QDISC Explained: A 5-KPI System for Smarter, More Profitable Manufacturing, Ep #34

you order one part from me. I'm gonna set up and I'm gonna run it and I'm gonna lose it in the last off or something and then I'm gonna have to start over and I'm gonna have to start over. Well now we know it's 30%, right? So run three of them from the get go and just price that in. - Price that in, yep. - When we brought this up to the customer that we had to change pricing because of this high scrap rate, they acknowledged that we're right and the reason they started outsourcing is because they had a higher scrap rate than that. They were making 10 to get two, but they understood that this is a hard part to make and we're okay with that. So the more you get that data then you can make those data driven decisions that I've got to charge X amount for this part to get a good one. (upbeat music) - Welcome to Buy the Numbers. Each week, we'll explore the numbers that drive your business from accounting and finance to operations and the exciting realm of mergers and acquisitions. Whether you're a seasoned veteran or just starting out, our discussions will equip you with the insights and strategies you need to rate in the power of data to elevate your manufacturing company. Let's crush some numbers. - John, welcome back to Buy the Numbers. - Hey Mike, great to see you again sir. - I think you now probably have officially a worthy award for the most frequent guest on Buy the Numbers. (laughing) - I'm gonna go back to my fifth grade class and grab that coveted copy of the Guinness Book of World Records. We had one for the entire class and see if I'm in there. - Yeah, exactly. Well, I couldn't think of somebody better to talk about this. I wanna talk about KPIs today. And for the listeners, we've done this a lot. I'm a big believer in data driven decisions and KPIs help you do that. And we've done a handful of shows on KPIs and people always seem to get a lot out of these and I think one of the interesting things about KPIs are that there's no right answer. You can measure whatever is important to you. And so I think it's really important to hear different perspectives on gathering KPIs, measuring KPIs and how to lead with data driven decisions. So anyway, so John, thank you for, I know you guys in the CLA is, you work with a lot of your clients on putting these systems in place, whether they're financial metrics or performance metrics. So yeah, I appreciate you joining today to talk about some of this. - Yeah, Mike, appreciate the opportunity to be here. And you know, certainly in my day to day life where I'm helping companies that are looking to improve their accounting function. And that's typically, you know, having a month and close process and reporting. And as I'm talking to these business owners, everyone is looking for KPIs. And I think it's a buzz word and there's a general consensus that this is important to running a business. And like you said, my having data to make decisions on the business, but what I often hear from these owners is one, you know, they're not sure where to start, what's important to measure, how often they should be measuring things or even what the format is. How do they go about starting to track KPIs? It's a topic that we get a lot of questions on. You know, and I think there's a lot of interest here on business owners and just how do you go about setting up a system to track? And you know, what's important to measure? And how do you do it? [MUSIC PLAYING] Manufacturers, what is your biggest headache? Is it measuring improving profitability, gaining efficiencies with AI and automation, maybe tightening up your cybersecurity, maybe getting your business ready to sell? At CLA, their goal is to know you and help you with challenges like these and more. Every day, CLA helps manufacturers tap into millions in revenue and cost savings. Like one manufacturer that boasted capacity in revenues by 15 to 20%, visit clacconnect.com to hear real success stories and learn how you can grow your top and bottom line. [MUSIC PLAYING] And everybody's KPIs can be drastically different, right? Because we all have different business goals. Maybe there's things we're tracking, of course, to our profitability and our performance, but maybe culture and all sorts of different things. And having those targets that you want to be at, give you a direction. I mean, one of the things I always-- a personal opinion on KPIs too, and data-driven decisions, in general, is I think it's often important to not just let the numbers make decisions for you. But I think it's important to know the effect of your decisions on your KPIs, right? I know I'm going to make this in it. I'm going to make this decision that does not supported by the math necessarily. But by having good KPIs, by monitoring them, by tracking that, you then at least know what you're giving up, right? Maybe you're willing to give up that little bit of ROI to make this different decision. Maybe you're-- because it's going to help your culture, or whatever that case might be. It's kind of a personal opinion. I know some people-- it's by the number of-- that's the end of the show. But it's just the math gives them the answer. And I don't think that's always right. But I do like to have the measures in place to know what the math is telling you, right? So I'm not just going blind. Yeah, Mike, can I say-- when you have the data to inform