Case Exercise B: Application of Enterprise Delivery System

If you are an entrepreneur, operations manager or consultant, try to

apply the Enterprise Delivery System framework to your enterprise or
the company you are consulting for. Put the relevant metrics at each
stage of the Input-Throughput-Output-Outcome continuum and discuss
the narratives of these metrics. If you are an entrepreneurship or
management student, request a company that you know to allow you to
do such an exercise for these.

C. PEOPLE METRICS

It is quite puzzling that entrepreneurs and managers put a lot of effort

in financial, operating and marketing metrics but do not go further to
the ones who are responsible for achieving good metrics on any or all of
these functions. Behind every good achievement is a person or a group
of persons that have managed resources and work processes very well.
This includes the board of directors, the top managers, the middle
managers, the first line managers, the supervisors and the rank and file.
If there are people measures at all being used by companies, they would
be concentrating mainly on salesmen and production personnel in the
factory or service shop. But even when companies measure sales per
salesman or goods produced per production worker, they are not really
very concerned about the people per se but the outputs and outcomes
they have contributed to the company. They do not monitor and
evaluate what makes a salesman sell more or a production worker
produce more. People’s behavior is not observed and documented.
Processes that people employ to get good results are not captured by
an effective knowledge management system. Hence, best practices are
not made explicit, making it difficult to pass on to others through
manuals, guidebooks and training sessions.

Part 1: Managing by Numbers and Narratives 60

People can be measured in so many different ways but only four
methods will be discussed in this book. There is one method, however,
that should not be employed and, yet, it is the most often used method.
Many human resource managers follow the easy path of relying on the
subjective evaluation of people by their managers or supervisors who,
invariably, will be biased in favor of their own people. These subjective
evaluation forms usually ask the managers about traits, characteristics
and behavior of their people that would be classified under the
following: Poor, Fair, Satisfactory, Very Good and Outstanding.
Sometimes it is stated in terms of expectation levels: Below
Expectations, Meeting Expectations and Exceeding Expectations. These
summative classifications would be applied to such people traits,
characteristics and behavior as: Diligence; Ability to work in a team;
Accomplishes assigned work; Punctuality; Commitment to the company;
Reliability; Consistency; and others. Without any objective evidence, the
manager classifies his or her people.

In my many decades of consultancy and management education

experience, most managers rate their people either Very Satisfactory or
Outstanding. When they give Satisfactory ratings to a few subordinates,
they are already quite displeased with their performance. It is quite
difficult, then, for companies to use these evaluation forms for
institutionalizing a fair and just compensation and reward system. There
may be one or two managers who are tough graders but their actual
performance (in terms of outputs and outcomes) may be better than
those who give high evaluation ratings. So the evaluation results are not
really comparable. To my mind, since the various functional
departments, sections and work units of the organization must carry out
specific action programs, activities and tasks to achieve their outputs
and outcomes, they must be made accountable and responsible for
those programs, activities and tasks as well as the resultant outputs and
outcomes. However, in carrying these out, they have to plan, coordinate
and relate well with the other units of the organization and the ability to
do so should also be evaluated.

Part 1: Managing by Numbers and Narratives 61

Service level agreements (SLAs) between and among units of the
organization should, therefore, carry a lot of weight in the evaluation
process because good management dictates that units must not
operate in silos but must operate together as a seamless enterprise.
This is another reason why I am not in favor of people being evaluated
by their own bosses in a subjective manner. Objective metrics should
always be used to provide ample evidence that the work has been done
well and that the work has achieved its intended results.

As mentioned earlier, four People measures will be discussed: (1)

Performance and Competence; (2) Behavior and Work Processes Carried
Out; (3) Morale and Satisfaction (Happiness) Level; and, (4) Safety,
Security, Working Conditions and Well-Being.

1. Performance and Competence

When companies talk about good people performance, they usually

mean that the people are producing the right outputs (right quantity at
the right quality specifications at the right time) that generate the right
outcomes (desired sales and profits). This can only happen if the
company is using the right technology and work processes, employing
highly competent people and operating in favorable market conditions.
Hence, people competence is an important factor in people
performance. That is why they invariably come together.

The easiest metrics to use when gauging people metrics are the ones
with very tangible outputs that can be linked to the outcomes. Sales
personnel are expected to bring in purchase orders (POs) from
customers. These POs translate to sales when the goods purchased by
these customers are delivered to them.

Production people are measured by their outputs of finished goods and

by the work-in-process goods they are still processing. Rejects, returns
and reworks are negative measures, meaning they indicate poor
performance.

