Measuring productivity
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The document discusses the importance of a business dashboard for measuring productivity and managing operations, comparing it to car dashboards that warn drivers of potential issues. It stresses the significance of real-time performance feedback based on critical metrics related to people and processes, emphasizing that this proactive approach leads to better decision-making. Additionally, the document outlines the steps for building an effective dashboard, including data collection, organization, and identifying key performance indicators.
Measuring productivity
- 1. feature Measuring Productivity By Joel Ungar, Principal, Maddox Ungar PLCC he earliest automobiles were called horseless carriages because that is exactly what they looked like — a horse-drawn carriage without a horse. These cars were so simple they didn’t even have a dashboard. When these cars were going to break down, there was only one way you knew it was going to happen — the car stopped running. Over time, car manufacturers started adding dashboards to their cars. The first dashboards were simple, telling you perhaps speed, fuel level and engine temperature. As time passed, dashboards became more and more sophisticated. Fast forward to today — how do you know when your car is going to break down? Frequently, your dashboard will give you some kind of a warning, giving you the opportunity to fix the problem before it disables your car. Often, the warning looks something like this: T The Solution: A Business Dashboard If your car (and mixers) have dashboards warning you of problems before they disable the vehicle, then your business should have a business dashboard. A business dashboard is a centralized reporting mechanism that provides real-time performance feedback about activities that are critically important to helping a company achieve specific goals. Real-time feedback gives decision makers the opportunity to react to issues before they become problems. Many businesses currently measure business success by relying on a simple formula: Revenues – Expense = Profit While profit is critically important to the success of a business, it is also a lagging indicator. By the time you have this information, it has already happened and it is too late to react. If you want to impact success, you need to shift your focus to a different and equally simple formula: People x Process = Profit When this happens, you know it is time to take your car in for service. The first thing the mechanic does is take a diagnostic computer and plug it into the computer in your car. Almost instantly, the mechanic has a report indicating the critical measures necessary to keep your car running. With this information, the mechanic is able to get right to fixing the problem instead of spending a lot of time (and your money) diagnosing the problem. Jack Welch, the legendary former CEO of General Electric, once said, “Doing business today is like trying to change the tire of a car going 50 miles per hour.” This pinpoints a problem: you can’t stop the car (or in this case, your business) to fix the problem. Management needs to be able to quickly identify problems and address them before they can do any real damage. The concrete industry is competitive and your competitors aren’t going to slow down when you have a problem. In today’s environment, you don’t have the time to tear apart the engine and look for the cause. 46 ı SPRING 2006 Your people and your processes are the drivers of business success. Measuring people and process provides a window into future outcomes and are therefore leading indicators. Think of people and process as the cause and revenue and expenses as the effect. If you want to change the effect, you have to change and manage the cause. Building Your Dashboard Even before you construct a dashboard, you need to have a sense of where you are going. In five years, you’ll arrive. The question is where. Perhaps you hope to double your number of plants and triple your revenue. Perhaps you want to sell the company and retire. Having this vision impacts the kind of dashboard you need to build. Once your vision is complete, there are four steps to building a business dashboard that will give you relevant and timely information to manage your business:
- 2. Step 1 — Collect Data Ready mix operations produce a tremendous amount of data every day. For example, the dispatch ticket usually captures the following data: On time New product arrivals Throughput development Employee Mgmt R&D Sales Acquisition Advancement Turnover Rate Cost of Shrinkage Productivity Product Customer Acquisition Mix Complaints Customer Cycle Attrition Backorders Frequency Gross Safety Time Rate Vendor Margin Violations Training Reliability Costs Credit Customer Service Improve Memos Inventory Mix Mix Turnover Billing Cash Quality Average Accuracy Control Morale Flow Sale Batch computers also capture data: • Batch number • Targeted tons of cement • Actual tons of cement • Targeted tons of gravel • Actual tons of gravel • Targeted tons of sand • Actual tons of sand • Targeted gallons of water • Actual gallons of water Other systems collect data every day: • Accounting • Payroll • Maintenance • Customer Management • • • • • • • • • Date Customer name Job name Driver name