decisions, I think, in a lot of ways, we're all coming to work and trying to do our best every day. In a lot of ways, having that data can relieve stress. When you think about being in the shop, we're under constant pressure to do things more efficiently to find ways to cut costs, reduce turnaround time, deliver equality products. So there's a lot of pressure on us as leaders and owners in the shop. So by having that data available to help with the decisions, to your point, we know we're objectively making decisions on the business. And there may be some trade-offs to the decisions that we're making, but at least we're informed. And I've often said calling balls and strikes, but it's really using the data to help us know, hey, is this something that was going to keep us on track? Or if we make this decision, is this going to send us in the wrong direction? And my overall opinion here on KPIs is really it's starting with understanding what's most important to the business. I like to know the long-term goals. And for some companies, that could be-- some companies might have a five-year plan. We know where we're going to be. And we've got some clear direction. Some companies might have a three-year plan. A lot of companies are probably thinking about next year, but maybe not to beyond that. But I think starting where you're at and understanding, first, where do the goals here? And then that's going to help to inform, OK, what do we need to measure? What's important to measure to help us towards those goals? Yeah, and I think that's such a great point. KPIs, they really should be like a living, breathing document in some regard, right? So at different stages of your company, different things are going to be important to you. So from a startup phase to a-- I'm preparing to sell. Look at that as a 20, 30-year span, whatever that might be. What you care about is going to change dramatically, right? Oh, and early on, it might be cash flow. And later, it's evidough, right? I mean, just from a financial perspective. Absolutely. And when you look at maybe the differences between the businesses that have good data-- and I'd say the KPIs, but maybe even beyond that, just good accounting data versus the companies that don't, I think that the difference really is in the visibility of knowing where we're at versus-- and being able to make proactive decisions versus, hey, we're driving a little bit blind here, something happens, and now we're going to be reactive to that. Or we don't really have a clear understanding of how the business is performing in different areas. You've shared with me some of your CLA material on KPIs. And you guys have core set of KPIs that you look at. You want to talk about those? Yeah, absolutely. The timing on this is great, Mike, for a couple of reasons. One is because we recently put out an article here on KPIs for manufacturing companies, but also just the time of year coming up to year end and thinking about what do we want to track here for 26. So we recently did an article that was with one of our consultants, Mike Estes, and then in conjunction with a company Phoenix Lighting and their CEO. And really looked at what are these KPIs that make sense for most manufacturing companies to look at. There's kind of a core set of KPIs that we recommend companies start with. And now, again, these are going to be different for every business. And I think it gets back to the end. alignment with the goals, but some of these are maybe foundational types of KPIs that we look at. So we came up with an acronym here for this QDesk. So we've got safety, quality, delivery, inventory, and cost is kind of the five buckets here of KPIs that we would look at. Now when we put those into a kind of a prioritized order, well, we started QDesk, we started with quality, but I think for most organizations, you're going to start with safety. So that makes for a nice acronym, but I think we arrange that. So I don't know how you spell it starting with an ass. It's going to be tough. I guess with an acronym, it has to sound like a word, right? So yeah. So yeah, so you know, certainly safety starting with, you know, measuring what's most important, you know, we all want our team to go home from work in the same condition that they arrived. So and when you think about, you know, safety and maybe some of the metrics that you might look at there, of course, there's accidents or reportable incidents. You know, that's a pretty, pretty common KPI and we all want to have that long period of time since there's been an incident. And I think most shops track that in one way or another kind of visibly on the floor. We might look at things like lost time or near misses. So those are kind of when we think about things that we look at for safety. You know, I've seen shops where, you know, they've tracked kind of see something say something types of initiatives and really just looking to get one, I think kind of a unison of the team or kind of collaboration that hey, we're, you know, we're in this together. We're all, you know, working towards this goal here of safety and, you know, certainly to create accountability as well. And we look at these KPI's. So we've got safety on the list. We've got of course quality. So when we think about my quality metrics and interested what you might track at the shop, I mean, certainly things like first pass yield or scrap rate. So quality's really high on our KPI list. We