Part 1: Managing by Numbers and Narratives 62

The engineering and maintenance people are expected to keep the
machinery and equipment running well and to prolong the useful or
economic lives of these machinery and equipment. They are usually
measured by how many hours of operations are lost due to machine
downtimes and how much are spent on repairs and maintenance. They
can also be measured on how efficiently and economically the
machinery and equipment are performing. This measure is probably a
joint responsibility with the production people who might be misusing
or abusing the machinery and equipment. So, it is to the interest of the
engineering and maintenance crew to oversee how the production
people are using the machinery and equipment.

Product design personnel can be evaluated on the quantity of design

inputs they submit and the relative success rates of their designs in the
marketplace as evidenced by sales.

Customer service personnel can be assessed according to the number of

customers they are able to process within a certain time period and the
satisfaction level of the customers they have served through a survey or
post-purchase interview. The number of complaints lodged against a
customer service staff can also be included in the metrics.

Human resource (HR) recruiters can be evaluated on their outputs on

number of personnel hired at a stipulated length of time versus the
number requested by all the departments and units for hiring at that
same length of time. On the outcome measure, how many of the
recruits are performing according to the expectations of the hiring
departments or units of the organization. If the hiring units have a large
say on the final recruits, then they should have joint responsibility and
accountability for those recruits.

Staff departments or units who service the front liners by doing

backroom support activities are a little more difficult to evaluate
because their work may be less tangible and harder to count both
quantitatively and qualitatively. Take the Accounting department. It is
supposed to submit financial accounting and management accounting

Part 1: Managing by Numbers and Narratives 63

reports with accompanying analysis and forecasts of the months and
years to come. Financial accounting primarily serves the purposes of
stockholders, banks and government entities (BIR and SEC). These are
mainly external parties. The management accounting reports are
designed for the internal management staff from the top down to the
supervisor levels. They usually include segment reports, detailed cost
accounting reports (which may employ standard versus actual volume
and price variance analysis), product line analysis, branch analysis,
break-even volume analysis, relevant and differential accounting for
investment decision making and other such management accounting
reports. The accounting department should provide accurate and timely
reports. However, accuracy of the reports is not solely dependent on
accounting because the other units of the organization may be
submitting erroneous information (garbage in, garbage out).

For example, the storage or warehouse personnel may not be

conducting physical audits of what inventories they actually possess.
Inventory numbers are all just accounting book entries without physical
verification. Credit and collection may not be reporting the correct
status of receivables. The selling units may be bloating sales (pushing
unneeded inventory to distributors just to record more sales and get
more commissions up front). The production crew may not be reporting
their rejects and returns, thus overstating what was actually well
produced and accepted by the customers).

To check on all of these accounting shortcomings, larger companies

create internal audit teams “to guard the guards”. Internal Audit should
report directly to the board of directors and not to management team
for proper checks and balances. Large companies also employ external
auditors, as required by law, to check on the soundness and accuracy of
financial statements.

Timeliness of these financial and accounting reports are easier to

measure. But the most problematic part is the assessment of how well
accounting has analyzed the reports in order to help management make
better decisions. Poor. faulty and misleading analysis can redound to

Part 1: Managing by Numbers and Narratives 64

bad business decisions. As for the forecasts, management must gauge
the reasonableness of the assumptions being made to support the
forecasts. Are they evidence based? Do they identify the critical
variables for success or failure? In summary, the accuracy part of the
accounting work can be scrutinized by the auditors. As for the higher
order thinking skills of analyzing and forecasting, some companies
create business comptrollership units that have greater analytical,
critical and creative thinking skills and processes to take care of this,
shifting the evaluation of such higher order thinking to them.

Enterprises must operate as one system with its different components

working harmoniously and synchronously with one another. The more
components that system has, the more difficult to manage. It would be
very difficult for the CEO and the COO to orchestrate and coordinate
everything if they would go about it through frequent face to face
encounters. That would lead to a tremendous loss of time for the
executives and managers of the enterprise who would be spending
most of their time meeting rather than leading, coaching and mentoring
their people.

Well-run enterprises develop “systems, processes, protocols and

procedures” that span in scope from designing and planning to
programming and scheduling, resource mobilization and allocation,
implementation and detailed execution. All of these must be done in an
integrated manner so that all the units of the organization remain in the
same page. Again, numbers can be used to make sure that one unit is
not forging way ahead or falling far behind the others. An executive
dashboard summarizing everything that’s going on must be made
available to the top and middle management while lower levels can be
shown only what’s relevant to them for proper functioning and for
coordination with the other units.

