“If something is worth doing, it’s worth doing well.”
In manufacturing, this old adage is as true today as it was 150 years ago. In fact, since the days of the Industrial Revolution, the need to manage performance has continued to be a manufacturing business fundamental.
Today’s definition of performance management has been refined to include
- the practice of developing strategy,
- the alignment of strategy with employee activities, and
- the measurement of how well actual performance adheres to strategy.
The key to success: employee understanding
Executive management is typically quite skilled at developing strategy for the company. However, a chief frustration for many manufacturing executives is the inability to get employees to execute the organization’s strategies. They watch as employees spend valuable time working on activities that are not tied to the objectives of the company.
Here’s the root problem: In most manufacturing companies, employees and managers are unable to articulate the strategy of the company. How can leadership expect that the company’s strategy be accomplished when their employees do not know what it is? Communication of the company’s strategy to employees is just a first step; management must find ways to ensure that each employee understands how he or she impacts the strategy.
Using a strategy map often helps to increase the level of strategic understanding throughout all levels of the company. The strategy map tool visually demonstrates how the company’s mission, vision, and key strategies cascade down through all departments to individual employees. With the proper understanding of what is important, employees can better prioritize activities and efforts so that they are working towards achieving the company’s objectives. And when employees do this, the bottom line always benefits.
Financial results are just part of the picture
How do you know if the company is on strategy and meeting its objectives? Like many other businesses, manufacturers often get caught in a pattern of only reviewing and monitoring historic financial results. While important, financial measures provide an incomplete picture of a company’s performance. They don’t get at the “why” and the “how” explanation for each of the results.
Non-financial measures can provide such explanations, and they can also serve as leading indicators that help predict financial results. By using both financial and non-financial measures, you will have a more balanced look at the performance of your company. This is the principal of the “balanced scorecard.”
The balanced scorecard is a tool that works hand-in-hand with the strategy map. It serves as a dashboard that helps a company steer operations and drive to higher performance. The scorecard is comprised of measures that are tied to strategy and indicate how the company is performing to strategy.
Choose employee metrics wisely
To be effective, these techniques must be taken to the employee level. There are three important things to keep in mind when determining measures for employees:
- Each employee’s measures should roll up to a company measure that is tied to a company strategy.
- Each employee should have no more than three or four measures.
- Each measure must be under the employee’s control.
Focus is critical. Employees will not be able to work towards large numbers of measures, so choose the three or four most important metrics that will help guide the employee to work to help achieve the company objectives. Also, keep in mind that it is unfair to measure an employee’s performance by something that is out of his or her control. Choose metrics that an employee can control and improve.
To remain competitive, today’s manufacturing company management must effectively communicate and gain understanding from all employees regarding the company’s strategy and objectives. In addition, metrics that tie to the strategy need to be put in place at both the company-wide and employee-specific levels.
High-performance organizations are the ones that will continue to succeed. Performance management is your ticket to get there.