System Variables

“What do you mean, I avoid making judgments about team members who report to me?” asked Derrick. “We have a very sophisticated performance appraisal system. It is based on something called Management by Objectives. And we have bonus compensation tied to it. The employee always knows where they stand based on the measurements.”

“What is it that you measure?” I replied.

“Well, it’s based on a number of things, for example, if they are able to meet production quota each month, that counts.”

“And what are the variables that influence production to quota?”

“It’s pretty cut and dried, they either make it or they don’t.”

I stopped for a moment to let Derrick catch his breath. “So, you are telling me, that your raw materials always meet spec and go right onto the line?”

Derrick turned his head slightly, looked at the floor, then back at me. “Well, no, sometimes we have to reject some of the material and that slows things down.”

“And what about the production machine, the one you were going to replace last year, but didn’t. You know, the bottleneck in your system, where all the materials stack up in front, waiting to go through?”

Derrick laughed, “You’re right on that one. That machine comes down about twice a week. We really should have replaced it. Maybe next summer. That’s why it’s important that everyone works extra hard to make sure they get their bonus.”

“So, let me understand this,” I responded. “Two system variables, raw material spec and machine down-time can have dramatic impact on production to quota, and you think you are managing employee performance based on that number?” -TF

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