To ensure that the enterprise is working as one, there should be service

level agreements (SLAs) between and among units. All departments,
sections and teams actually service one another. The production
department, for example, must serve the needs of the sales department

Part 1: Managing by Numbers and Narratives 65

which must possess the physical goods on hand for sale. To be able to
do this, the production group must be given accurate and timely sales
forecasts by the sales department in order to avoid over or under
production. This mutual servicing of requirements should be translated
into an SLA. With the SLA, top management can easily determine which
department delivered as required and which one fell behind on their
commitment.

Down the line, the SLAs become more complicated and intertwined. The
production department needs the services of engineering for preventive
maintenance to keep the machinery and equipment running
continuously, and for repairs and overhaul services should they conk
out. The property department must have replacement units for critical
machinery and equipment or adequate spare parts and supplies should
engineering and production require them. The materials department
must be able to supply all the needed inputs of the factory at the right
quantity, quality and time. In order for this to happen, the procurement
group should anticipate the requirements of the aforementioned units
and purchase the materials, spare parts, supplies and equipment ahead
(but not way ahead) of time. This forces procurement to manage the
company’s supply chain very well. Of course, all these require money,
which mandates the finance group to manage the cash flow well to
meet payment expectations.

As all these inter-company transactions are going on, the backroom and
support units of accounting, human resource management, corporate
planning, transportation and logistics, administrative services and
others must each play a role (capturing data, forecasting, delivering,
facilitating, etc.) for the entire system to work as one. All the units
should endeavor to have SLAs not just to coordinate the work in a
seamless manner but to ensure good communication among all the
units and prevent conflicts with and finger pointing at one another.

It is obvious from the above discussion that the more integrated the
operations of an enterprise is (i.e. less reliant on outsourcing from
others), the higher the need for a systemic and comprehensive

Part 1: Managing by Numbers and Narratives 66

performance evaluation method that makes everyone in the enterprise
accountable and responsible for their own actions and for their service
obligations to one another. The SLAs must be translated to numbers
that can be used to assess which units are meeting their obligations and
which are not.

Good people performance is normally achieved if the people are

competent in accomplishing the activities and tasks required of a job
and follow good processes, protocols and procedures attendant to
those activities and tasks. Levels of competence can, nevertheless, be
distinguished through the quality of the outputs they create.
Discriminating customers can differentiate between an excellent and
just a fairly good rendition of a culinary dish, between a very masterfully
crafted furniture and one done just by a master’s apprentice, between
an apparel of great workmanship and one that just passes the
acceptable grade. Even in an assembly type factory, there are work
teams that consistently produce goods to exact specifications at faster
times and those that have more rejects and work slower. In a
manufacturing enterprise, they grade their workers using four levels of
competency. The highest level includes workers that have multiple skills
and produce consistently good quality outputs on time in whatever
technical skill they are using. The lowest level includes new recruits with
limited skills and have to be thoroughly trained. In construction crews,
they are able to distinguish “maestros” or masters from ordinary
workers and from mere construction helpers. Oftentimes, construction
companies hold on to their most competent workers even if there is not
enough work to give because it is quite difficult to hire them when
things turn around for the better.

Case Example 10: People Metrics of a Training Firm

An enterprise dedicated to training managers and workers came up with

their own people metrics which they used for evaluating and
incentivizing their training and support personnel. The Training Firm (TF)
had its own lecturers and facilitators but also availed of the services of
free lancers, particularly in courses not along the expertise of their own

Part 1: Managing by Numbers and Narratives 67

people. It had a training support group that prepared the training room,
made sure all the lights and equipment were working, printed the
training materials and acted as the customer service group (which
contacted and followed up on customers, maintained communication,
and ensured the comfort and well-being of the trainess while on
training, including giving them lunch and snacks). This training support
group, in turn, sought the services of the company’s IT group, facilities
management, kitchen crew and janitorial/security services. The trainors
and the training support group were evaluated by their customers after
each and every course run. The customer evaluation form asked the
participants to rate the effectiveness, subject mastery, communication
skills, appropriateness of the learning materials and trainer’s rapport
with the trainees. Customers ranked them from one (lowest) to five
(highest). Each trainer was expected to attain an average score of at
least 4.5 out of 5.0. Customers also evaluated the training support group
in what they were responsible for (venue, food, printing and sending of
materials, ability to provide information, etc.). They were also expected
to average 4.5 out of 5.0. Aside from the customers’ evaluation, the
trainer rated the support group according to the readiness of the
materials, the venue, the equipment, and responsiveness to his/her
training needs. This was an all or nothing rating system. Either
everything had been prepared well or they had not been. In ninety out of
100 training days, the training support group must be totally ready to
support the training program. This was the minimum acceptable
performance. In turn, the training support group evaluated the kitchen,
facilities management, the IT group, janitorial and security services. In
order for everybody down the line to do their jobs well, the
trainer/facilitator must submit all his/her requirements on time. The
training support group must also inform the other groups about what
was expected of them given a certain amount of time for preparation.
This became the basis of their Service Level Agreements.

