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By its nature management is a holistic process. That is, we must not manage only one part of an organization. Yet, the growth of industrial enterprises necessitated division of labor. Companies split responsibilities among sales, engineering, finance and labor. As they grew the gaps between each discipline expanded until, in some cases, communication broke down. Then, top management had segregated data whose interactions were difficult to perceive.
We’ve now reached a point in which that is no longer necessary. By collecting three types of data we can see and make connections across the total enterprise. The three data sets are finance, labor and customer. Operations yields data that flows directly into financial metrics. It records productivity and quality of operations. Human resources generates data on the costs and ROI of hiring, paying developing and retaining people. Finally, customer data reveals the market’s response to the company’s products and services.
The great advance for management is, that with practice comes an understanding of the hidden set of algorithms that combine to create intelligence. As senior management acquires and learns how to apply the three simultaneously it gradually develops a higher order of management intelligence. Intelligence is an unbeatable competitive advantage.
Management has had operating and financial data for centuries. But it has been only within a decade with the advent of computer technology, behavioral science and analytic models that managers have been able to draw out the intelligence inherent within their data. Untold trillions of dollars are being spent every day without comprehensive knowledge of their antecedents on the profitability of a company. Stakeholders must rely on managerial experience which history shows is sometimes incorrect, irrelevant or obsolescent.
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The good news is that one industry is developing a trifecta approach to management data. In horse racing the bettor must predict which horses will finish first, second, and third in exact order. In management the question is how do operations, employees and customers interact? Over the past twenty years one benchmarking company, Black Box Intelligence (formerly TDn2K), has gradually laid a foundation of employee data on issues such as hiring, training and retention. Starting three years ago, Black Box Intelligence (formerly TDn2K) incorporated operating data from the same firms from which had come the employee data. Now, within the last two years, it has begun to capture customer data. As the three have come together, the fog surrounding management has begun to lift. Now their clients can see the three part inherent algorithms. At a common sense level, not only are the natural connections already apparent, but more importantly, the magnitude of effects that cross over within the three is becoming visible.
Today, restaurant management has reliable, valid, objective data that suggests where to make investments in operations, employee skills or customer service to control expenses and produce larger customer checks, referrals and returns. How much better is it to know that an investment in more flexible scheduling in the eastern region leads to measurably lower turnover and parallels higher customer satisfaction and returns in that market? At the same time, upgrading décor and investing in employee training boosts check levels in the southwest. Is it better to spend money on profit sharing or on management training in the Midwest? Is there provable data to support either alternative? Granted, a seasoned manager can feel the generally hidden, common sense connections. However, this data either overrides, validates or expands a manager’s perceptions. The trifecta method provides that intelligence.
To read more by Dr. Jac Fitz-enz, visit his website.
Founder and CEO, Human Capital Source
Dr. Jac Fitz-enz is the acknowledged father of human capital strategic analysis and measurement, founder of the Saratoga Institute, author of 12 books, and member of the Black Box Intelligence (formerly TDn2K) board of directors.