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Case Study: Setting Business Performance Targets
Submitted by Leslie Allan on March 11th, 2014
The most effective training programs are those that have a clear link with one or more business goals. In my Expert View on setting business objectives, I talked about why this is such an important first step in designing a new training program. I also highlighted a couple of approaches to consider when working with the management team to clarify the business direction. One of these was about setting SMART objectives and the other about taking a balanced scorecard view of the business.
In this blog post, I want to illustrate how one company went about setting targets before embarking on a training initiative. This example is equally instructive whether you are initiating a program of change in your organization or wanting to design and run a new training course for employees.
This mini-case study concerns an electronics manufacturing company implementing a new inventory management system. The implementation involves a server upgrade and the installation of new software. The business owners intend to engage the software vendor to roll out a training program for all production planning department and warehouse employees over a six week period.
In this case, the Project Manager organized an impact mapping workshop for the program sponsor and the training participants’ managers to attend. To get a view from the trenches, a representative group of prospective training program participants were also invited. After much discussion and debate, the meeting participants decided on two key business objectives. These were:
- reduce average monthly total inventory value by 30% by end of year
- improve delivery to commit by 20% by end of year
The meeting attendees then went on to discuss possible methods for calculating progress towards meeting the objectives. This is an important step that many organizations neglect, only to be faced with arguments later about whether the results did or did not meet target.
The meeting attendees considered many options, with proponents writing up various formulae for calculating results on a whiteboard. One group, for example, proposed that “average monthly value” be calculated by summing the values for each day of the month and dividing the result by the total number of days in that month. In the end and following much deliberation, the meeting attendees agreed that this value will be determined by summing the values on the first and last days of the month and dividing by two. This was also done for the other value; “delivery to commit”.
These two measures constitute the business’ “lagging” measures. Lagging measures give insight into the outcomes of a business’ activities. These outcomes typically directly impact the bottom line of a business. When a lagging indicator reveals that a business has failed an objective, it’s too late for the management team to do anything about it. For example, if the “delivery to commit” result for the month of June is calculated as 10% worse than the same time last year, the management team cannot take any remedial action to improve the June result.
For this reason, it makes good sense to develop some “leading” measures. These kinds of measures provide either advanced news that activities are on track or a warning sign that a key target will be missed. The Project Manager organized a follow up meeting to discuss and agree subsidiary objectives that would support the key business objectives. The means of measuring achievement of these second-level objectives could then serve as “leading” measures.
The Project Manager also invited the inventory management system software vendor to attend the meeting. After considerable debate, the meeting attendees agreed that to reduce total inventory value and improve the delivery to commit percentage to their target levels, the two following objectives needed to be met:
- 90% of inventory items entered in system by end of March
- reduce inventory data errors to 5% by end of June
In deciding these two targets, the vendor’s input proved invaluable as it had access to industry benchmarks and a wealth of experience with previous clients. Near the conclusion of the meeting, the Project Manager asked the Production Planning Manager and the Warehouse Supervisor to devise a procedure for measuring and reporting progress on targets.
With the business objectives agreed and in place, the instructional designer was then in the best position to write learning objectives and design a program that directly meets the needs of the business.
Find out more about setting business performance targets and improving the impact of your training programs. Check out Leslie Allan’s high impact training guide, From Training to Enhanced Workplace Performance. Learn proven strategies and techniques for finding performance roadblocks, aligning training to real needs, developing training partnerships, engaging learners and maximizing skill application. Find out more about From Training to Enhanced Workplace Performance and download the free introductory chapter today.