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Performance management blind spots...and their cost to the business. By Robin Tidd

A blind spot in performance management is an area or aspect you cannot see or cannot control, and, in some cases, may not even know is there, despite lots of reporting. It is an area where peoples’ actions and consequences are not brought together effectively or are not acted upon by ‘the people in the processes’. In some very good businesses with very strident and professional measurement and management, blind spots can still exist. If they do exist and you remove them, there is often a substantial gain to be had in performance figures.

The most common form of blind spot is the unreported or un-quantified horizontal cause and effect. Where several departments or areas of the business perform sequential functions to complete a contract, a task, or perform a service, it is necessary for reporting of all kinds of performance factors to go horizontally across the organisation as well as vertically. This is so that each group of people can know the effect of their work on each other, and can stand a chance of optimising it or making it work as well as it can. Often managers are very focused ‘downwards’ into their area of immediate control, not across the organisation. Often this is exacerbated by over zealous senior management, disenfranchising front line managers, which discourages them from liaising with a counterpart on the other side of the business.

This concept, the blind spot, can be found in all kinds of business, whether service or manufacturing, whether physical or intellectual. You could say that manufacturing is more likely to have a handle on all forms of loss than the rest. This is because things are easier to measure physically. However there is still plenty of scope for gain in all kinds of organisation.

The example below is a capital equipment manufacturer. Do not be put off by the fact that it is dissimilar to your business. The processes are as follows:

Each area or department is well managed from day to day against its own completion/delivery schedules, the management is very predominantly vertical. There is, of course, a high level work schedule for delivery of the project on time to the customer and that schedule is met more than 90% of the time. It is a complex sounding business which can have several major projects on at any one time. There are seemingly ‘uncontrollable’ (in their opinion) events going on all of the time, which serve to disrupt the schedules. As well as scheduling issues, i.e. timing issues, there are opportunities for significant financial improvement by reduction of errors and wasted materials or resources. Dozens of people are involved in this business on one suite. The departments depend on their colleagues to do the job well and on time, but if it does not happen that way, interruption, loss and disruption occur, followed by dismay and frustration. The projects are usually completed on time with a lot of strife, effort and resource typically thrown in at the latter stages...at what cost? I would observe that everybody is doing the best they can, yet the expression is often heard ‘everybody is looking after themselves’. This indicates a possible culture problem, and people think that cultures are hard to change. In reality the management control system is the main cause of the blind spot, not the people, so there is most certainly something which can be done about it.

In examining the management mechanisms the typical blind spot thing is happening. If actions upstream (at the earlier stages of the above process) are taken, which have effects downstream, these causes and effects are not reported precisely enough and are not controlled. Some may be verbalized, anecdotally causing consternation and perhaps discussion as instances, but this is not formally managed by the team to the benefit of all. Yet there are definite repeating generic patterns of failure. These are being treated as isolated instances. The result is that those upstream carry on doing the same things, unaware of the effect they are having, because nobody has shown them. Meanwhile those downstream carry on mumbling about their lot, not wishing to get into battles with people in other (often upstream) department about the way they (the others) do their job.

All front line managers have enough to do to manage their own area without getting involved with another area. You have to remember that there could be dozens of such effects and it could be weeks later that the cause turns into the effect. Hence the reason the management here is vertical. The Management Control System, (i.e. the KPIs, detailed drill downs and review meetings) covers only those issues which relate to a manager’s own department, not those which would help upstream departments and vice versa.

Although this might seem to the reader to be a phenomenon relating mainly to complex project based businesses, rather than to simpler manual processes or even to intellectual processes, I can assure you it is not. I can also assure you that if the vertical is well controlled, then it could be that by far the greatest remaining untapped source of improvement will be in the horizontal. Do not think that the expensive re-engineering of process is necessary, because it is probably not. All you need is to have key front line people across your business to be able to get their hands on these cross-functional effects.

How is this done effectively?
These are the basics, drawing attention to some important specifics:

• A simple map of the functions of the business. (see list below). This could be one piece of paper, in felt tipped pen, probably no longer than six feet and available for inspection by all. Examples of functions in different organisations are:


• Lead generation (marketing)


• Selling by converting leads to orders or customers


• Order entry


• Design/engineering


• Production planning


• Work planning


• Manufacturing/Operating (thousands of different specific activities with counterparts in service or intellectual processes)


• Assembly


• Installation


• Customer contact management


• Buying


• Stockholding


• Fulfilment


• Packaging and dispatch


• Warehousing


• Transport


• Debt collection

There are many more.

• For each function, i.e. activity (see the list below), a list of criteria otherwise known as Key Performance Indicators which show the manager that they are doing a good job in managing that function. For example generically:-


• Everything that was required was done on time


• It was done correctly


• There was no unacceptable re-work


• Good use was made of resources


• It was done at a good speed


• There were no unreasonable delays or stoppages


• It was acceptable to the customer


• Note that all of the above are capable of being judged against a hypothetical reasonable or acceptable

• For each of these factors, where there is a waste or error element, you need to know the reason for the loss. This is a massive issue. Blind spots can occur here. You need to know the root cause of these shortfalls. It is all too easy to log ‘waiting materials’, or ‘wrong drawings’ or ‘no operator’. The difficulty is that you are asking your managers to be aware of what went wrong elsewhere. If this is not recorded, then those at the cause end cannot know the extent of a problem they are causing. See review meetings below.


• Quantify the loss approximately in financial terms.
• Ensure that ‘effect information’ gets back to the cause area so that they can see the generics and can get mobilized to take corrective action if at all possible.
  
• Create review meetings which happen on a regular basis to attack repeated losses/problems using the people in the front line of process. Be sure to monitor the progress of such cross-functional issues visibly and publicly so that people get used to the concept that they are ‘all one team’.

Culture effects and ‘attitudes’
Phrases such as ‘working in cylinders’ (and not pipelines), joined up thinking and departmental barriers, are often used to describe the way an organisation works. If you hear such phrases, it may be that the organisation in question has blind spots. It is said, and I believe it to be true, that it takes three months to even begin to change long held beliefs. It is vital that there is a method to show people where they can have an effect by working together. This method can be implemented very quickly.

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