probably track it too many different ways. Yeah, first pass yield, scrap and rework as a percentage of dollars and as a percentage of parts, right? Because that can be drastically different. We dig even a little bit deeper into so of the exceptions, you know, leading causes, you know, those types of things. We dig in pretty deep on that side and that stems from, you know, not hitting our overall quality metrics. And so escapes, we also, you know, we track escapes differently from caught internally too, right? So, yeah, you know, escapes we want less than a half a percent internal. We usually run somewhere around 1.3, 1.4%. The less escapes we have, the more we catch internally, right? So it's kind of a, it's funny how those two numbers almost go in an opposite direction. Sure. But I'll always take a higher internal rate and lower escape. Yeah. I don't ever get upset about that. But then we then like I said, we dig in pretty deep into why. Yeah. Right. And so we track a lot of numbers, a lot of numbers in the Y range also. I think Mike, that's a big point there is the Y because we're going to, we have this data that we're tracking. We're looking at the numbers, maybe looking at the trends, but then, you know, what are we going to do with this information? And it's that, it's that Y, right? It's that digging in to understand the root cause there. And then like what are the decisions that we're going to make as a result? Yeah. Why are 70% of my crap and rework set up air? You know, whatever the case might be. I mean, I'm just making stuff up now. But, yeah. So now that tells me I've got a flaw in my setup instructions or process or something right. So I can dig in and try to improve that. I would say Mike, I've seen on the quality side, certainly a lot of shops may have some long term, long term contracts, particularly if they're doing government work. And in my experience, certainly the importance of tracking the right metrics on those jobs, those long term projects from the start is absolutely mission critical and certainly have seen, you know, some companies struggle with on the quality side not having the right tracking from the start. Yeah. And the, you know, let's pause here and talk a little bit too about. So we have our, we're tracking certain things related quality. We have our targets. We track towards those. Here's one of the questions that always comes us like, well, how do I know what my target is? Right? Like what's okay? Am I okay at 1.3% internal scrap and rework? I am. Am I okay at, you know, how did I establish? We want to be under half a percent escapes. And is that good? Right? I mean, that some people might think that's terrible. Some people might think that's incredible. Yep. So in my case, how did we establish those numbers as it relates to quality? The escapes under half a percent. That's the highest expectation of any of my customers. Okay. Right. So my customer that expects us to be the best expects us to be 99.5% of the parts we send them are right. They understand stuff happens and they're going to get a bad part. But the tightest restriction I have to still score well with them is 99.5. So that's just our standard. It's not our standard with that customer. That's just our standard. Yeah. Right. As it relates to internal, how did I establish that target of, so our target's actually 1.2. And that is actually as people have listened to by the numbers and making chips from the top shops, modern machine shop top shop survey. The top shops are generally in that range where it's one to 1.25 percentage, something like that. We want to be the best. We want to be a top shop. That's what we said is acceptable. You know, it's one thing to track it, but you got to know, why are you picking the target you're picking? Right. In our case, that's those two examples. Mike, I think the way you approach that and sort of looking at, right, here's the standard that we have to meet for, you know, our toughest customer. And that's going to be the benchmark here. We know that sort of the minimum. And right, we can improve from there. We get a lot of questions on kind of what's available for benchmarking information. And, you know, I think there certainly are sources like the top shops survey. And there you have some very kind of specific questions and metrics in that survey. And you probably have some good reliable data there that you can use. I know on the financial side, the one thing I would say, and this is, you know, from my experience here over the years is, yes, there are kind of financial benchmarks out there. But there's also a lot of differences, particularly when we're talking about smaller shops in how the numbers are being reported. So a lot of times with those financial benchmarks, you're comparing apples to oranges. Sure. So I think that, you know, for a lot of times for companies looking at their kind of past history can be a good starting point as well. We've kind of know where we've been. We know that we want to improve the business. We're going to pick some areas to focus on and then look for some incremental improvement. Yeah, we're making changes that, I mean, we may be way off of some top shops target that may or may not be relevant to this, right? But are we trending in the right direction? Yes, that's what KPIs can do such a good job of especially when you look at percentage of something. If you just looked at the dollar value of your rework and you