Steve Downton, Downton Service Management Consultants Ltd, Noventum Group
A number of key trends have emerged from 2009, not least of which has been the emergence of a serious lack of relevant operational measurements. Coming out of the recession has highlighted for many that the availability of reliable external data on customer needs and how to deliver to them is very limited. With a secondary challenge on how appropriate are measures carried over from the pre-recession era.
Senior executives are well aware of the impact of a measurement system on employees and managers. If a business wants to improve the way it is viewed by its customers, a strong focus on measuring what those customers care about most, would seem to be a good idea. Most companies, however, measure what is easy to measure, or what is important for them to measure, regardless of its impact on customers.
A lack of focus on the customer is compounded when many businesses discover, the hard way, that existing measurement systems struggle to accurately measure their operation. They find their existing measures have often become ineffective, and do not supply the information required to set up systems to accurately control the business. The overwhelming evidence shows that control of the operation is necessary to survive in the rapidly changing and very demanding environment that is field service today.
A business operating without measurement systems is in real danger that problems will go unnoticed, because the basic systems in place are not relevant or precise and will apparently indicate little or no problem, giving a false sense of security until it is too late for progressive action, rather like a fire alarm without batteries. The measures may also not accurately record all the information, which may result in an understatement of true costs, an issue becoming increasingly relevant to the service environment as the pressure on margins increases. In some cases the measures become misrepresented and give a false impression of continual improvement, which will only come to light over time. Finally, inappropriate measurement systems will not accurately capture the pertinent measurements that customers consider important and that then can be used to measure their satisfaction.
Discussions with a number of Service Directors has indicated that all the above dangers are, indeed, commonplace, and these problems are further compounded by the fact that most measures in place today, even if correct, are limited in scope and do not accurately assess external situations and cannot accurately gauge issues such as customer satisfaction or customer retention. The measures also do not allow for an accurate modelling of the operation that could be used for “What-If” forecasting and budgeting; a key requirement in the rapidly changing environment we face today.
In addition, it is important to realise that there will probably be the need to start measuring different areas of the business than were originally considered a requirement. For example, the original perception that customers are intrinsically good, is no longer valid: the reality is that customers per se are not good, but profitable customers are! How many businesses really know which of their customers are profitable and which are not, and why?
One measurement issue of particular relevance to the field service environment is that quite often a measure is in place simply because it has always been, even though its value to the business has long been lost. With growing pressures on performance, (operationally in terms of customer satisfaction and retention, and financially in terms of costs and margins), it is essential that even before a measurement system is put in place, the operation is reviewed to isolate redundant measures and identify the breadth and depth of measures required, and the type of measurement system needed to deliver optimum control and performance to satisfy business requirements.
The challenge for operations developing their performance has been that many of the original management tools for field service operations were basic and relied heavily on the skill of the engineer. Early measurements sought to control engineers by demanding achievement of specific targets. Modern measurement systems need to focus on controlling the business and not the individual; therefore, the most effective measurement systems should put operational strategy and vision as the core requirement. It is also very important that any measurement system put into place, will accommodate and be consistent with, initiatives already underway.
It is critical to identify the measures that drive performance and link these to the establishment of specific measures for operational strategy, to ensure that the business is driven in the desired direction. This will require establishment of business objectives that are derived from the overall strategy, as strategies driven by an accelerating rate of change need to become much more operationally focused and shorter term in their outlook.
Measurement systems that have particular applicability to service measurement need to have the following key attributes: firstly, the ability to capture what are normally considered intangible measures; secondly, to provide a balanced view across a number of measures, avoiding the danger of focusing on a single metric, and versatile enough to capture a more accurate picture; thirdly, and most importantly, the measures must be derived from the operational strategy and provide a consistent measurement of the business.
The measurement system needs to establish targets, but be adaptable so that empowered people in the extended environment of field service will adopt appropriate behaviour, and take whatever action necessary to arrive at those targets. The measures must be designed to inspire those working in the operation to work towards the overall vision. Senior managers may know what the end result should be, but they cannot always tell employees exactly how to achieve that result, if only because the conditions of operation may be inherently different and constantly changing.
This new approach to performance measurement is consistent with initiatives underway in many companies, such as: cross-functional integration, customer-supplier partnerships, global scale, continuous improvement and team, rather than individual, accountability. Combining the financial, customer, internal process, innovation, and organisational learning perspectives, an effective measurement helps managers understand, the many inter-relationships. This understanding can help managers rise above traditional notions of functional barriers, and ultimately lead to improved decision-making and problem solving. The measurement system needs to be taken out of accounting and made part of every manager’s job: it must be aimed at keeping companies looking - and moving - forward instead of referring backwards to historic snapshots of results.
The fundamental purpose of such measurement is to enable the management team to establish an operational business model, which will define, and link, the overall strategic goals to specific elements that can be controlled. The measurement system can then be used as a strategic management system, which will continually assess and feed back the performance of the business at a corporate, functional and individual level.
In summary, in order to set up or improve existing performance management systems, there are a number of basic requirements that need to be in place: -
- The measures must be regarded by all as critical to the business and they must be kept to a minimum.
- There might be different levels of measures but the functional measures must be driven by the business measures, which in turn must be derived from the top-level strategy.
- The measures must be externally as well as internally focused.
- The measures must be designed to look forward to encompass improvements as well as measuring current performance.
- The measures must include financial aspects as well as operational.
Taking these concepts on board will encourage focus on performance improvement targets and should enable consistency and consensus across functions, bringing a much clearer understanding of overall business goals. Although this method will achieve tangible results, the real value from any measurement system comes when it is used as the building block for an integrated and iterative strategic management system, by enabling the operation to align it’s management processes and to focus the whole business on implementing the operational strategy. This ensures that changes all work together to add momentum and keep the operation moving forward in the desired strategic direction.
To achieve this movement towards the strategic direction the management team require a performance measurement framework within which to implement the strategy, while at the same time allowing the strategy itself to evolve in response to rapidly changing business landscapes, demanding customers and a developing technological environment. Without a performance measurement framework to support these drivers, and provide the necessary consistency of vision, direction and action, any attempt to change direction or introduce new strategies and processes will be fraught with risk and potential disaster.
However, once the performance measurement system is in place and is closely linked to operational strategy, it will be easy to establish, create and maintain a business model. Applying this model the senior executives can then ensure that the measures are customer-focused to support the business commitment and strategy. The advantage of customer-focused measures is that they ensure customer issues are surfaced and that the energy of the business is focused on the customers.
