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The Point by Buyers Meeting Point

Confronting Mr. Drucker: Are you getting what you need from your metrics?

Peter-Drucker

Last week I presented a webinar (hosted by Supply Chain Now Radio, APICS Atlanta, and Talent Stream) on Managing Your Metrics: Making Sure Your Metrics Deliver the Desired Results. The webinar is now available on demand, and you can access it here.

The core idea behind my presentation is that metrics – as important as they are – can not be implicitly trusted to achieve an enterprise’s stated objectives. Procurement and supply chain are quantitatively driven functions. Metrics just feel right… which is why we need to be all the more vigilant to be sure we don’t follow a number down a rabbit hole.

 

Peter Drucker, the founder of modern management, has famously been quoted as saying that “you can can’t manage what you can’t measure”, and that is true. But it is not an exclusive truth. Here are a few other statements that are equally true:

  • Just because you can measure something doesn’t mean it is important.
  • Just because you can measure something doesn’t mean it is the right place to focus your efforts.
  • Sometimes you aren’t measuring something you could, and that does not make those things UN-important.

 

In the webinar, we talked through a few of the common traps companies fall into with their metrics:

 

Let Them Eat Cake

If you celebrate quantitatively measured performance (presumably with a cake in the breakroom or company kitchen), make sure the metrics are actually taking you in the right direction. In a true story pulled from the page of Finance Unleased, former IKEA Transformation Lead Peter Huber points out how a company with an industry topping customer satisfaction performance rating can still be failing their customers, while an improvement in service goes unnoticed.

 

Beware the Distraction of Vanity Metrics

In 2011, DoSomething.org, a digital platform for community activism, posted a YouTube video in conjunction with ESPN asking young people to donate their used sports equipment to kids in need. It was twice as popular as any video Dosomething.org had posted to date, getting 1.5 Million views. Then came the data report: only eight viewers signed up to donate equipment, and zero actually donated. Views did not equal success because success was measured in terms of donations, and so the video had to be considered a complete failure.

 

Moneyball and Metrics’ Predictive Value

Baseball teams used to focus on a single number—team batting average—when they talked about scoring runs for the purposes of recruiting. But after doing a proper statistical analysis, the Oakland A’s front office recognized that a player’s ability to get on base was a much better predictor of how many runs he would score. And for a time, at least until the other teams caught up, players with an ability to get on base were less expensive than players with a higher batting average. Now that’s value! As a result, they were able to recruit winning players without breaking the bank.

 

At the end of the day, all metrics should be able to survive the answers to the following questions:

  • Do improvements in the selected metrics drive the desired business outcomes?
  • Do the values of the metrics aligned with the results being seen?
  • Are there business objectives that are not paired with quantitative information?
  • What will serve as evidence that you have achieve a specific objective?
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Saturday, 22 September 2018

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