had a really low month to hit your target on a pure dollar value standpoint, you could be like, oh, we're doing a great job. It was also our slowest month. Yeah. And as a percentage, it was three times the month before. So I always try to boil KPIs down to make them very relevant. It doesn't matter what the inputs were, right? It's a percentage of something. It's a ratio, whatever, so that I can really trend how I'm doing regardless of all the other variables. Yeah, that makes a lot of sense. And I think it's just, you know, it's certainly, it's understanding the metrics and really making sure that we understand what we're measuring and what the results say because we could go from not having any KPIs to setting up KPIs we don't understand. And then we're making the wrong decisions. Yeah, and I like the percentage because it's almost like you could have a basketball player has scored 30 points last night, but he took 40 shots. And they say, well, that's not great. So yeah, a lot of times the, you know, having those percentages to kind of normalize the numbers. But I think it's really understanding what we're measuring and what those results actually mean for the business. Well, and I know we haven't gotten off quality, but let's take that a step further because I'm just thinking about how we, you know, how we implement some of this KPIs into our overall process. So by tracking quality well and knowing what our percentage of scrap is, we're also able to prioritize that in when we're bidding new jobs right so if we expect that we're going to have 1.3 parts percent scrap or rework then we know that to make a hundred parts we've got to make a 101 right so I need enough material like I'm going to start that order with 101 and really if I'm doing it really correctly I'm going to probably start with 102 right because 1.3 is going to be two parts and we do that and we price that in so if someone orders a hundred parts or ask us to quote a hundred parts we price it like we've got to run 102 well now my scrapping rework is paid for right it's part of my cost of this job if I end up with 102 parts great you know generally the customer will take those two extra parts or maybe they go in inventory whatever the case might be but I've priced that in the other thing that's done for us is it's also identified parts that we can achieve that low-over rate there's one part we have in our shop that we know we're going to have a 30 percent scrap rate on it's just and we have tried to improve that for four year like as far as we know it can't be improved there's a tolerance stack up to the part that you're just going to miss a couple of them well used to we didn't know that so you order one part from me I'm going to set up and I'm going to run it and I'm going to lose it in the last off or something and then I'm going to have to start over and I'm have to start over well now we know it's 30 percent right so run three of them yep from the get go and just price that in price it in yep and you might end up with two you're probably not going to end up with three but you will end up with one and your cost shallower you've priced the part appropriately and this actually this one part when we brought this up to the customer that we had to change pricing because of this high scrap rate they acknowledged that we're right and the reason they started outsourcing is because they had a higher scrap rate than that okay yep so it made an improvement yeah yeah so they yeah this was not a shock to anybody they were making ten to get two right and they understood that this is a hard part to make and we're okay with that so you know the more you get that data then you can make those data driven decisions that I've got to charge X amount for this part to get a good one yeah these are all interrelated right looking across the different but different engines in the shop and yeah you're right and also going back to just the what do we benchmark against well in our shop we've got a part here with there's a high variability on the yield so that's going to be different than other shops right sure so yes so we've talked about safety and quality so in that kind of core five and the Q-disk we also have the delivery so you know certainly I think the big one that companies look at is the on-time delivery we might also look at things like our our suppliers delivery rates as well we could look at things like downtime within the shop we might track production downtime which is going to tie into our ability to deliver on time right so we also have inventory which is a big one there within the top five so you know we're looking at things like I think most of the audience here I'm assuming that you know we're generally making to order so we're right you know there's going to be some overrun but we're generally not maintaining kind of a large finish goods volume right so really looking at kind of raw materials you know things like cycle counting the raw materials making sure that you know we've got accurate quantities in the system you know how often we're turning that inventory I've seen again it in this may be applied to some of the audience but with those sometimes with those government contracts there's we end up having inventory that's held yeah so when those cases we may have some finished goods that we need to track more closely and that could be important to the shop and then rounding out the top five we have cost and for cost