Truck number Mix Admixtures Surcharges Yards Cost of Capital Accounts Receivable Innovation Quotient On time New product arrivals Throughput development Employee Mgmt R&D Sales Acquisition Advancement Turnover Rate Cost of Shrinkage Productivity Product Customer Acquisition Mix Complaints Customer Cycle Attrition Backorders Frequency Gross Safety Time Rate Vendor Margin Violations Training Reliability Costs Credit Business Memos Customer Service Inventory Mix Mix Activities Turnover Billing Quality Average spin off Accuracy Control Morale Sale data Sales per Return on Order Bad Debt person Market Equity Entry write-offs Rework Share Accounts Waste/Scrap Management Return on Customer Receivable Net Profit Effectiveness Innovation Quotient Discounts Taken Technology Management Assets Community Involvement Return on Bad Debt Market Equity write-offs Rework Share Waste/Scrap Management Return on Customer Effectiveness Assets Referrals Discounts Community Professional Returns Taken Involvement Technology Development Management Order Entry If the goal is to increase market share, a different set of data would be examined: On time New product arrivals Throughput development Employee Mgmt R&D Sales Acquisition Advancement Turnover Rate Cost of Shrinkage Productivity Product Customer Acquisition Mix Complaints Customer Backorders Frequency Cycle Attrition Gross Safety Time Rate Vendor Margin Violations Training Reliability Costs Credit Customer Service Memos Increase Inventory Mix Mix Turnover Billing Market Quality Average Accuracy Control Morale Share Sale Cost of Capital Net Profit Sales per person Accounts Receivable Innovation Quotient Return on Bad Debt Market Equity write-offs Rework Share Waste/Scrap Management Return on Customer Effectiveness Assets Referrals Discounts Advertising Professional Returns Taken Technology Effectiveness Development Management Order Entry Referrals Professional Development Returns ...you need to have a sense of where you are going. In five years, you'll arrive. The question is where. Net Profit Sales per person Once you have a clear vision and a plan to achieve your vision, you need a filter to help you sort through the enormous amount of data your operations generate on a daily basis. Doing this allows you to focus on the data that is most critical to your company. Without a filter, it is easy to become overwhelmed with the volume of data you generate each day: Cost of Capital Looking at all of this data without a filter would lead to overload. Instead, focus on a specific goal and see which data is relevant. For example, if your goal is to improve cash flow, you would look at these indicators: While going through this process, there are several things to keep in mind: 1. Start with a baseline. Without a baseline in place, you can’t easily set reasonable targets. For example, NRMCA’s annual Industry Data Survey is a good starting point. The survey summarizes both financial and operational data reported confidentially by producers throughout the United States. 2. Standardize performance data. Performance needs to be standardized for the data to be consistent. For example, if you have five dispatchers issuing tickets and they all do it differently, how will you ever determine what your best practices are? CONCRETE in focus ı 47
- 3. feature 3. Identify important measures. There are three basic ways to identify the measures that are important for your company: i. Map a cycle of customer interaction. Draw a large circle, and starting at the top and proceeding clockwise, indicate all the different ways you “touch” a customer during a selling cycle. A ready mix producer might have the following touches for one order: • Customer phones in order • Dispatcher takes order • Dispatcher enters order • Dispatcher assigns load to driver • Driver delivers load • Driver obtains signed delivery ticket • Billing prices out tickets • Billing invoices customer • Customer pays invoice Mixers M ixers 121 Knight Drive • Winterville, NC 28590 • Phone: 252.355.7667 • Fax: 252.355.0940 Web Site: www.abcmixers.com • E-mail: joe@usa.com Volume discounts! Sale prices! Check out our inventory at www.abcmixers.com Greenville, North Carolina 48 ı SPRING 2006 Wanted to Buy: Good used concrete mixers. Please call, fax, or e-mail the details if you have Mixers that you have for sale. Willing to pay top dollar. Good used concrete mixers. Mack, IHC, Autocar, Oskosh, and more. Please call for specifications and details. Wanted to Sell: (20) 1989 Mack DM686SX triaxle mixers – 12 yard, 300 engine 8 speed, 58,000 rears 20,000 front axle PS (5) 1989 Mack RB690s mixers – 300 engine 8 speed, 44,000 rears 20,000 front, power steering, 10 yard Mtm (2) 1995 Mack DM690s Boostaload mixers – 10 yard challenge (70%), 300 engine 8 speed, 44,000 rears PS Call about many others available! • Sales follows up on order satisfaction How well the company performs each of these steps in the sales cycle has a significant impact on operations. ii. Process mapping. This is similar to the cycle of customer interaction. Process mapping is linear and is designed to develop a detailed map of a particular process, especially if it has been determined to be critically important or problematic. For example, a producer may determine that it is having too many rejected loads. Identifying each step in a linear