The importance of Data-Driven Management

Management decision based on objective data is a key component in any company. For example, on a project-by-project basis, Lean Six Sigma projects provide means of analyzing process data to achieve process improvements. In the larger organizational view, these process improvement are initiated so that the organization can achieve its organizational priorities. The priorities are developed bases on analysis of key stakeholder needs and wants, including the costumer, shareholder, and employee groups. In this way, data driven management provides a means of achieving organizational objectives by quantifying needs or wants of stakeholder groups relative to current baselines, and acting upon the data to reduce those critical gaps in performance.

The choice of what to measure is crucial to the success of the organizational. Improperly chosen metrics lead to suboptimal behavior and can lead to people away from organizational´ s goals instead of toward them. Joiner (1994) suggest three system wide measures of performance – overall customer satisfaction, total cycle time, and first-pass quality. An effective metric for quantifying first-pass quality is total cost of poor quality. Once chosen, the metrics must be communicated to the members of the organization. To be useful, the employee must be able to influence the metric through performance, and it must be clear precisely how the employee´s performance influence metric.

Rose (1995) lists the following attributes of good metrics:

·         They are customer centered and focused on indicators that provide value to customer, such as product quality, service dependability, and timeliness of delivery, or are associated with internal work process that address system cost reduction, waste reduction, coordination and team work, innovation, and customer satisfaction.

·         They measure performance across time, which shows trends rather than snapshots

·         They provide direct information at level at which they are applied. No further process or analysis is required to determine meaning.

·         They are linked with organization´s mission, strategies, and actions. They contribute to organizational direction and control

·         They are collaboratively developed by teams of people who provide, collect, process, and use data.

Nowadays, Balanced Score cards help the organization maintain perspective by providing a concise display of performance metrics in four areas that correspond roughly to the major stakeholders – costumer, financial, internal process, and learning & growth (Kaplan and Norton, 1992). This table shows an example of objectives and the performance metric:

Balanced scorecard metrics
	GOAL(Objective)	Candidate Metrics (Measure)
Financial	Increase in turnover of 15% on last year	Monthly turnover
Customer	Customers must receive their deliveries in full and on time	What % of monthly deliveries reached desired destination in full and on time
Process	Appoint a new sales person Enter all orders into the production planning system promptly	Date salesman appointed Number of orders entered within 24 hours.
Innovation	Change infrastructure - install a new XYZ widget maker	Installation date of new machinery

With performance metrics you take a measurement and rate it against a Target for comparison. The Target is usually graded into levels like Outstanding, Above target, on Target and below target. In the presentation of results the target levels are usually color coded so you can see at glance if you are on target, below target, above target, etc….

Ask yourself!!

·         Do you have good metrics?

·         Are your improvement initiatives tied to organizational objectives?