Take Control of Your Business
May 19, 2016
Establish metrics to define, evaluate and plan for success, especially with CNC machinery
By Rob Bromley
This article appeared in the Q2 2016 issue of ISFA’s Countertops & Architectural Surfaces magazine (www.isfanow.org/news/).
HOW DO YOU KNOW IF YOU ARE SUCCESSFUL?
Does your accountant tell you monthly, quarterly or annually if you are profitable? It is difficult to successfully manage your business if you have not identified key metrics within your company. Defining metrics within a business allows for tracking, monitoring and assessing success or opportunities within the organization. This is particularly true when it comes to the successful use and integration of CNC machinery.
The main goal of defining business metrics is to track costs, communicate a company’s progression toward certain short- and long-term goals and objectives, and ultimately increase bottom-line profitability.
Where to Begin?
Every area of a business has specific metrics that could be measured and monitored:marketers track campaign and program statistics; sales teams monitor new opportunities and leads; production managers monitor production volumes and costs; and owners look at big picture financial metrics.
Implementing metrics in a business first begins by understanding the cost structure. In an average fabrication shop, overhead costs may be 33 percent. These are typically fixed costs (building, office staff, insurance, etc.) and do not fluctuate with business volume. Another 33 percent may be tied into material costs and the remaining 33 percent may be in labor costs. An organization should determine where it has the most “pain” and develop metrics to measure those key areas.
In many fabrication businesses the production/shop areas have huge opportunities to improve flow efficiencies and reduce labor costs. The ongoing struggle to find, train and retain employees continues to plague businesses around the country. Measuring the right things could help you to decide when and if new employees are needed, or if machinery upgrades are warranted and what the ROI on such a machinery investment will be.
Establishing metrics within your business will be easy — only if you start small, that is. Don’t get overwhelmed by thinking you have to implement 15 different metrics within every department of your business. You are better off starting with a total of two to three key metrics that will be manageable and easy to monitor.
Don’t overcomplicate things — keep it simple. Don’t get caught in the “paralysis by analysis” syndrome. This often leads to becoming overwhelmed and freezing up in a sea of data.
A key metric that is often discussed within the stone fabrication industry is square feet per labor hour. This measurement evaluates labor efficiency and could be a key metric within various departments. For example, a business should evaluate the square feet per labor hour of various departments such as templaters, programmers and shop floor associates. These metrics will vary based upon the department, but at least a baseline gets determined and managers can understand what improvement could look like.
One other metric that fits in this same realm is material usage. How much of each slab is being used and how much is being tossed into a dumpster? An analysis of nesting methods could yield improved usage and cost savings (see Figure 1).
Often, companies get nervous that they are establishing the correct metrics. There is no “right” and “wrong” answer as it pertains to metrics. Just start and be consistent. By establishing some type of measurement within a business, the baseline and starting point are defined. If changes are made, a determination can be made as to whether or not the change has had a positive or negative impact on a business. This can’t be done this if there is no baseline to compare the progress to the value of metrics!
An owner or manager can’t be an island as it pertains to metrics. The whole team needs to be involved on the value, benefits and purpose of establishing these metrics. Sometimes, owners are challenged with getting employees onboard with the process. Why? In addition to working as a tool to evaluate success and opportunity, metrics also evaluate failure, which may scare some. But, employees have to know that the idea is to improve the process, not single out individuals.
Think of metrics like grades given in school. Getting an “A” vs. a “C-” clearly identified where there were opportunities to improve. Why can’t we implement these same strategies within our own business and move our “C-” business to an “A” business. This can only be done through the implementation of metrics. You may be running a “C-” business and not know it.
Metrics without goals can be a waste of time, resources and money. Once opportunities have been identified, goals to meet your objectives must then be identified. Goals help employees get onboard and start focusing on the opportunities. Goals also identify clear accountability, which enables owners to manage through clear definitions.
When establishing goals, try to make the SMART goals (specific, measurable, action focused, reasonable and timely).
Often, establishing goals happens from owners or managers who feel largely responsible for communicating necessary information with little or no input from employees. However, the A+ managers and owners will consider having a bottom-up SMART goal setting meeting where employees are asked to share their ideas and opinions. This takes time and energy, but involving employees in the goal process enhances collaboration and they feel a sense of ownership in reaching the goals.
Create a Dashboard
Metric discussions should be incorporated into regular weekly meetings. This heightens the focus and importance of the areas of focus for the business.
To simplify metrics communication, a dashboard that highlights trends can be developed. The dashboard can be updated weekly or monthly. Sometimes CNC equipment will even capture this information for a shop. For example, the dashboard in Figure 2 highlights the square feet per labor hour progress over the course of a year, with plotted points every 30 days.
By having metrics clearly visible encourages growth and makes success more likely. Adding these visual representations that show growth trends enable associates to see where they need to focus without even having to tell them. Dashboards speak louder than words and make internal communication easy and more impactful.
Figure 2 – A variety of machine metrics is available. For instance, Park Industries exclusive OPS Productivity Reporting allows fabricators to capture metrics in real time.
Recognizing employees for a job well done is just good business. If a team has met or exceeded the goals identified, they should be recognized and made to feel appreciated. The world’s talent pool is shrinking and it’s becoming harder and harder to find and keep great employees. One of the best ways to keep great employees is to recognize them for their hard work and achievement.
Employee bonus programs come in many forms, such as profit sharing, year-end bonuses, production-based bonuses or noncash bonuses. Owners and managers should identify what type of bonus program will work best with their employees. Once that is done, it’s vitally important it is kept aligned with the goals to ensure its effectiveness.
Plan for Success
It’s hard to change old habits, especially if those habits have made money in the past. Today, we are working in different competitive, economic and fabrication environments. Now is the time for owners and managers to challenge themselves and their operations to do things differently and plan for success. To do so, one must continuously ask, “Why do we do it this way?” “Would I give this an ‘A’ or a ‘C-’ grade?” A mode of continuous improvement is a must and owners should look at ways to bring the business and its profitability to a new level.
Start planning your success today!
About the Author
Rob Bromley has been a sales consultant for Park Industries since 2003. Having spent the last 12 years working in the stone industry, he has a multitude of fabrication knowledge and experience. Rob has been a key speaker at Park Industries Digital Stoneworking Expo for years highlighting the value and importance of establishing metrics.