map may help identify areas for improvement. iii. Construct a hierarchal view. Examine your business to identify your performance areas. Most producers typically have four major performance areas: • Finance — all activities relating to the financial aspects of the business, including accounts receivable, accounts payable, payroll, financial reporting and banking. • Operations — all activities relating to the development, production and delivery of concrete, including manufacturing processes, inventory management, quality control, order processing and delivery. • Customers — all activities relating to the acquisition and retention of customers, including marketing, sales and customer service. • People — all activities relating to hiring, training, managing, growing and developing people. The producer then needs to identify the critical success factors relating to each of these areas. Key performance indicators are linked to the critical success factors, then identify the activities that have an impact on the key performance indicators. For example, a critical success factor for finance could be cash flow. One of the key performance indicators for cash flow could be days’ sales in accounts receivable. The producer could set a goal of reducing days outstanding from 65 days to 47 days.
- 4. Activity measures that could be tracked would include the time it takes to get billings out and the accuracy of billing statements. Visually, this could look like the following: Finance Example: Finance Enterprise, Company, Division Finance Critical Success Factors KPIs Outcome Measures Activity Input Measures Critical Succes Critical Success Factor: Cash Flow Cash Key Performan Key Performance indicators: Recei Receivable Days (Goal: Reduce A/R from 65 to 47 days) (Goal Activity Measu Activity Measures: Time it takes to get billing out Time (Goal: 24 hrs.) Errors Errors in billing statements (Goal: 98% accuracy) By using these different tools, you can start pinpointing the data that will you need to construct your dashboard. Once you have your data in place, you then need a way to display it. Step 2 — Organize Information Once you have figured out which data is most relevant to your goals and your pressing needs, the next step is to construct your business dashboard so you can access the information you need to manage your business more effectively. There are numerous ways to create a dashboard. For example, you might construct a dashboard to track your daily yardage by plant, along with other key information such as top jobs, trucks used and yards per hour. To build the report, you have to know where to find the data. In this case, most if not all of the data can be found in your concrete operations database. Driver hours might be in the same database, or might be in a database from your timekeeping system. As long as your database is ODBC compliant (for Open DataBase Connectivi- ty), you can access your data and manipulate it. You could construct a database in Microsoft Access that queries the raw data and then perform needed calculations. For example, to calculate average load, you need to first have the database determine the total yards and the total number of loads. From there, it is simply a division calculation. Fortunately, the major software vendors, including Systech, GivenHansco and Command Alkon, use databases that are ODBC compliant. Once you have your data in place, you then need to display it. A dashboard can be as simple as a piece of paper tacked on a corkboard with handwritten numbers or it can be produced by sophisticated software. One option is to use Crystal Reports, a powerful report writer. Crystal Reports takes the information from a data source and then displays it. CONCRETE in focus ı 49
- 5. NRMCA - Education, Certification, Advocacy, Promotion $350* to join NRMCA could save you, and make you, many thousands more. Get member discounts on state-of-the-art publications and educational opportunities to help you make more and save more. NRMCA publications and educational opportunities increase efficiency. Whether it’s programs that reduce your risks of fines for non-compliance with Federal regulations, workshops that improve plant operations, the industry’s best training workshops, easy access to technical experts, or any of hundreds of publications, certification and educational choices, membership in NRMCA pays for itself with a proven ROI. Find out for yourself. Join today. Complete the application below and fax to (301) 5854219 or mail to NRMCA, 900 Spring Street, Silver Spring, MD 20910. Call Kathleen-Carr-Smith NRMCA Membership Director at 1-888-846-7622, ext 1145, kcarr-smith@nrmca.org. Compute your NRMCA Dues Please type or print Multiply your company and its subsidiaries’ 2005 cubic yard production by .0175. * Minimum dues (for all members producing less than 20,001 cubic yards: $350) Company X 0.175 = $ 2005 cubic yard production 1.75 cents per Your 2006 (if over 20,000 cyd.) cubic yard membership dues Address Choose your payment option Annual Payment—Full year payment enclosed Quarterly Payment—First payment enclosed (Total dues must be greater than $1,000) Name/Title City/State/Zip Phone Email Fax Payment Type By Check (please make payable to NRMCA) Charge to Amex VISA MasterCard Card # Exp Date Name on Card Signature www.nrmca.org 888-84NRMCA.
