Business and Process Metrics

What do you measure in your business? You probably use a number of metrics, which may include some of the following:

  • Inventory levels
  • Aging of inventory
  • Profits and losses
  • Cost of goods or services sold
  • Return on investment

As you get more and more into Six Sigma, you’ll need to supplement these overall business metrics with metrics related to the performance of the processes you’re trying to improve, such as:

  • Cycle time (an important indicator of process speed, which is often a key competitive factor)
  • Percent of final products or services with defects or the number of defects per product or service
  • Hours required to produce a certain number of outputs or provide a service
  • Customer satisfaction (extent to which products or services meet customer expectations)
  • Yield (amount of acceptable goods or services relative to the total number produced or delivered)
  • Cost of poor quality (a concept we’ll cover in a later)

If you haven’t set any metrics, I’m surprised you’re still in business!

How have you made important business decisions without data? Have you relied on your intuition? Have you just guessed?
Imagine for a moment that you’re a surgeon. You are in the operating room, about to operate on a man who is suffering from abdominal pain. But you haven’t run any diagnostic tests, you haven’t asked the patient any questions, and you don’t have his previous health records. What do you do? Do you take a wild guess that he has appendicitis and just start cutting? Of course not!
Just as a physician uses information to diagnose an illness before beginning treatment, Six Sigma uses metrics to help you identify areas (processes) for improvement.

I cannot emphasize to you enough that, as a small business owner or manager, it is absolutely imperative that you track the progress of your company!

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