When Performance Metrics Hurt Instead of Help a Company

When do performance metrics hurt a company instead of help a company?  Simple, when they are applied incorrectly.

Well, DUH!!! You say?  Not fast.  Let's look at a few examples.

1st, "Dewey WINS!!!"

(Image from Chicago Tribune)

We all know the famous gaff of the Chicago Tribune.  Simple statistics error and an eager editor to scoop the competition lead to one of the most famous political headlines of all time.

Lesson Learned:  Understand the foundation of the numbers and their meaning, Understand what is needed to be collected to obtain proper results.

2nd, Kansas City Hyatt Regency walkway collapse

(Images from Wikipedia)

This is one of the most infamous engineering disasters in history.  The cause of the issue was the variation of the design from the engineer's intent.  

(Image from Wikipedia)

Don't worry, I am not going into the loading diagram so relax, this isn't an engineering lecture.  What I do want you to notice is how simple the design change was.  The contractor made that change without the engineers approval.  He did it without knowing anything about loads etc.  The contractor wasn't the only one at fault either.  The engineer made a mistake in thinking the contractor had the ability to manufacture a 4 story tall threaded rod.  (Trust me, that is very long and very expensive to make, if it was possible at the time.)

Lesson Learned:  Don't change things without a complete understanding of all the facts, especially if that data is available to you (Contractor should have made a call to the design engineer and ask about the change.)  Also do not accept your own ideas without  some review from a qualified source, (the engineer should have contacted a contractor or manufacturer about maximum available rod lengths for his project.)  

3rd,  HR employee retention demographics.

Here is where we check to see if everyone has been paying attention.  A manufacturing company needs to keep it's top talent, but due to other issues it can't compete in a normal way.  (Salary, benefits, perks, etc.)  The HR department does a study and shows a single digit turn over rate for the entire company.  HR smiles and thinks only minor changes are needed to maintain their current staff.  HR does a report and presents it to management.  Professional staff roll over continues, and even accelerates.  Why?

HR lumped professional degree employees in with hourly line workers, (note:  The HR department does a study and shows a single digit turn over rate for the ENTIRE company.)  HR could have looked at who was leaving the company, conducted exit interviews with the leaving employee or colleges.  Actually focused on the people leaving.  The first clue is when you have Professionals leaving (engineers, accountants, management,) you gut a company.  The people who put your product to market you need to keep.  We all know you loose enough of your professional staff, you loose the core of your company.

Lessons Learned:  All 4 from above.  

These issues affect companies every day.  Not getting to the core of the issue and understanding what the numbers are telling us.  Be sure your performance metrics can be used to answer the questions you need answered.  If not you will continue to loose as in the examples here.  

How much of your company have you lost?

How to turn a competitive advantage into a commodity

Today is tough.  More and more companies are looking for away to obtain a competitive advantage over their competition.  When you achieve this advantage you want to hold on to it for as long as possible and, if your smart with your strategy, you develop your next advantage before your competition passes your previous one.

What you don't want to do is make your deficits so overpowering that your advantage, your companies strength, does not matter.  You especially don't want to do this with a deficit in customer service.  I have an example of a company that has done just that.

I will call the company Big.  Big has an advantage over their competitors with their subscription product and as such has more customer's than anyone else.  The issue is business practices that directly influence customer service.  I have has experience with Big on a personal and a professional level.  Big will do almost anything to obtain a nice business account.  Deep discounts on products and subscriptions are the norm.  They tout a high customer service rating.  The reason the rating is so high is the issue to customer ratio.  On standard accounts, nothing special, they do everything right.  It is when you have a variation in the norm that the company quickly falls flat on it's face.

During this particular opportunity, the company paired a product for an application.  The issue is the product comes with known issues to Big.  Company Big's salesman didn't divulge these issues and now won't exchange the product for a working one.  There is ample profit in the price Big sold this product for (even with the discounts) to not loose money on an exchange for a proper product.  The rep has said it is against Big's policy to do such and exchange.

So where did Big go wrong?
#1.  Big did not look out for his customer and take the opportunity to sell the correct product to the customer based on the customer's needs and expectations.
#2.  Big has put his corporate policy above customer satisfaction.
#3.  Big has not done due diligence to correct the issue of the product with the manufacturer or update the customer.

What Big has done, through poor customer service, has turned their competitive advantage position into a commodity.  People I know what have had opportunities with Big will leave them for a lower price as soon as it is available.  That is a commodity decision not a product one.

Where could Big have fixed it?
#1.  Train the sales force and update them on potential issues with products so they can recommend the correct product to their customer based on their needs.
#2.  Have a corporate policy initiative, based on all the data (including profit/loss), that allows corrections to mistakes without having the customer go through a very long and difficult process to reach upper management.
#3.  Work with product suppliers to ensure quality of performance on product delivered to customers.
#4.  Train staff on how to handle customer opportunities.  Given the time in business a decision matrix should be able to be compiled to assist with the decision making process in-line with corporate goals.

In the end, there are many reasons this went awry.  Short sighted management, poorly rewarded goal structure for sales and service, price based account acquisition.  It is difficult to tell without diving into Big's business model.  What I do know, when company Not-As-Big comes along and does due diligence on these issues, Big will become Big minus one.