- 6. The following report was prepared in Crystal Reports from a simple database I created in Microsoft Access: Flint Ready-Mixed Concrete Daily Activity Report Tuesday, January 7, 2003 Flint LESSER CONSTRUCTION CRAWFORD WALL COMPANY Total Trucks Number of Loads Total Orders Driver Hours Bay City LAFORGE BUILDING COMPANY Total Trucks Number of Loads Total Orders Driver Hours Saginaw STEFANOS AND SONS PURSEL CONCRETE Total Trucks Number of Loads Total Orders Driver Hours Midland BEALS COMPANY WILKOP COMPANY Total Trucks Number of Loads Total Orders Driver Hours Company Totals: Total Trucks Number of Loads Total Orders Driver Hours 4 17 7 30.00 AARON GARAGE 24151 TELEGRAPH Total Yards- Flint Average Load Average Delivery Time Yards Per Hour 38.00 26.00 129.00 7 .5 9 1.76 4.30 4 71 1 37.00 MONROE HARBOR Total Yards- Bay City Average Load Average Delivery Time Yards Per Hour 639.00 639.00 9 .00 0.52 17.27 9 21 6 62.00 WALKER OFFICE BUILDING WALGREENS Total Yards- Saginaw Average Load Average Delivery Time Yards Per Hour 70.00 54.00 158.00 7 .5 2 2.95 2.55 Goal 7.50 6 15 9 41.50 LEWANDOWSKI BROTHERS LANGER PAVING Total Yards- Midland Average Load Average Delivery Time Yards Per Hour 42.00 30.00 106.50 7 .10 2.77 2.57 Goal 7.50 23 124 23 170.50 Total Yards Average Load Average Delivery Time Yards Per Hour This report was done at an overall level on a specific plant basis. You may also wish to get more detailed. Yards per hour is a key productivity measure in the concrete industry and can be calculated on a per driver basis. You can also use a Crystal Reports feature called Conditional Formatting to make values below a desired benchmark stand out. In this report, drivers with yards 1,032.50 8 .33 1.38 6.06 Goal 7.50 3.50 Goal 7.50 3.50 3.50 3.50 Goal 7.50 3.50 per hour less than 3.00 appear in red. Having this information available allows you to both let the employees who can control these results know what is expected and measure their progress against the standard. Regardless of the nature of the dashboard, you will get the benefit of a centralized view of your information as opposed to a more fragmented view. Flint Ready-Mixed Concrete Yards Per Hour Tuesday, January 7, 2003 Driver Flint Hoover Kolpak Oliver Schaeffer Total - Flint Bay City Dines Gabel Miller Paulson Total - Bay City Saginaw Blake Burns Crusher Maltese Matone Me r r el l i Newsted Pierce Potter Total - Saginaw Midland Holderby Hunicutt Klinger Malone Shenson Sulu Total - Midland Total - Company Yards Per Hour Loads Yards Hours 4 4 5 4 17.00 35.50 31.00 36.00 26.50 129.00 7. 00 7.25 8.50 7.25 30.00 5 .07 4.28 4.24 3.66 4.30 19 18 16 18 71.00 1 7 1 .0 0 1 6 2 .0 0 144.00 1 6 2 .0 0 639.00 9.00 9. 5 0 9.50 9. 0 0 37.00 19 . 0 0 1 7 .0 5 15.16 18.00 17.27 1 2 2 3 4 2 3 2 2 21.00 9.00 14.00 18.00 27.00 15.00 1 2 .0 0 27 . 0 0 18 .00 18.00 158.00 6.00 5.75 7.00 7.50 9.75 5.7 5 7 . 75 6 .5 0 6.00 62.00 1.50 2.43 2.57 3.60 1.54 2.09 3.4 8 2.77 3.00 2.55 3 3 2 2 3 2 15.00 3 0 .0 0 12.00 13.00 18.00 1 3 .5 0 20.00 106.50 7 .5 0 7.75 7.25 6.25 6. 7 5 6.00 41.50 4 . 00 1.55 1.79 2.88 2.00 3.33 2.57 124.00 1,032.50 170.50 6.06 CONCRETE in focus ı 51
