Theory of Constraints Handbook - James Cox Iii [264]
Modern corporations have metrics everywhere and they devote tremendous amounts of resources and energy to maintaining them. What is interesting is that the number of measures, like the universe, always seems to be expanding (even accelerating). An analogy (with a direct connection to this topic, by the way) is with modern Enterprise Resources Planning (ERP) systems. Ask any ERP provider how many lines of code they had 10 years ago versus how many they have today (they may not even be able to give you a number). The irony or perhaps the lesson is that most of their customers will candidly admit (behind closed doors) that those systems have not really produced any better business results over that 10-year period; they are just more costly to operate. Are we making it harder than it needs to be?
FIGURE 14-2 Average improvement in measures of companies after implementation of TOC. (From Mabin, V. and Balderstone, S. 2000. The World of Theory of Constraints. Boca Raton, FL: St. Lucie Press.)
Maybe in trying to control everywhere we end up controlling nowhere. Albert Einstein once said, “Any intelligent fool can make things bigger and more complex, it takes a touch of genius and a lot of courage to move in the opposite direction.” He also said, “Everything should be made as simple as possible and not simpler.” In these two statements, he cleverly lays out the criteria for effective problem solving and control. Solutions should be elegant, meaning concise and simple, but at the same time, all truly relevant factors must be considered. This is the direction of the solution for resolving measurement/performance dilemmas.
Ultimately, what is needed are measurements that contain a set of relatively simple, highly visible execution priorities to focus and align the entire team of functional managers around actions that have the greatest organizational ROI regardless of the impact on the tactical objectives. In other words, all of the objectives should be understood relative to their current impact on ROI.
The achievement of this solution will reduce the number of primary metrics and the corresponding potential for conflicts between metrics as well as better clarify the actions needed to meet those metrics.
Why Do We Have Measurements?
The point of any system of measurement should be to:
Judge progression toward a specific goal or objective.
Drive behavior toward a specific goal or objective.
Highlight relevant factors in relation to achieving the goal or objective.
In a recent USA Today piece by Bruce Horovitz (2009), Douglas Conant, President and CEO of Campbell’s Soup said, “You can’t talk your way out of something you behaved your way into.” Assuming an organization has a defined objective, one of the keys to reaching that objective (in any time frame) is to get all of the components of the system to behave in a manner that moves the system toward the objective. Why is there a link between measurements and behavior? The saying, “tell me how you measure me and I will tell you how I behave,” has always been a cliché linking behavior to measurements. It is a cliché because, while true, it is an oversimplification of the relationship between metrics and behavior. Not only is it simply the existence of a metric that drives a specific behavior, it is also the lack of another directly conflicting metric that drives directly conflicting behavior under the same circumstances and a system of feedback and accountability that removes the cliché label from the phrase.
This means that metrics must be coordinated and constructed in order to induce local areas to work together to do what is in the interest of the whole and those metrics must be backed up by a robust system of accountability and visibility (that in itself needs to be measured). This is a basic building block to organizational synchronization and efficiency. If resources are not behaving in a synchronized manner, then some conclusions might be drawn:
1. Formal metrics are not in synchronization. There