Complex Conclusions and Questions Raised by a few “Simple Metrics”

I had been working as the Controller for a midsize manufacturing concern for about two years. It was a five-plant operation put together by some venture capital folks. The investors were not directly involved in the operations. We had a president who had been with one of the plants for several years and generally knew the business. He had never worked for a major corporation or been a senior executive before but seemed like a pretty sharp chap. He was a bit arrogant, a micromanager and appeared to lack cohesive direction. Because of this we were constantly changing focus from increasing sales at any cost, to cutting costs, to penetrating new markets, to cutting low margin customers and then back to square one again. One could almost say that we were slightly schizophrenic and dysfunctional. This caused a lot of mid-management turnover that resulted in operational problems like poor scheduling, material shortages, low efficiency, etc. The corporation as a whole was doing OK financially but there was no growth. We were always short of cash and could not replace or add any capital equipment or make any major improvements. Adding to staff positions took an act of God. If anyone asked for capital funds, they would always be told to “earn it first and spend it later.” Everyone made do with what they had. That was our environment. Stagnation was almost becoming a self-fulfilling prophecy.

Our plants had all been stand alone small businesses prior to the consolidation and although they bore our corporate logo on all their buildings and letterhead, they continued to operate basically as they had before. There was no centralized ERP system or even connectivity between the plants and headquarters. Each plant had some kind of legacy-computerized systems to track production, measure efficiency, pay the bills, etc. Some had better, some had worse. We shared a few common Excel workbook templates that the CFO had designed for reporting financial data.

It was at this juncture that we changed direction again. The president decided that he could no longer devote his time to directing day-to-day operations with the individual plant managers and needed to concentrate on growing sales. He hired a new VP of operations.

Bruce had been a divisional VP of operations for a major global manufacturer in our line of business. According to his Bio, he had been with that firm since leaving college and worked his way up from being a plant HR manager to plant manager and so on. Bruce was in his mid-thirties, well spoken but almost as arrogant as the president and slightly cockier.

Bruce made the rounds at our plants for the first three weeks of his employment and then presented his observations to both our president and CFO. I was not fortunate to see the entire report but the CFO mentioned that Bruce had determined that the plants spent an excessive amount of time on internal reporting. He also observed that there were too many reports floating around the plants and headquarters. According to Bruce, these could all be replaced with a few simple metrics. I was both pleased as well as suspicious at hearing this remark but I thought that I’d wait to see just what was in store. As I expected, my suspicions were soon rewarded.

I was moving more and more into the corporate side of things for the company but the CFO thought that I should speak with Bruce about his ideas concerning reporting. We were hiring a new plant controller for our local facility and the CFO thought that this might be a perfect opportunity to change some of the plant’s reporting to the new few simple metrics.

Bruce handed me a form titled “Dashboard” that contained six “metrics” or six items listed vertically that were required to be reported each month. Across the top of the form were five column headings. The first was a column for actual, the next three columns were headed Good, Outstanding and Exceptional and the final column was titled “score”. I could see at the bottom of the form that he had simply copied it from a set of forms from his old company. It still bore their name and logo. The first three metrics were fairly simple and benign. I recognized immediately that this was data everyone collected and reported in a similar format. It was of a common nature: safety, net profit and efficiency. The next three, however, looked unfamiliar: I asked Bruce what they meant. I will not go into a detailed explanation here. Suffice it to say, they were quite complex and nothing like we were used to.

Bruce explained that his former company had measured these three simple metrics and that they were key performance indicators. I asked him of what value this data had in managing an operation. He never really provided an answer but smugly related that his former operations had always managed to score “Exceptional” in these areas. Scoring Exceptional had resulted in his plants’ being given more resources as well as gaining “bonus” payments for management. I then asked for an explanation about how the metrics were calculated. Bruce went into a lengthy dissertation using some terminology and jargon that I was totally unfamiliar with. It became obvious that these terms and this reporting were peculiar to his former company and had probably been developed over a considerable period of time. I am certain that they were important and valuable in the context of that company’s operating environment and corporate goals. But in ours? We had no way of duplicating this data with the output available from our various manufacturing-reporting systems. I asked Bruce about how he had received these reports back at his old company. He stated that they emanated from their headquarter’s IT and accounting departments. I told him that we had no IT department and explained our reporting processes and capabilities. Bruce insisted that these metrics were key performance indicators and that he needed this data to manage the plants.

It was obvious from our conversation that complying with Bruce’s wishes would entail much more data gathering, input, validation and reporting than we were used to. His few simple metrics could only add to the workload. I reported this back to the CFO. He listened attentively but suggested that we give it a try anyway. Bruce was new and both the CFO and the president were banking on Bruce to help turn things around. Besides, we probably could have used to get rid of some of our old reports anyway.