- 7. feature Step 3 — Knowledge Through Analysis Once you have successfully built your dashboard, improved your processes and set new standards, it is time to repeat the process. K A U F M A N Concrete Treatments The world’s only water-based, curing & sealing compounds, that are freeze-thaw stable, are made by Kaufman Products. Our line of water-emulsion systems may be easily thawed and re-used. Not once. Not twice. Thousands of times; without any deleterious after-effects. No other manufacturer can match this feature – but there is more! The Next Step Epoxy Resin Systems Non-Shrink Grouts Form Release Agents Curing & Sealing Compounds Winter Admixtures Shake-On & Liquid-Chemical Hardeners Epoxy Coatings 52 ı SPRING 2006 To do this, you need to keep asking questions. For example, say that yards per hour is below the desired benchmark. Questions you could ask include: • How is yards per hour now as compared to the recent past? • If there has been a change in performance, what recent people or process changes have occurred? • Does it happen systematically? In other words, is yards per hour falling short of desired levels regardless of the people involved? • Can the problem be tied to a specific trend? Does this occur only on days when there is a specific job type? For example, you may find that yards per hour is down on days when there is a greater percentage of drivers with minimal experience. The response could then be to improve your training process. The possibilities are endless. Now that you have been collecting, organizing and analyzing data, it is time to act. You have identified the factors that are hurting yards per hour. Now apply wisdom to test new strategies to improve the weakness. Once you have identified the better strategy, that strategy then becomes your new performance standard. Kaufman Products is an American family-owned business that began manufacturing water-emulsion curing compounds over 30 years ago. Self-Leveling Underlayments & Toppings Is it a People or Process Issue? Step 4 — Applied Wisdom These water-emulsion products, and our line of high-solids, oil-based cures, are compatible with all carpet and tile mastics. No removal is necessary, cutting down dramatically on labor costs. Latex-Modified & Cement Repair Mortars Now that you have a dashboard, you can determine if you are on target to achieve your goals. If not, the dashboard should highlight the areas that are underperforming. You then can ask a key question: 3811 Curtis Avenue Baltimore, Maryland USA 21226-1131 (800) 637-6372 (Toll Free) (410) 354-8600 (Local) (410) 354-1122 (Fax) WWW.KAUFMANPRODUCTS.NET INFO@KAUFMANPRODUCTS.NET Once you have successfully built your dashboard, improved your processes and set new standards, it is time to repeat the process. Continually review your processes to see if there is yet another better way to do something. Only then can you answer the question “how high is high?” ■ Ungar is a frequent speaker at NRMCA’s Business Administration Conference and an instructor of NRMCA’s Financial Management Course. For more information, Ungar can be contacted at 248/341-1263 or via email at jmungar@maddoxungar.com.