Our Sites

Tuning up a metal fabricator's performance measures

When company metrics aren’t evolving, shop floor employees tune might out

measuring business metrics

Metal fabrication companies aren’t static. They evolve, and the performance measures they use should do the same. Getty Images

What measures are you using to determine your company’s performance? How do you know if you have had a good day, week, month, or even year? You look to your performance measures, of course. But as you step back and give thoughtful evaluation, do you see a set of performance measures that provide timely, effective, and relevant insight, or do you see a collection of measures that tell you about outcomes but little about the performance of upstream operations?

Just like you can tune up your operations to be more effective and competitive, you can also tune up your performance measures to reflect contemporary conditions and opportunities.

Metrics Drive Behavior

The performance metrics you use might not have changed in a while. Perhaps they’ve been static for years. But has your company remained static? Probably not. Customers and customer demands change; equipment is updated to reflect technological improvements; and the flow within the operations changes, especially if you’re aggressively pursuing your lean journey. If metrics do not keep pace, you may unintentionally be inhibiting your company’s performance.

Effective metrics and performance measures will drive behavior. You should revisit them to make sure they are still driving the right behavior—hence the need for a periodic tuneup.

Focus on Behavior

Keeping your performance measures relevant is serious business. It would be easy to make knee-jerk decisions based on the latest issue, complaint, or problem. But metrics developed in this way probably don’t tell you what you need to know and have a short shelf life. You’re likely to replace it with another measure that feels good in the moment.

Selecting and tuning performance measures is a process, and treating it as such should help you gather meaningful, lasting information for guiding the business. Equally important, you develop mechanisms that influence outcomes and drive the desired behavior.

What behaviors do you want to affect? Do they focus on cost, quality, or delivery? Maybe you need to influence speed, cleanliness, or safety. If you are tuning an existing metric, have employees drifted away from its original intent, or are they simply failing to comply? Answering these sorts of questions will help you build clarity around the desired behavior and intent.

Next, be sure you understand the inputs to the performance measure. If you are tuning an existing measure, have the inputs changed? This could be the result of information system upgrades, new technologies for data acquisition, or fundamental changes to your manufacturing processes and flow.

In some cases, new or different technologies make gathering data for those inputs a lot easier. One risk is that you may have an overwhelming amount of data or information to choose from. Make wise choices and avoid the next “shiny object.”

Understand how you will use the metric to its maximum benefit. If people don’t understand the metric, they won’t respond to it. Explain what the metric is, how it affects people and the processes being measured, and what employees can do to influence it. If the metric is designed well, what a person does should be consistent with the behavior that is desired.

Make the metric visible. You could have a dashboard shared via electronic media, the old-fashioned production board in the work area where key metrics are posted and updated regularly, or an in-plant live monitor that scrolls real-time data.

Share metric updates during shift startup huddles, daily production meetings, and other consistent gatherings. Reinforcement and repetition keep performance measures front and center.

Sometimes the performance measures and metrics already exist but are not shared or visible. In this case, the tuning may be more about bringing the information out from the cover of darkness and into the brilliant daylight. Think about that image from the perspective of a shop employee who might think communications are weak and information isn’t shared. A well-tuned metric brings everyone into the know; creates alignment; and moves the performance in a way that is safer, more competitive, and customer-centric.

Balancing Outcomes With In-process Metrics

When developing metrics, you might rely heavily on the financials, especially the profit and loss (P&L) statement. Unfortunately, by the time you see the P&L, the horse is out of the barn. Financial statements like the P&L show you the outcome; the problem is in the rear-view mirror. It already happened, and you can’t turn back time and fix it. But if you balance the P&L with upstream in-process measures, you can detect early warning signals that may affect the P&L for the current period. Such in-process measures might include:

  • Clean plant behavior using 5S audit scores. 5S is a way of life for companies that are serious about their lean journeys. The 5S audit sets expectations and provides feedback directly to people in all work areas. You can roll up the 5S scores to departmental, plant, and even companywide scores. This tuneup clearly drives a positive behavior.
  • Focus on velocity of material. Time-based performance measures provide deep insight into the velocity of the material moving through your operations. This also supports the concepts of “make one, move one” and “the product never stops moving once it starts in the operation.” This performance measure makes velocity tangible and easy to understand.
  • Accuracy behavior using internal and external nonconformance occurrences. Accuracy shows up in your operation in many ways, from the quality of a weld bead and the size of a bored hole to the correctness of an inventory count. Nonconformance indicates some sort of quality error. Understanding whether the nonconformance was caught internally or whether it escaped to the customer tells you about the diligence of your operators, supervisors, and support personnel.
  • Cost control behavior using performance-to-budget. The overall financial performance of your company is critically important, but it is difficult for most supervisors, managers, and even front-line personnel to understand how they can impact the higher-level P&L. When you distill financial performance down to the individual departmental budget, then the connection between the local action and the local financial performance becomes much clearer. A well-trained supervisor will be able to explain to the welder, machine operator, or material handler how each person has a direct impact on the budget. Tune up this metric to make it meaningful for everyone, from the shop floor to the top floor.
  • On-time delivery behavior using work-order target-date performance. To complete a product on time, you need to start and complete the component parts on time. If a product must be laser-cut from a flat sheet, formed on a press brake, welded, painted, and then shipped, you cannot expect to meet the ship date if upstream operations weren’t performed by specified target dates. Tune up this measure to drive upstream work-order target-date performance.

These upstream, in-process measures provide deeper insight about the likelihood of meeting your outcome performance measures. In some cases, you can simply tune up the measure. In other cases, you may have to develop new measures from scratch.

Engaged People Make a Difference

Performance measures can be specific and spur engagement or be abstract and, from your employees’ perspective, utterly irrelevant. When they engage people, they support your lean journey, and front-line personnel begin behaving in a way that contributes meaningfully within their work area and to the overall financial performance.

When supervisors and managers engage with performance measures, they work hard to meet objectives because they can see the link between their actions and results. When they don’t work hard to meet the objectives, leaders use performance measures as a tool to hold them accountable. When leadership views this as a developmental exercise rather than a punitive proposition, good things can happen.

Take some time to objectively evaluate your performance measures. Explore how effectively they support the changes you’re making to specific operations and the overall business. When you tune up your performance measures in the right way, you engage people, and everyone begins to see how they do what they do can truly make a difference.

Editor's note: For a sampling of performance measures, both operational and financial, check out FMA's 2021 Financial Ratios & Operational Benchmarking Survey.

About the Author
Back2Basics  LLC

Jeff Sipes

Principal

9250 Eagle Meadow Dr.

Indianapolis, IN 46234

(317) 439-7960