There are two reasons why performance measures don’t guarantee performance.
In this article, I address the second reason performance measures don’t guarantee performance. Click here to read the first article discussing the first reason. In the next article, I will offer a solution. What follows is an excerpt from The Contract Professional’s Playbook.
Second, buying companies set the wrong target. Let’s look at a commercial example. In a call center setting, a target might be eight calls per representative per hour. But this target could drive the wrong behavior—for instance, cutting calls off before the problem is solved decreasing customer satisfaction. A blended SLA that weights first contact resolution and customer satisfaction higher than the number of calls completed and hold times would be more appropriate in most instances. The contract professional needs to understand the impact of the target on the rest of the business objectives.
Returning to on-time delivery, seek to understand the downside as well as the upside of a 99% delivery rate:
- What is the industry standard (benchmark) delivery rate for this type of product? Is 99% higher or lower than that standard?
- How critical is a 99% on-time delivery rate to the buyer’s overall business objectives?
- Will a 99% on-time delivery rate incentivize the supplier to short ship?
- Will it cost a premium to get to a 99% on-time delivery rate?
- Does it make sense to have a 99% complete shipment requirement with the 99% delivery rate?
- If so, what would that cost the buying company? What are the upside benefits to any increase in costs that outweigh the increased costs?
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