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I’ve been working on Lean activities with many of my clients over the past year.  One of the things I’m finding is how bad the reporting systems companies have are.  Instead of getting all of the problems out in the open companies go to great lengths to hide them.

Start with your financial reporting package.

Well, you might not want to start here.  Instead you might want to throw these measurements out, not for historical purposes, but for planning purposes.

I’ve been having a really hard time recently finding any numbers that help make a company better in their profit and loss or balance sheet.  There is some interesting information in the cash flow statement, but most people I work with don’t know how to read or interpret this statement.

The other problem with these reports is that it allows you to hide your problems.  You might think that increasing sales means you need to increase inventory, but is that really true?  If you have more sales turnover shouldn’t you be able to decrease your inventory?

Look at your productivity numbers.

If you have a standard of 90% for effectiveness in your company you’re probably kidding yourself.  You’re likely not measuring everything.  The best in the world rarely get more than 80% out of their factories.  If you’re getting 90% or even close to this I can almost promise you that you’re not measuring everything you could or should.

Are your processes in statistical control?

This is another scary area.  Most of the time you don’t know if you are getting expected performance from your processes.  If you don’t measure it and you don’t measure it in a statistically significant manner you just don’t know.  You might assume your processes are in control.  When you start measuring you’re likely in for an unhappy discovery. 

If you aren’t using statistical process control methods you are likely allowing information you should focus on slip through the cracks.  Until you know where you stand you don’t really know what to concentrate on.

Are mistakes OK at your company?

If making mistakes is not OK, the scary stuff will never come out.  You’ve probably heard about shooting the messenger.  It’s not something you want in your company.  At the same time, if you don’t celebrate mistakes, then a great deal of effort will end up being spent on hiding the scary stuff.

You don’t just want to celebrate mistakes, you want to make sure that there is learning with all mistakes that are made.  If you start demanding that your people make lots of small experiments that lead to discovering better ways you’ll find that your people start getting more engaged in what your company is doing.

Remember your people are scared about downside risks.

I think one of the reasons our people don’t tell us when things go wrong is they don’t want to get fired.  Our employees come to us with lots of personal baggage.  A major part of this baggage or belief system is that making mistakes is bad.

All you have to do is watch the news for fifteen minutes.  You’re almost sure to see a story where some public official made a mistake and the world wants to jump up and down about the mistake they made.  You rarely see the reporters asking what the politician learned.  Your employees learn from these lessons, mistakes are bad and must be hidden.

Making your employees understand that mistakes are expected is hard work.  You have to overcome your own biases as well as of those your employees have.  It’s all part of taking the really scary things and bringing them out of the closet.  Those companies that do so always outperform those that don’t.

What are you doing to bring those scary things out of your closet?  At you being honest about what needs improvement at your company?  If not, why not?

Part of knowing what to focus on is knowing how to figure out what they key metrics are in your business.  We’ve put together a special report on this topic.  If you’re interested in getting this report, click on the button below.

Securities and Investment Advisory Services offered through NFP Securities, Inc. (NFPSI), Member FINRA/SIPC. Stage 2 Planning Partners and NFPSI are not affiliated.

This article is published for residents of the United States only.  Registered Representatives and Investment Adviser Representatives of NFP Securities, Inc. may only conduct business with residents of the states and jurisdictions in which they are properly registered.  Therefore, a response to a request for information may be delayed.  Not all of the products and services referenced on this site are available in every state and through every representative or advisor listed.

Topics: key metrics, business coaching, value creation

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