Use benchmarking to improve management team metrics

The golden rule of benchmark analysis is “never do it yourself.” The process requires that the entire company be involved. The job of any business owner is to receive as much information about the company as is feasible to obtain. This information is first processed by the management team in such a way as to make it clear and efficient. The owner, who sees the big picture, uses this information to implement changes and make adjustments. The information is only as good as what the management staff provides.

Financial metric ratios are fairly easy to establish, and given the nature of the green industry, the historical approach to metric database establishment works well. For a greenhouse owner to establish benchmarks to assess a company’s management team, the process can be much more difficult. The criteria can be difficult to put in writing, and the ways to quantify the outputs can also be difficult as management departments must interact.

Setting management metrics
The first thing to determine is who of your company’s employees are true managers and why they do what they do. Line supervisors who manage the activities of a few people or a large single task team are not the entities discussed in this article. A manager is the person who is placed in control of a set collection of key company objectives. The number of people that they supervise is almost irrelevant.

A greenhouse owner must have a clear and defined set of expectations for each management department. The metrics for managers are related to the company’s objectives and profitability, not necessarily personal aspects of their jobs. The owner must discuss with each department manager an agreed upon list of expectations. These expectations should relate to department output, intra- and inter-department communications, department resource efficiency, department cooperation as well as overall commitment to making company operations flow smoothly. A very efficient business office that does not cooperate with production or marketing information flow issues can cause a company to go bankrupt.

Benchmarking internal/external dependency
Managers frequently work as a team and must be assessed as to how well they or their department provide support or materials to other departments. Like any group activity, departments can be dependent upon each other to provide services. If a department falls short, the next-in-line departments may not perform up to standards.

One way to ensure the necessary support is provided is to establish a dependency chart or dependency diagram. This is similar to a flow chart, but it focuses on what each department is dependent upon from other departments. Assessment benchmarks are set up as to how well each department provides its services/materials/information to other departments, rather than just looking at final product outputs.

The benefit to setting up assessment metrics based upon what each company department or unit needs to provide the other company departments can quickly identify where bottlenecks occur and avoid blaming or assessing error on the wrong department. This can easily occur when simple outputs such as the number of plants harvested or number of boxes filled or shipped are the only metrics.

Measuring metrics
Measuring metrics for shipping/marketing department interactions can be set up as follows to document metrics for internal dependency:


There are dozens of relationships between information and product that could be assessed. That is why it is necessary to customize the metrics to your company’s situation and needs.
 

Vendors, outsourced services
External dependency specifically addresses your vendors or outsourced services. From growing media delivery to document printing to payroll, if you outsource, these services need to be benchmarked as if they were management departments. To fail to include these services can lead to drift and flow problems, such as longer delivery delays, successive drops in product quality, or even a decrease in the number of contacts with a company vendor. This drifting away from excellence or quality service is subtle but can easily impact profits.

When a new vendor offers a lower price, benchmarking past performance can tell you if the current vendor is excellent, satisfactory or should be replaced. Moreover, you can approach vendors with a summary of their performance when price increases are to be instituted or new contracts come due. This can sometimes lead to a cost savings, additional services or other accommodations. External benchmarks can be as rudimentary as on time vendor deliveries  to the amount of loss or rejected products (i.e., number of usable cuttings).

Financial metrics
Another approach to department management is to assess or compare outputs vs. department expenditures. This can range from dollars generated by a department to cost reductions implemented. Each company has different products and services, so how you measure outputs financially is highly dependent on your company’s inventory system, its billing system and its cropping system. Here’s an example of two ratios a company could consider.

The essential thing is to get managers to agree on the metrics to be assessed. Employees in the shipping department may wish to include cost of operating and maintaining the trucks in their allowed expenses if a company chooses to determine how well they manage “on the road” expenditures. Either way is fine, as long as the owner knows what’s involved with each metric.

Each company has its own set of output bottlenecks and information flow areas that are weak or inefficient. By establishing benchmarks for management of these areas, it places performance expectations on the managers, who will then place higher expectations on employees. Most companies that undertake this benchmarking step see rapid improvement in information flow between departments and reductions in labor loss due to down time and material shortfalls.

Once a company establishes what is being measured and what the base-line levels are, historic benchmarks can be developed for more complicated and detailed areas like shipping. 


Paul Thomas is professor and extension specialist, University of Georgia, Department of Horticulture, pathomas@uga.edu. Charles Hall is professor and Ellison Chair in International Floriculture, Texas A&M University, Department of Horticultural Sciences, charliehall@tamu.edu.