“We”™re trying to beef up the quality and efficiency of our operations department. To do that, we need to figure out where to focus. It feels like we”™re constantly scrambling. There”™s a lot of information out there and nothing is tied together.”
Thoughts of the day: Operations relies on other departments for information and analysis. Help your company become more productive and profitable by merging information and tracking results over time. Build teams from across the organization to work toward companywide solutions that deliver the results you want.
The operations department is the heart of the business. It”™s usually the largest, most expensive department. And it intertwines with all the other areas of the business.
It can be a real challenge to gather information from across the organization in order to set goals and measure outcomes in operations. It can cost $10,000 to $100,000 to $1 million or more, to purchase and implement a complete dashboard reporting system. And you still may not get what you want.
Without spending any additional money on systems, with just a few hours of labor, start the foundation for your operations-improvement initiative. Build an internal business dashboard. Agree on specific data points that have the potential to yield actionable information for operations to use.
Track and analyze data via spreadsheets and graphs. Make sure information is readily available from critical sources such as the prospect and customer database and the accounting system.
Ask a companywide team to brainstorm 10 to 20 factors that make your company unique operationally. Embed measures related to those unique factors in the dashboard.
Encourage your dashboard team to compare the performance of one product or service with another. Ask them to come up with ways to improve the results for one or more of the products or services.
Think quality and fit to customer needs are important? Measure waste thrown out during production, refunds issued for poor performance, units returned, customer complaints and testimonials, reorders and upsells. Divide by total units produced or dollar value of products or services delivered.
Speed to market important? Track the number of days it takes to get from order placed to order delivered. Compare what”™s being done right with the things that arrive fastest. Look at how lessons learned from the fastest deliveries can be applied to the laggards.
Use profit and loss and balance sheet for standard ratios, to see how your company”™s operations department is doing in comparison to other companies. Gross profit, net income, cash on hand, accounts receivable and inventory on hand are some of the measures you want to use. All are divided by revenue in order to benchmark results.
Help everyone in the company get on the same page by establishing goals for profitability, productivity, exit value, marketing output, performance quality and overhead measures such as cost of lease vs. revenue and revenue per full-time equivalent or FTE. Ask teams from across the company to meet regularly to compare performance vs. goals. They can set improvement targets for the next period and develop and follow up on actionable next steps.
Make sure that your data collection systems are accurate. Garbage in will result in garbage out. Teach people doing data entry why it”™s importance to put in correct information. Encourage them to ask questions if things seem off. Cross check data to spot errors: units produced compared with revenue invoiced, hours worked vs. jobs in process, new orders vs. ongoing orders. If you see spikes, find out if it”™s a data entry problem or an issue in operations.
People throughout the organization will become more familiar with what”™s going on by reporting on and analyzing data regularly. Familiarity makes it easier to spot something that”™s out of order, identify successes and set goals for the future. Setting up teams helps to ensure that everyone has a vested interest in achieving the goals.
Looking for a good book? Try “Performance Dashboard: Measuring, Monitoring, and Managing Your Business” by Wayne Eckerson.
Andi Gray is president of Strategy Leaders Inc., strategyleaders.com, a business-consulting firm that specializes in helping small to midsize, privately held businesses achieve doubled revenues and tripled profits in repetitive growth cycles. Interested in learning how Strategy Leaders can help your business? Call for a free consultation and diagnostic process: (877) 238-3535. Do you have a question for Andi? Email her at AskAndi@StrategyLeaders.com. Visit AskAndi.com for an entire library of Ask Andi articles.
