Return to Measures

Cardinal measures

  • If you want to manage productivity well, you first need to measure it well and ensure your team understand the few cardinal measures you use

 Cardinal measures

  • Every organisation, whatever its size, has plenty happening by the hour, week or year – customers seen, calls taken, transactions made, incidents attended, press releases written, widgets produced – so which are the most important areas to measure and how to measure them?

  • At present, many managers suffer ‘information overload’ –  many also have important ‘information gaps’ – hence, they end up focusing too much on one area, say costs, and ignoring others like quality

  • After their recall of nearly 10 million vehicles, most due to ‘unintended acceleration’ troubles, Akio Toyoda, president of Toyota, commented “some executives just got too big headed and focused too excessively on profit – what suffered was the reliability and quality of Toyota’s cars – a reputation that took years to build but only days to unravel”

  • Managers at all levels thus need a set of measures which covers all areas where it is most important that an organisation performs well – a set which prevents them ignoring any one key area and so risking unseen dangers which might sink them

  • These measures are what we call ‘cardinal measures’ – at sea, cardinal buoys are the most important for skippers to navigate their boats safely from A to B

  • Cardinal measures are the messengers of good or bad news:

    • They ring alarm bells when major dangers, or opportunities, approach

    • They highlight where improvement is needed, albeit not how to improve

  • Once a cardinal measure has raised an alarm, the manager responsible for it should drill down to measures below to find possible causes of why things have gone wrong, or unexpectedly right, and decide what action to take

  • Jack Welch, ex CEO of GE, said: “Managers need something that lets them move faster, communicate more clearly and involve everyone in a focused effort to serve ever more demanding customers”

  • Paul Rogers of Bains consultancy rightly said: “Good companies concentrate on the stuff that really matters – and, when they make decisions, they get it right more often than they get it wrong – less successful companies take too long to make up their minds, and decisions are made by the wrong people in the wrong part of the organisation or based on the wrong information”

  • A set of cardinal measures provides the answer for most managers

Financial outcomes

Of the many financial measures available, only three qualify as the top financial cardinals – the alarm bells that should prompt action in good time At organisation level in the private sector, they’re total revenue, total costs and profitability Total revenue covers not only all outputs sold but also all outcomes the customers took into …

Customer outcomes

All organisations have two kinds of customer – external and internal: External customers – They decide whether or not to buy or use the products and services you offer them – whether you offer them value/ benefits Internal customers – They are fellow-workers further ‘down the line’ who depend on you to supply them with information, …

Productivity & Waste

Managers need to know how much more they might offer their customers, existing and potential, and how much less it might cost Imagine if a manager found that a direct competitor sold 10 times as much to a common market, or produced twice as much from the same input resources, or had unit costs 70% …

Mental Inputs

There are two significant mental inputs which impact productivity levels: Employee motivation Corporate knowledge Employee motivation: There’s no precise formula to determine the impact of improving employee motivation on productivity levels Hence one is left with the following broad relationship:                          Productivity = Ability …