You can only control what you measure…

“You can’t control what you don’t measure…” is a phrase that I have come across often. It is widely used in areas such as Six-sigma and lean. It applies equally to personal life and business. I like to express things in positive terms so I would suggest that it should be “you can only control what you measure”. Whichever way we say it, it would appear that this is an abridged version of a much longer phrase;

You can only control what you measure

“Measurement is the first step that leads to control and eventually to improvement. If you can’t measure something, you can’t understand it. If you can’t understand it, you can’t control it. If you can’t control it, you can’t improve it.” Dr. H. James Harrington 

There are many examples that I am sure you can think of that demonstrate the maxim. An example could be, if you are looking to control your weight, how might you do that if you didn’t use your scales? Well, you cannot really can you? That leads me into another proposition, is the thing you measure the right thing? Take your weight, Can you directly control it?

I would like to suggest that you cannot ‘directly’ control your weight. Why? Because your weight is the function of two things, your calorie intake and your calorie usage. In order for you to maintain your weight the two (intake and usage) need to be roughly in balance; to lose weight you usage must exceed intake. Therefore, to control weight you must measure and control the intake and usage. Measuring your weight using scales is measuring an output, the result, but you really need to measure and control and the two variables that lead to the result and determine how they drive it to affect the output.

OK, so how does this apply to your business?

Similarly in business, there are a number of parameters that you might wish to measure and control; such as sales, revenue, profit. However, once again these tend to be output parameters of other functions and in this case there is a serial dependancy too. Let’s use profit as an example.

In it’s simplest form

Profit = (Sales Revenue) – (cost of sales)

Sales revenue is the product of number of units sold and selling price. Cost of sales is the combination of the sold units’ manufacturing (variable) costs and you may then go on to introduce the overhead (fixed) costs of your business. Therefore, to improve your profitability you would need to improve your revenue and/or reduce your cost of sales; both of which have dependent variables, that you might consider measureing, controlling and improving to increase your profitability.

Baselining.

Measure and control, baselining

 

Before you can start to improve, you need to know where your are starting from. You need to establish your current performance, what the values of the various ‘parameters’ are. Only when you have done that can you start to identify which ones need to be improved. This determination of your current performance is often referred to as obtaining your baseline.

The questions:

  • What are your targets?
  • Are you measuring your performance against them?
  • Have you established your current performance?
  • Have you identified the parameters that effect that performance?
  • Are you measuring and controlling them?