Does your management team review Financial or Operational performance indicators (or both)?

In this video, I talk about why it's essential to look at both operational and financial metrics during your performance reviews – whether they're weekly, monthly, or even annual reviews. A lot of companies focus too much on the financial side, looking at things like sales volume or how much they overspent on materials or labour, but these figures don't tell the full story. You need to dive deeper into the operational reasons behind those numbers. For example, if material costs are higher than budgeted, it's important to understand whether that’s due to inefficiencies like higher waste or rework, or maybe it’s just the result of producing a different mix of products than you initially planned.

But for a fruitful discussion, operational KPIs – like waste percentages, rework levels, and overall equipment effectiveness (OEE) – can give a much clearer picture of what’s going on in the business. These are the things that operational managers need to be monitoring because they directly impact financial results. If you're just looking at the financials without understanding the operational drivers behind them, you’re missing the opportunity to make real improvements.

A best practice is to link your monthly variance reports to the original budget assumptions. If your budget is built on certain assumptions about production volumes, efficiency levels, and labour usage, then those same assumptions should be reviewed every month. This keeps you aligned with reality and helps you make better decisions. At the end of the day, the goal is to use these insights to drive operational excellence, not just to explain why the numbers ended up where they did.
#continuousimprovement #capacity #laboratoryscience
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00:00 Introduction: Importance of Operational and Financial Metrics
02:36 Linking Financial and Operational KPIs
07:55 Example: OEE & Labour Costs
09:32 Monthly Budget Review: Checking Assumptions and Ratios
12:04 Daily and Weekly Operational Indicators for Continuous Improvement

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