Supply Chain Metrics that Matter. Cecere Lora M.

was a career man. Ethical and strong, Joe could outwork most of his peers, but never wanted to take credit. As a lifelong learner, he was curious and always asked questions and provoked what he called “learning moments.” He pushed his team to do well because he genuinely wanted his company to do well in the market. He was a team player, but never a boat rocker. His goal was to retire from the company at 65, and enjoy his bass boat and spend many days fly-fishing. He kept a bright red fly-fishing rod in the corner of his office to remind him that life was not all about work. He had pictures on his desk of himself and his son fishing.

      Joe's personal goals centered on living and enjoying the journey. He had a large family. Joe considered himself fortunate to be a dad to nine girls and one boy. The boy was his youngest, and while Joe worked hard, he would also make it known if his son had a ballgame. He was always present at his son's games, sitting on the bleachers rain or shine, cheering and eating peanuts.

      His relationship with his boss, Filipe, was tenuous. Joe wished that Filipe had a bit more humility and was more open to learn. Filipe was flamboyant and always wanted to be the center of attention. Joe was different: he knew that he didn't have all the answers and wanted to know more.

      Setting Metrics Targets

      The story goes on and on. It happens over and over again in corporate America. Operational leaders, like Joe, try to do the right thing but are unable to make progress in metric performance. In this story, Joe is making the mistake of looking at metrics in isolation. He lacks a basic understanding of the interrelationship of metrics and the need to manage a balanced portfolio. This is common. Most companies lack the understanding of how to drive balance and resiliency in metrics performance and how to improve year-over-year performance.

      The examples in this book are based on a variety of experiences. They do not come from one interaction, but instead are insights gleaned from working with many companies. Joe is a fictional character who is a composite of real managers. I find that the questions that different companies ask, and sometimes forget to ask, are eerily similar.

      Each leader wants to draw a road map, and they want to know where they are on their journey. There is a quest for excellence, but it is amazing how often leaders do not know what good looks like. There is a lack of clarity on the end state. The alignment of metrics to improve corporate performance is easier said than done. There is a struggle to align functional silos.

      Metrics That Matter is written for the Joe (or Jane) in every organization who does not want to be average. They want to excel. There is a fire in the belly to understand how operational performance affects corporate performance. They are ready to start the journey and find answers to the question, “What is possible?”

      The Journey

      The first step of the journey, for a guy like Joe, is to define operations excellence. The second is to identify the right metrics. The metrics chosen need to reflect all of the elements of the complex system. It is not easy. Putting together the metrics framework requires a clear definition of strategy. There are no cookie-cutter answers. The answer is slightly different for each company.

Figure 1.1 shows how the process for metrics maturity can be iterative. For teams like Joe's, there are five steps. Progress requires continuous learning, refinement, and renewal over many years. It takes a year-over-year focus and discipline by the executive team. Change happens in small increments, not leaps and bounds.

Figure 1.1 The Metrics Journey

      The first step is awareness of the need to change. The stimulus is often failure. It could be a missed earnings call, surprises at the end of the quarter, loss of market share, a market downturn, or the loss of business. When this happens, bad news moves like a lightning bolt through the organization. The gap in performance is a wake-up call. Normally, good news will travel fast in the organization while bad news moves slowly. It is only when there is a crisis that bad news travels fast. When the organization recognizes the need for change and is ready for alignment on the metrics that matter, there is an awakening and a call to action.

      The second step is metrics definition. This decision needs to be based on business strategy. It needs to be a conscious and a set of deliberate choices. The challenge is selection of a few meaningful metrics that represent all of the elements of the complex system. Most companies measure too many things and are not clear on which metrics matter. Gaining clarity is a part of the journey.

      The third step is driving organizational alignment on the metrics system. This requires building a guiding coalition with a clear vision that needs to be cross-functional. In this step, functional metrics are aligned to corporate metrics frameworks, and targets are established to drive incentives.

      The fourth step is to build organizational potential. A look at industry performance and accomplishments of industry peer group leaders helps to ground the discussion. The organization can then craft a road map for performance improvement.

      The last step, and a very important one, is to refine and adjust the metrics to drive strength, balance, and resiliency, over time, in corporate performance.

      It is a journey, not a sprint, and it is ongoing. Patience and discipline are essential. Most of the average Joes work in large matrixed organizations within a global company. Progress needs to be measured in millimeters, not meters. Substantial progress happens over the course of many years.

      Metrics That Matter at FMC Agricultural Solutions

      In the process of writing the book, I have sent the chapters to industry leaders to get feedback. Throughout the book, I will share perspectives from these leaders. Here is an excerpt from an interview with Marty Kisliuk of FMC Agricultural Solutions:

      If you don't measure the right things, you will not get better. However, if you measure them, it does not mean that you will get better. There is always tension. If you are not struggling with metrics, then you probably are not using them.

      When I think about the metrics that matter, I start my thinking with business strategy. I ask myself, “What is it? And, how will we measure the success of this strategy?” I don't think that any leadership team can deal with more than five to seven metrics at the same time. There is an issue of focus and selective strategy. It varies by industry.

      The metrics that matter are going to be the ones that you can take action on. There are two important words implied in the word actionable: action and able. I don't think that any organization can take action on all the metrics simultaneously. We need to start with two or three metrics and move them together.

      After being chosen, the metrics cannot align organizations, but they can misalign them. It is only the action by leaders that can drive alignment.

      A classic discussion for me is cost versus value. I want to sell value, and I define value as benefit over cost. Cost is only one side of the equation of value. As a result, you cannot have the operations team aligned for cost and the go-to-market teams of sales and marketing driving value. This is nonsense. We have to do it together.

      Marty Kisliuk, Director of Global Operations, FMC Agricultural Solutions

      Conquering the Effective Frontier

      Joe asked me to come back the following week and we continued our talk. The BHAG discussion was still uncomfortable. He had gotten some tough feedback from his team.

As I worked with him, it became clear to me that he, like other executives I work with, was battling a list of ever-changing goals for growth, profitability, and cycles in the face of rising complexity. When this happens, frustration reigns. Arguments abound and tensions are high. Leadership teams want to do the right thing, but it just isn't clear what to do to move forward. The obstacles are large, and the benefits are many. Each organization has a unique potential as defined by the Effective Frontier in Figure 1.2.

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