A 5% reduction in manpower, another 5% in inventory, a 10% in travel expenses, productivity improvement (no figures here) and there are many more such arbitrary goals – we have all heard it before and it these are still quite common at most meetings & in Annual Operating Plans.
When faced with such arbitrary (I call these figures arbitrary for a reason) exhortations, how would you react?
1. Accept and start working to achieve them?
2. Form focused teams with these goals in mind?
3. Haggle with the boss for a 7% change and not 10% as demanded?
4. Grumble how difficult it is to achieve even half of what is demanded?
Most reactions would be one of the above but none that would demand the basis of such goals.
1. The methodology used to arrive at these figures
2. In what way could a 5% reduction in inventory benefit the organization? Would negotiating on supply lead times give us more benefits? Can setting up an offsite inventory achieve benefits several times the one being demanded arbitrarily?
3. Would a 5% reduction in head count reduce the number of layers from 14 to 6; would the decision making process be speeded up? Would the number of signatures on the approval form be reduced from 8 to 2?
4. How can a 15% growth in sales be an achievement when the market that we are present in, has grown by 40%?
5. Any measurement to support such goals?
In one of my previous jobs, an improvement of 10% in OEE (Overall equipment effectiveness) was set, needless to say, without relevant measurements. Our measurements showed that a lot more was possible. A 245% improvement was achieved against a target of 300% that the team had set for itself. To imagine that the organization was actually planning to underperform with an arbitrary target of a 10% improvement!
Any goal that is set without measurements is arbitrary and needs to be treated with the contempt it deserves. Such arbitrary goals have the negative effect of getting the organization to underperform. Managers may channelize entire departments and motivated individuals in pursuit of underperformance.
Keep the measurements relevant, simple and reliable. Measurements will lead to breakthrough achievements. Several such achievements lead to pride; and pride in the jobs that we do, leads to Excellence.
