"If you can't measure it, you can't improve it. And if it isn't being measured, it isn't being managed." That's the thinking of BDC consultant Gordon Lyall.
"You need to have a score board to really see how your business is doing. And once you can get a handle on your company's performance, then you're better prepared to get the most benefit from quality management system," explains Lyall.
You should assess what you want to measure and improve in your business and determine a benchmark. You could use ISO, one of the most popular quality management systems, to implement standards that guarantee conformity and quality of your products and services. Once the system is in place, your company would be audited by an independent third party, accredited registrar and, if all of the requirements are met, awarded official certification. You can use these documented processes to ensure that your company remains in line with your benchmark. Ultimately, you would develop new norms for your processes.
Measuring your company's performance will enable you to reap the following benefits of ISO: standardized processes, more efficient and focused training for employees, quicker detection of problems, more effective solutions and better customer service. Entrepreneurs can also improve communications, enhance supplier relationships and increase employee participation in the company.
Measuring key indicators
Many entrepreneurs today may not see the long-term value of measuring performance because they're caught up in daily firefighting, or consider this too time-consuming, says Lyall. "But if they want to compete in a tougher business environment, they need to arm themselves with concrete facts and data," he emphasizes.
Although many entrepreneurs may assume measurable data is limited to obvious areas such as costs, there are several other "key indicators" that are vital: quality, delivery deadlines, safety, environmental impact and employee satisfaction.
Quality can easily be measured in terms of the number of returned products, credit memos or client complaints.
Meeting promised deadlines and product delivery cycle times are strong indications of a company's well-being. "Speed is a valuable asset in a company competing for business today," says Lyall.
Entrepreneurs should also collect data on safety performance, which is not limited to the manufacturing environment. "You may need to know, for example, how many people are out with back problems, driving-related injuries, or repetitive strain injuries in your company."
Environmental impact is an increasingly important measurement in particular if you intend to include the ISO 14001 Environmental Standard in your management system. "Knowing how much waste you generate, or how much pollution you are adding to the environment is an important part of being a good corporate citizen and improving productivity," he says.
Finally, assessing employee satisfaction is crucial for entrepreneurs. The rule of thumb is that happy employees are generally more productive employees. An employee survey could be a useful tool to indicate the level of satisfaction. "You can use the results to improve, for example, your employee reward system," he says.
Key success factors
Lyall offers some advice to entrepreneurs about measuring data:
Collect data that tells your story
Start with broad, meaningful data that answers basic questions such as, is my company making money? And be sure to collect information that is relevant. "You want data that can actually tell you something about your business," he says. Many entrepreneurs get caught up in too much detail, or irrelevant data collection. "If you don't have sick leave issues, for example, then you don't need to gather information on that aspect."
Get timely data
Lyall advises that entrepreneurs collect data that remains relevant. "If you're talking about last year's accident rates then you need to speed up your data collection process," he says.
Collect, display and communicate
Business owners should also ensure that their data is in a format that can be easily analyzed. "Use graphs, pie charts and other visual elements so that you can communicate your message to all stakeholders effectively," he says.
Get external help
External consultants such as BDC Consulting have the expertise needed to help you collect, measure and manage data, says Lyall. "An external adviser can determine where the data is available and set up a tracking system for all of your key indicators," he concludes.