I contacted the plants and obtained copies of all of the reports Bruce had referred to earlier. They were all of a similar nature and reported various metrics: downtime, set-up time, machine hours, labor hours, variance to standards, etc. Of course there were variations and a variety of formats due to dissimilar computer systems but they were all pretty basic. Two of the plants had such primitive systems that they did not even report some of this data. I also spoke to the plant controllers who insisted that their respective plant managers needed these reports to adequately manage their plants. It was all they had. Not many of these reports could be eliminated and since those that could were mainly byproducts of the production data that was already being collected, scrapping them would not result in any reduction of manpower or effort. I then briefed the controllers on the new metrics that Bruce was insisting upon. Three of the plants complained that this data was not even available through their reporting systems and that it would have to be gathered, collated and reported manually. Four of the five agreed that the data would require a lot of work and additional resources to obtain. I mentioned all of this Bruce and he said that he’d talk to the president about it. He insisted that he needed the data at any cost and that it would pay for itself.

I reported this back to the CFO but he reiterated that Bruce had to be given a chance to turn things around. Within six months, Bruce had replaced three of the five plant managers with individuals that he knew from his former employer. The three newbies insisted on new the reporting metrics. These metrics were what they were used to and they could not manage without them. There was now even more turmoil at the plants due to the new reporting requirements. Bruce had forgotten to mention that although his simple three new metrics were reported monthly, they also needed to be monitored on a daily basis as well so that operational adjustments could be made throughout the month to ensure that the month end results were not a surprise. Bruce insisted that the daily results be reported to him everyday by 10 AM. Plant personnel were scrambling to gather the data to meet Bruce’s daily reporting deadline. Resources were diverted from production supervision, quality assurance, technical support and even accounting functions to gather data for daily reporting. Because two of the plants had no easy methods to even gather accurate information, they estimated it. A tremendous amount of effort seemed to be directed toward completing the daily report rather than interpreting or reacting to the information it contained. If one person the chain of reporting was absent due to illness or vacation, the daily reporting fell apart. Bruce insisted that there be “back-up” personnel. There were none. Staff was already stretched to the limit. Whenever the reports were late, threatening E-mails would emanate from Bruce’s laptop. Several long time employees at the plants were actually terminated for not fulfilling their roles in the reporting process even though that was not their primary job function.

Our president soon began to monitor the daily reports himself. Apparently, his focus had changed again. Being a micromanager by nature, he even made several modifications to the formats. This set him on a collision course with Bruce. I believe there was a power (if not ego) struggle going on between them. The president did not like the daily results gleaned from the reports and wanted something done about them. But critical resources had been diverted from real value added activities to gathering and reporting the data. This resulted in even more threatening E-mails from Bruce.

Two years later, Bruce was gone. He had resigned and taken one of his former plant managers with him to another company. A year later, another of Bruce’s hires was terminated for allegedly falsifying data. The new directive from the president was to “Get back to the basics.”

There are many conclusions and questions raised by this story. You may agree, disagree or even add your own.

1. Small companies oftentimes feel that they can “cash in” on the success of large corporations by hiring executives from those concerns. A word of caution here: Large corporations have already invested in the infrastructures needed to support complex reporting metrics. Bruce had “grown up” in such a concern and might have thought that his former environment could simply be transplanted to another company. We did not have the resources to replicate his former comfort zone. He did not seem willing to recognize that.

2. I will always wonder exactly what was Bruce told during his interview for the position. What was he told about the context of our firm? Did he even ask about it? What specific goals was he given? What did he agree could be accomplished?

3. During his three-week orientation plant tours, did Bruce bother to find out anything about how our plants operated and the resources available to them? Armed with that knowledge, he might have modified his strategy and concentrated on other areas besides reporting. Had he done that, Bruce might have been able to make some real impact on productivity or efficiency without creating more complexity and chaos. He did not seem very flexible about modifying his goals to fit the environment.

4. Snapping your fingers and sending threatening E-mails is no way to lead improvements. This should be a slow and calculated process.

5. My overall impression of Bruce was that he was more of a big company bureaucrat than anything else. We were a very “hands on” organization. Even the president went out on the floor and kicked the tires from time ro time. Bruce always wore blue jeans and said that the people would relate to him better if he dressed down. But he rarely made an appearance in a production area. He chose to lead through his laptop. He worked from home a lot of the time.

6. Perhaps someone can explain why flexibility, adaptability, ability to prioritize and solve problems as well as good people management skills are always held up to middle managers as important personal characteristics. Yet, certain executives appear not to need any of them – just a pedigree.

7. What does this say about the leadership of the corporation?

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