Part 1: Managing by Numbers and Narratives 68

2. Behavior and Work Processes Carried Out

While people outputs and outcomes can be readily measured, they will
not happen at the desired performance levels if the organization does
not pay close attention to the behavior exhibited and work processes
carried out by the people. These behaviors and work processes are
mainly manifested in the throughput stage where the managers and the
workers are transforming the inputs into outputs. Strictly speaking, the
quality assurance (QA) group should be the one in charge of this. The
quality control (QC) group focuses mainly on the outputs. They also get
physical samples of the work-in-process goods but they are not
monitoring the behavior and work processes of the people. While large
manufacturing firms realize the value of quality assurance, smaller
manufacturers, construction firms, service organizations and
agricultural enterprises hardly undertake this crucial function.

Case Example 11: Cacao Production by Two Communities

in Samar

A non-government organization (NGO) was funded by a philanthropic

funder to plant cacao in the elevated areas of the province of Samar.
Two communities were chosen for the project. A social enterprise
development officer (SEDO) was assigned to coordinate activities on the
ground with the help of cacao experts, social enterprise development
trainers and developers and local government agricultural technicians.
The SEDO was supposed to help coordinate the entire project and see to
it that the proper activities were carried out. One very important task
was given to the SEDO, and this was to document the actual work
processes, practices and behavior of the two cacao communities as they
went about their activities and tasks. The process documentation
method used by the SEDO followed the Learning Before Doing, Learning
While Doing and Learning After Doing format and guidelines developed
by Bayan Academy. Learning Before Doing entailed all the preparatory
work including the area and the sector situation analysis, the feasibility
study, the study of the community and its members, the cacao industry

Part 1: Managing by Numbers and Narratives 69

study, the step-by-step “ideal” work processes and practices in cacao
planting and cultivation and the determination of performance
indicators as the seedlings were growing (e.g. survival rate, growth
rate). These step-by-step processes and performance indicators were to
be used in the next phase as the SEDO documented the actual practices
employed by the two communities in community organizing and cacao
planting. The SEDO was supposed to compare and contrast the ideal
work processes with the actual work practices of the two communities,
thus documenting and measuring the “behavioral gaps” that could
explain the achievement or non-achievement of the project outputs and
outcomes.

Just to give a few examples, the farmers of the first community were
performing better than the farmers of the second community and this
was attributed by the SEDO to what the leaders of the two communities
did and did not do and what the farmer-members did and did not do in
terms of required work processes as per the guidelines. The second
community had a harder time putting their organization together. They
also failed to strictly follow guidelines on how to dig the holes for the
cacao seedlings (the holes were not as wide and deep as specified), how
to make compost to fertilize the soil, how to build a shade over the
growing seedlings to protect them from too much sunlight, and other
such guidelines. As a result, the seedlings of the second community had
a lower survival rate and a slower growth rate, which were some of the
performance measures set at the Learning Before Doing stage. Once the
project was done, the Learning Before and While Doing documentations
were supposed to lead to better guidelines on work processes, practices
and behavior in the future as recommended by the Learning After Doing
manuals which would be based on the post mortem analysis, the
insighting process after analysis, and the culling of lessons learned from
the first two stages of Learning Before and While Doing.

The case on the two cacao communities in Samar illustrates how an

organization can develop good metrics on people work processes,
practices and behavior. As can be gleaned, this would require a good

Part 1: Managing by Numbers and Narratives 70

process documentation and gap measurement method (between ideal
and actual). The method allows an enterprise or a community of
workers to be a learning organization, continuously improving itself.

