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Are you using your rear-view mirror to drive your company?

I've sat in a few, ok a lot of exec & operations meetings at companies as they discuss the various metrics that are being used to monitor the performance of the company and make some fairly major decisions. Each time I do I see largely the same thing, and it's not good.

The range of metrics used in businesses always surprises me in the commonality across businesses and industries, they tend to include things like:

  • DiFOT / DiFOTiS (Delivery in Full on Time / Delivery in Full on Time n Spec)
  • Productivity – there are a myriad of variations such as OEE (Overall Equipment Effectiveness) , Cost of Sales Vs Cost of Goods, Manufacturing Cycle Time, Schedule Adherence etc
  • Gross Margin
  • Net Profit
  • Work In Progress / Inventory turns
The list goes on and on but look at it carefully and you should notice something about those items…. They are all historical measures, it's like trying to drive down the motorway using the rear-view mirror to guide you.

Lag Measures

Historical or Lag measures are all easy to get the numbers for, after all they have happened so the number is the number, the horse, as they say, has bolted and there is nothing you can do about it other than try to do better next time.

Lag measures are a kin to the old golfing quote of "Hit & Hope", sure there maybe a post mortem on the number and everyone agrees we will do X, Y or Z but then wait till the end of the week or the month to get the results and round the loop we go. 

There must be a better method!

Lead Measures

Lead measures on the other hand are predictive, if X happens then the result will be Y, they are typically the derivative of the Lag measures that you are already using. They are however harder to measure so take a bit of effort to really get a handle on where the number comes from, but the outcome is that there is no more guessing on achieving the result. and everyone. 

Lets look at an Example

Let's say you need to improve your delivery performance for your factory, your DiFoTiS (no point measuring how many you deliver is half of them don't meet specification right?)

So DiFoTiS is your LAG measure that you want to improve, great so let's define the improvement you want to achieve between Jan & June clearly so how about : Move DiFoTiS from 68% to 92% by June 2018.

Ok so what elements could you monitor that would increase the chances of you delivering on time and in specification?

What if we measured these 3 LEAD Measures:

  • On Time Start
  • Machine Uptime
  • Line Quality

Why are they lead measures? Well the bet that your taking is that by starting on time you should finish on time and so improve the chance of meeting your delivery. If the machine is up & producing, then you again improve the chance of success and by measuring quality then obviously you don't ship faulty items.

Obviously, you can break line quality into its own Lead / Lag set up with Line Quality being the Lag but you get the idea.

Once you have your Leads focus all your efforts and resources on these and watch your Lag measures improve, it may not happen right away, but if you have picked the right leads then it'll happen and you will never go back to that rear view mirror again.

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Wednesday, 02 December 2020

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