Takeaway – Management Control and Reporting Systems (MCRS) reveals how businesses need to take great care in designing information gathering and reporting. Information is to our businesses what oxygen is to our blood. Company health is determined by it.
Imagine the environment of a hospital intensive care unit. The patients in ICU are monitored closely: blood pressure, heart rate, body temp, etc. These are referred to as a patient’s “vitals.” They reflect the condition of the person and alert medical staff to changes that may require immediate action.
We would be shocked if we had a loved one in an ICU and learn that there were no alarms that sounded when critical conditions worsened or that the patient would only be checked at the beginning and end of a shift. This is not good enough to ensure safe recovery of a patient and it’s not good enough for monitoring your business’s vital functions either.
Designing Your MCRS
The first step is establishing a clear vision. We can’t take aim without a target. Our MCRS will help us navigate the dangerous waters between our current condition and the desired company goal. Our company goals and objectives need to be clearly stated and understood.
Our next step is to plot our course. Review all projects and objectives that need to be successful to move us forward. Here is where we determine our business “vitals.” These are our key performance indicators (KPIs). We need a structure that gives us confidence in all decision making at all levels of the organization.
- What must be monitored. (KPIs)
- Duration of time between checks
- Who will be responsible for monitoring KPIs
- What will be done with the gathered information (data)
- How to alert needed stakeholders and establish the appropriate response. This is often called an escalation metric.
Data is the fuel the drives any business. Profit is a product of performance, but it’s data that drives performance and thus creates profit. Profit is a lagging indicator and to control profit we need leading indicators.
What are the key performance indicators that are vital to you achieving your business goals?
A Lesson in Visual Data
China controls roughly 85% to 95% of the global supply of rare earths. These materials are needed for many types of products. From smart phones to paint used in fluorescent lamps. In 2010, China started raising the price of these materials. This increased the cost of fluorescent lamp production. Paint containing rare earth materials became the most expensive component of the lamp.
In the world’s largest fluorescent lamp factory; To help employees understand and monitor this raised cost, all bins near production used for scrap lamps, had a label placed on them. The label stated the amount of money lost with each full bin. This had a big impact on employees. No one wanted to see thousands of dollars lost in this manner.
Identify what data drives the correct behavior and how you can best monitor it.
Start Small and Expand
When collecting, and reviewing data, start with small durations of time and people reviewing the information. Expand out in time duration and levels of review. Here is the true power of MCRS; how you share KPI information.
Create loops that review performance data. These loops are your insurance that information is driving the desired behavior and that needed action is being taken in a timely manner.
A loop structure may expand in this manner:
- Loop One – Employees perform quality checks or monitor performance at the lowest level as work is done. This level is referred to as short interval control. Data is captured and monitored by the process owner and reviewed by their supervisor.
- Loop Two – This involves first level leaders and supervisors. Where short interval control checks may take place several times per shift, this level reviews information at the beginning and end of a work shift or day as a minimum. They validate that operations are okay or respond as needed.
- Loop Three – This takes the information up the chain to the next levels of management. Data is reviewed off dashboards, reports, or in meetings. This happens at a scheduled time each shift/day.
- Loop Four – This involves the highest levels of management. By this point, corrective actions are in place or defined. Upper management reviews effectiveness and gives support as needed.
When employees know these loops are in place, and receive feedback in a timely manner, it kicks up importance for tasks they do that impact measured activities.
” We must check the pulse of the processes many times per day. We cannot afford to be running mediocre. The expectation is world class performance with our KPI’s. MCRS must have all the elements, including the needed attention at all levels from the shop floor to upper management. We need set loops checking the pulse every 2 to 4 hours of every day. “ – Santiago Londono
The point of the loops and all we do in MCRS is to provide a structure not unlike that of a hospital intensive care unit. Vitals are monitored in a short interval control fashion. As information is gathered, it is continually reviewed and plans revised. Nothing is left to chance.
I have visited companies that state they have a good handle on gathering and sharing data. But when I start asking questions, I find no structure that cohesively gathers and reviews information with closed feedback loops. Assumptions are made and information falls between the cracks.
How often have we seen this scenario: A costly problem is revealed to upper management, leading to fines, recalls, and loss of customer loyalty. Yet, low level employees were aware of the issue from its beginning.
If you don’t have a robust structure for gathering and reporting information, you most likely have information being filtered and covered up.
When it comes to creating proactive information loops, nothing works better than going electronic. We need real time information, delivered to us. Remember, it comes down to structure. Mobile apps that can easily gather and share information become our best tools for MCRS.
How well do you gather and share performance data? Mobile devices have a level of acceptance computers never achieved. We love our tablets and smart phones. Mobile devices and data gathering/sharing is a perfect match. Take advantage and streamline your MCRS.
It all comes down to this: Effort connected to outcome. When it comes to monitoring information, is your business like an Intensive Care Unit or like a grave yard; where your information gets buried?