Case Example 12: The Award-Giving Foundation

A publishing company entrusted a social development foundation to

solicit the participation of basic educational institutions to join a yearly
nation-wide contest to fete schools that had achieved excellence in
transformative innovations that raised the quality standards,
performance results and educational impact of these schools. Every
year, roughly fifteen to twenty schools were included in the short list of
semi-finalists. The foundation commissioned a technical screening
committee composed of experienced Education PhD’s to visit the semi-
finalists and validate their claims by going through their actual program
implementation processes and assessing their impact on the students by
interviewing the students and other stakeholders knowledgeable about
the program. Case studies and audio-visual presentations were then
prepared by the foundation with the help of the school authorities on
about ten finalists. A National Screening Committee deliberated and
chose the seven winners and named one of them as the most
transformative school. This top winner received Php 500,000 while the
remaining six got Php 300,000 each. A grand awarding ceremony was
usually held in a theater or a top hotel ballroom.

Over the last ten years, the foundation was only able to conduct and
complete six contests instead of ten. To the president of the foundation,
this was unacceptable because delays in the award process meant an
opportunity loss in terms of management fees in running the awards.
The president, time and again, berated the program head and assistant.
“Why do you insist on following a very sequential process. First, you wait
for all the applications to come in before short listing. Then you schedule
the very busy members of the Technical Screening to visit the short listed
schools, which they cannot accomplish in a short period of time. Then
you bring in the case writers and audio-visual group to the schools short-
listed, then you put the cases with accompanying readings on lessons

Part 1: Managing by Numbers and Narratives 71

learned in a book, etcetera. I instruct you to do a good PERT-CPM
process on the yearly award cycle. For example, when you receive the
applications and some of them look like very probable potential winners,
why not get the Technical Screening, case writers and audio-visual group
to visit them right away while awaiting other good entries. Throw out
those applications which are lame and obviously not up to par with our
standards. This will save us a lot of time because we are going to do
some of the activities and tasks simultaneously using the PERT-CPM
process.”

3. Morale and Satisfaction Level

The entrepreneur or manager should possess a fairly good level of

emotional intelligence to discern whether the organization has a strong
esprit ‘d corps or not. A high level of employee morale usually translates
to intense levels of work commitment, a genuine feeling of
organizational belonging, a strong sense or urgency and initiative, a
work atmosphere that is conducive to helping one another, sufficient
space and tolerance for constructive criticism and a generally optimistic
and hopeful attitude towards career progression and company growth
prospects. There is not much whining and grumbling, agitating and
complaining, finger-pointing and hand-washing. Unfortunately, some
entrepreneurs and managers are too task oriented to notice the people
behind the tasks.

Sooner or later, people problems explode right before their faces and
they are clueless why these explosions happened at all. There are many
telltale signs of poor employee morale: rising tardiness and
absenteeism, longer lunch and merienda breaks, intensified gossip
levels and office squabbles, delayed work submissions, wrangling
managers, abrupt resignations, contentious townhall or group
meetings, frequent firings and a barrage of administrative memos with
obvious attempts to impose more controls and prescribe more
bureaucratic procedures to discipline the organization. More formal
methods could be adopted like regular surveys on employee morale and
satisfaction levels. Questions on levels of job fulfillment, work-life

Part 1: Managing by Numbers and Narratives 72

balance, conduciveness of work environment, room for advancement
and progress, harmonious and nurturing organizational culture,
satisfaction with compensation and benefits, relationships with
superiors and subordinates, discrimination and favoritism and others
could be asked and the answers could be analyzed and watched over
time to determine areas for improvement and further strengthening.

4. Safety, Security, Working Conditions and Well-Being

More and more, government regulatory agencies are issuing

administrative circulars that would ensure that organizations are
complying with minimum employee and customer safety and security
standards that affect the health and well being of these constituencies.
The government is also getting more concerned about an organization’s
impact on the environment and the communities surrounding the
company. There are stricter controls on product quality, transparency
and their short/long term effects on consumers. Pollutive and
poisonous environments compromise the health of the people and
should be given more emphasis. Destruction of human habitants, illegal
or immoral business practices, and attempts to dominate and
monopolize industries have become priorities in the agenda of
regulators. More recently, corporations have seen it fit to add
compliance, safety and security personnel to their staff roster to ensure
compliance. Enterprises should, therefore, add metrics that monitor and
evaluate their people’s compliance with all regulatory requirements.

Case Exercise C: Application of Four Types of People Metrics

Having gone through the four types of people metrics, try to apply them
to the company you own, manage, or consult for. Provide the
corresponding narratives. If you are an entrepreneurship or
management student, try to secure the permission of a company to
apply this model on them.

Part 1: Managing by Numbers and Narratives 73