Most organizations, even those considered successful, do not reach the true level of performance of which they are capable. A significant contributor to this dilemma can be traced to how they measure themselves. Most measurement systems are based on outdated financial and management philosophies that do not link all decisions and actions to the goal of the organization. Unfortunately, they usually have metrics that only serve to conflict and confuse.
This often leads not only to negative decisions and behaviors on the shop floor, but also to the organization making flawed make/buy and outsourcing decisions, in effect creating the opposite effect these decisions were intended to produce.
Good metrics tell you how well you are doing, where you need to improve, and what actions you need to take to be better. They measure each local area’s contribution to the entire system, rather than simply promoting local efficiencies. They inform the organization of the financial impact of every decision made from the board room all the way to the shop floor, no matter how small the decision seems to be.
Leveraged Management Metrics (LM2) provides a set of cohesive, synergistic measurements and methodologies that move a system toward its goal. LM2 enables the organization to judge the impact of any local decision, including make/buy and outsourcing decisions. Without LM2, you will never be able to be as profitable as you can be.
Based on TOC and Throughput Accounting, these philosophies are fully GAAP compatible and do not require maintaining separate accounting records. LM2 can be implemented alone, or in support of Vector Strategies’ other solutions, such as Critical Chain, Drum-Buffer-Rope and Supply Chain Management, and incorporates their performance into the measurement process.