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Defining the right metrics for your company

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Operations Excellence by Sepp Gmeiner
Sepp Gmeiner is a partner with Lignum Consulting. For feedback, questions and/or suggestions please email

How do you know that what you are doing is right?
This is not the first time that I have written about measurements. But it is such an essential and important issue that it bears repeating.
There are very few subjects where there are no measurements involved. In sports there is the score, the ranking, or the batting average. In weather forecasting, you have the temperature and the amount of expected rain or snow.
When you talk about business, you have your specific measures. First of all, you have your financial numbers, numbers that you are required to collect by law. Most of us do not want to include these facts in discussions. So when we talk about the business, we often talk details, but do not have hard numbers. Things are ‘good,’ ‘soft,’ and ‘strong’ etc.
Our minds cannot truly ‘measure,’ we can only compare and recognize when issues are becoming bigger or smaller. Our expectations also skew our senses. When there are small changes, we do not feel them. An improvement of 1 – 5 per cent per month would be barely noticeable if it was not measured. In terms of continuous improvement, such a sustained improvement (or decline) is big.
The only way I know how to convert opinions and gut-feelings to facts, is by collecting data.

How much measuring is enough?
Keep it to a minimum, is the short answer.
Any measurement costs something to collect, to tabulate, to analyze and to archive. If you do nothing with the data it is a waste of resources.
If you already have sufficient control, and a deep understanding of your business/operation, you might not need many or even any additional measures. 

What you measure gets attention ... what gets attention will improve
Sit back and establish a few things that are not quite right in your organization. What keeps you awake at night?
This can be a company-wide issue, if you are the owner or key manager, or a departmental issue in the area you supervise. Quantify the current situation and the ideal situation (target) and you have established the measurement.
You can measure different things with almost unrestricted units of measure:
• Volume per time (cabinets, pieces, linear feet.... per day, shift, hour...)
• Productivity (output vs. input) (volume per worker, per labour hour,)
• Quality (reject rate, cost of quality- %,...)
• Safety (number of incidents, near misses, cost...)
• On-time performance (i.e. % of orders shipped complete on the original promise date?)

Each measurement selected should have a valid reason for being selected. If your company always ships on time and your customers do not have an issue with your shipping performance, look at other measurements.
Select what is important. Select something where you want to see improvement. Select something that addresses the bottleneck.
You can select measurements for the overall performance of the company, for major departments or working groups, or even for individuals.
If you collect data on a daily basis you still need to process and display them in a bigger time frame. Weekly, biweekly or monthly measures are usually the best practical reporting cycles. More important than the actual measurement is the trend over a period of time.
With whom do you share this data? Good measures, good performance indicators should be shared with a bigger group. Everyone in a group should understand what the goals are and how their group is performing. For this reason you might want to create different levels of reporting:
Shop floor:
This can be volume, quality and on-time measurements
Supervisor/department managers:
Productivity, overtime per week, material yields Management: financial performance, labour cost productivity
This reporting should become a part of the daily /weekly work routines. The measures and the terminology have to go hand in hand. The company strategy and the goals for Continuous Improvement Projects need to reflect in the measurements, and more importantly, they need to show up as measurable improvements. If you think you are improving something and it does not show up in the results - you have a problem. Either the improvement action is not working or the measuring is wrong. Both these results would be a critical problem.
Starting a project of implementing Key Performance Measures (KPM) is not a short-term project. It should be considered a long-term project. Too many attempts at starting a program get cancelled and/ or run out of steam at the first economic challenge. Therefore, start small, with few measures and build on the successes of those. It is easy to go bigger later.
By implementing these KPM systems, productivity gains of 10-15 per cent can be made within the first year of implementation. This gain is not due to the measurement or because the progress is being charted. The difference is that focus is being put on what is declared as critical. This focus allows the organization to align itself to the company objectives. This alignment and focus takes the slack out of the system. Once the slack is out of the system it becomes very clear where there is a bottleneck. The measurements provide the communication tool for management and employees alike. And by having a common language and objective, it is much easier to address the next critical steps.
It takes management commitment, however, this system may well become the best management tool you ever implemented.

Sepp Gmeiner is a partner with Lignum Consulting. For feedback, questions and/or suggestions he can be contacted at

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