A few years ago, I was invited to speak in Scottsdale, Ariz. at a meeting sponsored by the Mountain States Lumber & Building Material Dealers Association. During the meeting I had an opportunity to spend some time with another speaker on the program, Mr. Howard Putnam, the former CEO at Southwest Airlines.
In our conversation that evening, Mr. Putnam told me that he attributed Southwest Airlines’ obsession with measurements—that is, their insistence on measuring as many operational functions as possible—to Southwest’s success at becoming the world’s largest and most profitable low-cost airline. “If you don’t measure it,” Putnam told me, “it’s impossible to manage it.”
“Give me an example,” I asked.
“Okay, let’s consider our ability to get our planes back in the air after they have landed,” Putnam said. “At Southwest we figured we were making the most money when our pilots and flight attendants were in the air flying our passengers, not when they were sitting in the staff lounge smoking cigarettes and drinking coffee, so we began to keep score. When we began working on this, we were not very efficient, but before long we were able to land our planes, deplane our passengers, refuel the plane, clean the plane, change flight crews and re-board the passengers in 20 minutes or less while many of our competitors take an hour or more to do the same thing.”
I began to apply this principle when making recommendations to consulting clients. I began to think about when drivers returned from deliveries and how long it was taking them to leave the yard with another delivery. My clients who set up a system to keep score were amazed at how long some drivers were taking to get back on the road. This measurement gave yard foremen the information
they needed to substantially increase driver productivity.
Salespeople who keep records on the percentage of quotes that become orders are almost always shocked at how low their quote-to-order ratio is, especially when quoting prospects. Two-to-three hours is a lot of time to invest in doing a takeoff if only 20% to 25% of this work ever produces an order.
Operations managers who were challenged to get more productivity out of their delivery vehicles and drivers began to estimate the percentage of each truck’s capacity each load represented. Delivery vehicles that were leaving the yard loaded with only 25% to 30% of the truck’s capacity could significantly improve productivity if the dispatcher were successful at doubling or tripling the size of each payload.
For many years salespeople had been compensated with commission plans tied to sales. Then when computer systems came along and managers were able to calculate and capture the gross margin generated on each sale, management was able to increase each salesperson’s productivity by expanding the compensation plan to include an additional incentive on gross profit production, as well.
Measurements rarely take place in building supply businesses unless a progressive manager takes the initiative to expose the organization to the concept. If managers do not choose to install productivity measurements, I can only think of only two possible reasons:
1. Management doesn’t believe in the power of measurements.
2. Management is simply not motivated enough to improve overall organizational productivity.
Owners and managers looking for proof need only pay more attention to the productivity increases of sports teams and individual athletes themselves. Sports teams measure virtually everything. Why are coaches and athletes so convinced that measurements improve performance?
Try keeping score and you’ll soon find out.