body positions that account for a significant part of sports performance. On the practice field and in competition, thorough and exhaustive measurement of every aspect of performance has become commonplace. It’s no longer just about the scoreboard: in football, the performance numbers that coaches are paying attention are metrics like average gain on first down, average gain per pass attempted, and the ratio of runs to passes.

For the individual athletes, the gym has been re-named the fitness center, where you’ll find practically every competitive athlete in every sport in the world. (OK, we’ll leave bowling off that list. Some things will never change.) In team sports measurement of individual performance by sport and position is now the standard. Upper body strength is measured by bench press for offensive linemen; speed in the 40-yard dash for linebackers and wide receivers; vertical leap for basketball players.

While athletes were using measurement to dramatically improve, those of us in operations were doing exactly the same, following the same approach. Our version of high-resolution slow motion video was computer technology. We made great use of the microchip to improve the performance of our equipment and our people. Our coaches and trainers were some of the best brains to be found in the world of quality improvement, work process re-engineering, and business management: names like Deming, Drucker, and Campy.

It’s a great story, and one that we can be justifiably proud.

Since we all knew the most important part of our job as managers was sending people home safe, you’d think the next place we’d apply what we learned about performance measurement was to managing safety.

While that makes perfect sense, it’s not what most of us did.

Measuring: Business and Safety

Sure, we kept lots of numbers and statistics about how our safety performance was going. We made a lot of decisions based on what we thought the numbers were telling us. The differences between how we used performance measures for the business and how we used numbers to manage safety were startling.

Business measures are easy to understand; safety measures are not.

We could have easily explained any of our business performance measures to our fifth grade sons and daughters. Production gets measured in barrels, truckloads, boxes, and feet. Cost gets measured in dollars and compared to budgets; quality by the number of conforming products and customer complaints; schedule in hours, milestones, and percentage complete.

Every one of our kids could understand these measures. More importantly, so could our employees.

As for safety, we lived and died by the total recordable injury frequency rate.

Frequency rates may be a great idea for the safety staff or the president of the company, but they were pretty much useless to many of us out on the job. First, there’s the issue of what counts as an injury? Turns out there are volumes written on that one, much of that in government regulations that look like the tax code.

Have an injury in our department, and somebody would have to calculate a frequency rate for us. Our number went from zero to sixty faster than a stolen sports car. That’s because the rates are calculated based on manhours worked, which roughly equate to injuries per 100 workers per year. Rarely did we have a hundred working people on this job, or the injury right at the end of the year.

Of course, we’d post the rate on the sign at the gate so everyone could see it. And even pay bonuses based on the rate. But only the guys over in the Safety Office could tell us what the rate actually meant.

What kind of a performance measure is that?

Everybody in operations keeps score for the business; the Safety office tells us how well we were doing at safety.

Every shift, our staff added up their business performance numbers. Because they helped collect the data, they knew all about the numbers and the reasons why they were what they were. If you had a question about yesterday’s production or shipments, you could pick up the phone and ask the guy on the production line or in the warehouse what the story was. He’d tell you all about the reasons why production was up or shipments were down.

Our safety department counted the safety performance numbers. They’d get the medical reports; accident and near miss reports, training records; and medical costs from the insurance carrier. Then they’d report the results to us managers.

That process usually left the rest of the organization right out of the loop. We’d be the first to hear about problems and trends, and have nobody to ask about the trends or what was really going on. What kind of system is that?

For the business, we had lots of things to count; for safety, we often counted zeroes.

We counted production in units, pounds, barrels, feet, dollars and miles. There were plenty of those to count: everybody worked hard and produced a lot. Counting items was a huge part of our lives, as well it should.

Fortunately, we seldom had anything to count for safety performance. People came in, worked and went home safe at the end of the day. That’s good news in every respect, but it did leave us counting a lot of zero’s.

Zeros look good on the scoreboard. They aren’t of much use in telling whether our performance was getting better or worse. We’d go for a long stretch with no injuries. Then, bam, in a matter of a few weeks, we see at a couple of injuries and that would send the injury rate off the charts. We were either doing great or doing awful, and we never could predict from the injury numbers what would happen in the future.

Everybody could tell good from bad performance for the business; for safety, sometimes we weren’t sure which direction was up.

Run a few weeks in a row at less than capacity, and everybody in the company knew there was a production problem. If we managed to come in below budget, we were heroes. When the number of customer complaints decreased, we all saw that as a good development which would ultimately show up in sales and profits.

For some of our safety measures, good and bad weren’t all that clear. Say, for example, the times when the number of near miss incidents was on the rise: did that mean we were headed for a big problem? We managers never could agree on the answer to that one. Half of us said, “watch out” and half of us said “good news.”

If we say that safety meeting attendance was falling, should we worry that we were about to have an accident? Everybody knew the relationship between customer complaint and sales, but we were never sure about the relationship between safety meetings and injuries.

In operations, if we didn’t have enough data to know what to do, we collected more data. For safety, we’d usually act on the data we had.

When we had production or product quality problems, we were always quick to call in the experts. They knew how to dig through the data and find the cause of the problem. If the cause couldn’t be found, they’d go out and collect more data until they had the information they needed.

When it came to safety problems, it seemed like we never needed to call in the experts. Or collect more data. Or admit that the answer wasn’t obvious. We managers were always sure we knew what the problem was, and how to correct it.

Or so we thought.

In retrospect, we should have followed our approach of measuring product quality, customer satisfaction, and reliability. That would have made our lives as far simpler, and we probably would have gotten better results with less effort.

It’s one of the biggest mistakes we managers made.