I’m a big advocate for metrics and key performance indicator (KPI) driven workflows. I believe in the value of data-driven processes, and have seen first-hand the impact of KPI focused process improvement projects.
For many manufacturers, the increased use of software systems that document all of their processes has allowed them to identify even more ways to improve production. Companies are increasingly able to deploy lean production processes to help them further improve their products, innovate production, and increase profitability.
However, there comes a point when metrics and KPIs can hurt your business. Firms can become so hyper focused on metrics and processes that they lose sight of the bigger picture, the human element, or even worse – their customers’ or market’s wants and needs. All of this can translate into long-term harm to your company.
In this article I will discuss the need to review business practices and put metric-driven management in its place.
Process Improvement is a Good Thing
Focusing on process improvement is a good thing. Many manufacturers have implemented a continuous improvement program that focuses on evolving production and management process in order to increase efficiencies and reduce waste throughout the company. This type of program can lead to significant innovation across a company – by shining a light on waste, companies can make adjustments to the way they operate that can have a big impact on the whole company.
This can help improve company spending, increase throughput and output, reduce scrap and waste, and have a myriad of other impacts.
The companies who are most successful at this have continuous improvement as a key part of their company culture. More importantly, they see improvement as everyone’s responsibility and solicit feedback from everyone from front-line operators to C-level execs. This helps create a culture of feedback and openness.
When Processes Can Haunt You
Continuous improvement is good, however it can become dangerous when it leads to a culture of standardization. When companies see the benefits of continuous improvement, it’s very easy to become blinded by the benefits and try to standardize everything into a process, checklist, or set of steps. In doing so you may gain some efficiencies but it can also lead to negative consequences.
Employees may be less likely to provide feedback if their tasks are so standardized that it leaves little room for creativity. Likewise, management may be less willing to hear feedback if it falls outside of the process, and overall team morale can suffer.
The Pontiac Aztek is a great example of how over-standardization (amongst other things) can lead to failure.
Lessons Learned from one of the Automotive Industry’s Biggest Failures
The Pontiac Aztek was launched in 2001 to much fanfare. CBS gave one away to the first winner of the Survivor reality show, marketing campaigns targeted an active lifestyle and features such as an attachable tent showed the seemingly limitless potential of the vehicle, and yet it was a complete failure.
Launched as “quite possibly the most versatile vehicle on the planet”, General Motors (Pontiac’s parent company) sold 119,692 vehicles over the seven-year life of the car, compared against a sales forecast of 75,000 vehicles per year. The vehicle was panned widely for its design despite the fact that it was a competent vehicle.
Bob Lutz, industry expert, cites a totalitarian management culture and a focus on the process as critical factors that led to the Aztek’s failure. According to Lutz, management was unwilling to listen to feedback and had declared the Aztek a winner before production even began. Project managers assigned to the project saw the Aztek as a success: all of their milestones and gates were met, the Gantt charts stayed on schedule, and they successfully delivered on the project. Internally, GM saw the Aztek as an ideal program, but the market didn’t respond.
Listening to Your Audience and Team
One of the big failures of the Aztek program was management’s unwillingness to listen to their own team or their customer base. By deciding the program was a success from the outset, management was unable to see issues with the design and corners that would need to be cut in order to deliver the final product.
This had an impact on team morale as the project team wasn’t valued or able to provide input if it was perceived negatively. GM also ignored the feedback from their market research – they weren’t alone in this behavior, but it really shows why you need to listen to your customer base.
The Aztek was ultimately put into a market that was already cold to the design of the vehicle. In today’s social media-driven economy it’s impossible to ignore the customers. Both of these seem to be pretty basic points, however, and healthy corporate culture is usually focused on fostering feedback loops, but this was more of a mindset problem. The team decided that the Aztek was a winner from the outset and there was no way of looking at the project from a critical standpoint, so no one on the team could stand back and look at the project in the wider picture. The team were given their project tasks and had to achieve their milestones.
Don’t Focus Only on the Processes
From a project management standpoint this project was a dream. As mentioned above, everything was delivered on time. The team hit their goals and considered the project to be a success. Outside of the company, however, the Aztek is almost universally looked at as a failure, and something that could be seen as leading to the end of Pontiac.
The team was so focused on the project and hitting all milestones that success was defined by delivering the project and not how successful the product was in the market.
Large companies such as GM need to be process driven. Repeatability and consistency are keys to efficient manufacturing and operations. However, by over emphasizing the process, management sets the team up for failure.
KPIs were disconnected from the end-result of the project (i.e. market success), and as a result the project team was disconnected from success of the project. Success of a project should consider how well the project team delivered on the original objectives and deliverables, but also how the project impacts the wider company. By over-focusing on processes it’s easy to lose sight of the wider picture and for companies to become over departmentalized. This can lead to a culture of isolation where employees only contribute exactly what is asked of them, instead of viewing themselves as an important part in the overall success of the company.
Striking the Balance Between KPIs and Team Input
The failures of the Aztek go well beyond these two points but they help to illustrate something that goes beyond automotive and into virtually every business; standardization and processes need to be balanced with responsive management and a culture of feedback. As mentioned above, properly implemented continuous improvement programs foster feedback and help create a loop that engages the whole team in company success.
Many companies find that bringing in an external consultant or third-party can help them implement a strong process improvement or continuous improvement program. By bringing in someone from the outside it can be easier to see issues and opportunities for improvement. They can also bring a wealth of experience from different companies and industries to help you improve your business.
At the end of the day, a process improvement program can help your business tremendously. KPIs and metrics certainly have their place in the business world, but it’s important to not rely on them exclusively and to look at individual impact in the wider success of a company – sometimes the qualitative contributions that go beyond meeting a metric can have a bigger impact on outcomes.