Why Metrics Matter
July 02, 2012
A well-planned journey or expedition will have a plan, a budget, a map, and a compass. Before embarking, you should ask three fundamental questions:
1. Where do we want to go?
2. How do we get there?
3. How will we know when we have arrived?
After the trip is completed, you often reflect on the travel and the outcome. Did we reach the objective? Arrive on time? Stay on the budget? Travel efficiently? What should we do differently next time?
The same line of questioning should prevail when setting off on a business “journey”—whether it’s a limited expansion to a distribution center or a over-year strategic plan. Setting broad and special goals, determining strategic and tactical directions, and maximizing resources require at least three levels of planning in an organization—strategic planning, operational planning (S&OP), and production planning. Most organizations place great emphasis on the “hows and whys” of strategic planning and on S&OP (sales and operations planning). Much less attention is typically paid to metrics—how well are we doing against our goals and objectives set in the planning process. However, launching a business initiative without the right metrics is akin to starting on a real expedition without a compass. And without knowing where you are or how you’re doing, the default measure tends to be costs.
Managers often don’t understand the importance of the information provided by operational metrics or the significance of the metrics themselves. This article will explore the need for a well-structured operational metrics program and the value such a program can provide. Throughout our discussion, the term “metrics” will refer to operational metrics as opposed to financial metrics.
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A well-planned journey or expedition will have a plan, a budget, a map, and a compass. Before embarking, you should ask three fundamental questions:
1. Where do we want to go?
2. How do we get there?
3. How will we know when we have arrived?
After the trip is completed, you often reflect on the travel and the outcome. Did we reach the objective? Arrive on time? Stay on the budget? Travel efficiently? What should we do differently next time?
The same line of questioning should prevail when setting off on a business “journey”—whether it’s a limited expansion to a distribution center or a over-year strategic plan. Setting broad and special goals, determining strategic and tactical directions, and maximizing resources require at least three levels of planning in an organization—strategic planning, operational planning (S&OP), and production planning. Most organizations place great emphasis on the “hows and whys” of strategic planning and on S&OP (sales and operations planning). Much less attention is typically paid to metrics—how well are we doing against our goals and objectives set in the planning process. However, launching a business initiative without the right metrics is akin to starting on a real expedition without a compass. And without knowing where you are or how you’re doing, the default measure tends to be costs.
Managers often don’t understand the importance of the information provided by operational metrics or the significance of the metrics themselves. This article will explore the need for a well-structured operational metrics program and the value such a program can provide. Throughout our discussion, the term “metrics” will refer to operational metrics as opposed to financial metrics.
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