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The drilling industry has a lot of interest in metrics these days. Implemented properly, metrics can increase uptime, drive down costs and improve customer relationships. They also enable managers and supervisors to make the transition from being functionally proficient to becoming more effective business managers.
Yet, despite the improvement capabilities, challenges remain. Drillers that want to implement performance management must define the right metrics, access the appropriate data and fully integrate it into their management processes.
While most organizations have a lot of metrics, they are not always the right metrics nor are they utilized in the right way. Organizations do not always put enough time and thought into defining the correct Critical Success Factors; Key Performance Indicators; Results Indicators; and Performance Indicators. And when companies do have the right metrics they are often not incorporated into the management process in an aligned, level-appropriate way.
Metrics have to be applied continually every day at each level in the organization in order to translate into optimum performance improvement – this is the essence of performance management. A system can enable this process but will not by itself deliver the required outcomes. There are no shortcuts.
In fact, we are seeing strong similarities between the drilling industry today and what many of our Fortune 500 manufacturing clients did over the last 15 years with respect to implementing new Enterprise Resource Planning Systems (ERP) and Computerized Maintenance Management Systems (CMMS) to provide better information to manage their operations. Implemented properly, these systems can significantly improve key business processes. But in our experience, the best results occur when the system capabilities are coupled with an effective performance management process. In fact, the difference is like night and day.
However, there are certain challenges. First, the metrics are often perceived to be personal. Managers are frequently measured, evaluated and sometimes paid based on the metrics. If they are poorly conceived or constructed, metrics can cause resentment and drive the wrong kinds of behavior. Second, if people are not involved in the development of the metrics or do not understand how and why they are used there will likely be resistance. And third, some organizations are allergic to accountability. If transparency and accountability are lacking, the transition to effective performance management can be difficult. It will take time for the organization to assimilate the necessary level of transparency and it generally requires professional change management support. However, when implemented correctly, these processes become fully embedded into the organization’s ethos and the performance outcomes are be substantial.
Getting Metrics Right
While the best organizations often achieve stellar results, it involves far more than installing a system or metrics application. Converting data to reliable, actionable information; having effective business processes; and having a full understanding of how to drive performance within the context of your company’s management processes are all critical to success.
An effective performance management process can deliver very significant improvements in operations productivity, maintenance reliability and financial performance. Follow these 11 tips to implement an effective performance management process that works for you:
- Start with the answer—Be clear about how you compete, the specific financial outcomes you are looking for and the operational capabilities required. Then, determine which metrics are required at the strategic, operational and tactical levels in the organization. If you don’t know how to do this, get help. Good metrics are really important to the success of your process.
- Reporting is overrated—Most metrics packages are heavily oriented toward what happened (results indicators), as opposed to what is happening or will happen (performance indicators). Lean toward managing proactively versus reactively—that’s where the money is.
- Balance is overrated—There’s no doubt that trade-offs have to be managed and the best organizations excel at it. But know what matters most to your performance and drive it home. Too much emphasis on balance can result in stasis at suboptimal performance levels.
- Metrics are not results—Many organizations do not incorporate metrics into their daily management practices to the degree that they could, especially performance indicators. Additionally, they also don’t know how to use metrics effectively. If you are going to implement performance management, spend enough time on training to ensure that your people know how to use the information and that the process is effectively embedded in your organization.
- Don’t boil the ocean—Implementing enterprise-wide performance management can be a bear, especially if your data is not readily accessible or accurate. It’s usually necessary to walk before you run and there’s no need to wait to get started. Figure out the areas that matter most and begin there.
- Be realistic—If your enterprise system data is not highly accurate or functioning effectively, hooking a performance management solution up to it is only going to add to the problem. The foundational data and processes are key.
- Use the right tools—There are some great metrics solutions available. Find the one that meets your business requirements and make sure it works in your system’s environment.
- Use what you have—There is definitely a place for metrics solutions but don’t underestimate the systems you already have. Know your capabilities and gaps before spending big on new solutions.
- Prove the prototype—Make sure the process works before rolling it out. This includes not only the system and data but also the metrics, processes, behaviors and results. If you get good results, performance management will sell itself, which makes it a lot easier to implement.
- Focus on the business—Systems providers know a lot about their applications but not always as much about your business. Technology is a performance management enabler, not the complete solution. Make sure those responsible for the project understand the business as much as the application.
- Don’t sweat the culture—There are a lot of factors that influence the culture of an organization. While an increase in visibility, transparency and accountability is often met with some resistance, the friction doesn’t last forever. Performance management is one of the most practical and effective tools available for aligning effort to purpose, and that—regardless of cultural differences—is what any organization is all about.