right it's really related to these other categories one thing that we see as an opportunity for a lot of shops is just really elevating their understanding of how they're utilizing capacity within the shop so maybe looking at KPIs around utilization in our experience that you know often the biggest lever that shops can pull here when we're thinking about improving profitability is just how do we utilize the additional the existing capacity that we have within the shop equipment and people so we generally recommend that as kind of an important metric for shops particularly when you have you know when you have you're in a high fixed cost lots of lots of equipment type of environment Hey everybody what do you think of when I say ODD well in making chips we've got lots of acronyms to deal with but ODD is on time delivery on time delivery is part of Hills mission deliver quality parts on time every time when I was shopping for an ERP system I was looking for something that would ensure that we do that on a regular basis delivering jobs on time with something we struggled with and I know that most shops struggle with I think I saw recently that 70% of shops struggle with the delivering parts on time so the best decision I made in that inner pro shop does you know that many approach shops customers quickly experienced 95% or better on time delivery rates with their customers and now pro shop has a guide to help all shops whether you're using pro shop or not visit pro shop ERP dot com slash 95 again that's pro shop ERP slash 95 to get your copy today so let's touch on that one because to me once you start getting into efficiency utilization and those types of things there's just so many ways you can track it right I mean like I think in most cases if I really wanted to I could always make the numbers look good just depending on how I calculate it right so I've actually tried to slim my down and make it as simple as possible so there is no bias towards this or that but what are some of the ways like that you would say like if I want to track you know overall efficiency utilization so forth I mean you have like kind of a best practice look at that and actually what I can do is I can tell you the highest level I look at it before I dig any deeper so you know we have a shop rate we want to hit as a shop we bid based off of that we try to perform based off of that so one of the simplest things I look at and this is so simple but I'll look at labor hours for a time period right whether I'm looking at a week a month a quarter whatever it might be times might shop rate and I get a number I paid for five thousand hours in this time period at call it $90 an hour you know something like that whatever blended rate I'm looking for is a shop so I have there's four and fifty thousand dollars there in that time period what did I actually hit did I hit over that under that yeah right so that gives me a very high level look at just from a labor hours standpoint yeah look at spending we're going to be able to look at anything else but the other day we're generally selling I think most of us in this business are selling labor hours so Mike if you want to know kind of where you're at mid-month that's a good leading indicator right for you so the hours how many labor hours do you have at that yeah so I just look at it what percentage of hours that I paid for at my shop rate and then how much have I actually shipped like I want that to be 0.85 0.9 or better right some months it's 1.4 right yeah months it's 0.6 right so it's a very high level simplistic view at what I just call utilization right like are we billing for the time that we're spending yeah but then from there I can dig down into 100 more KPIs yeah well I love that one so you've kind of got the utilization but you're also kind of playing there on the billing and the cash flow as well right because it's what if we recorded for labor hours and what have we turned around and build how do we you know ultimately get paid for this time so as are we utilized and then how quickly are we getting those products out the door and invoicing collect it's interesting because you know we might look at things by work center and you know looking at utilization by work center I found in practice that information's really helpful when we're having we're doing quoting meetings or you know looking at bidding on jobs and really considering is this a part of the shop where we have excess capacity right and then but you start to look at well what does it really cost us to run this job is it's the materials right we already have the people we already have the equipment so you know that can be a way where we can find some opportunities to improve the bottom line you know I think when we're talking about anything you know related to pricing you know there's always strategy involved there and you know you want to be kind of true to you know how you know you're pricing strategy but if we have the capacity I think kind of the general point is just hey we may want to be a little bit more aggressive to take on on certain types of work. When you look at just the overall cost structure within a shop, if we're getting into any type of accrual accounting, you can end up with complexities there that lead to the wrong decisions. And when you start to think about how we're allocating labor and overhead, and those things are certainly important, and we need to have an understanding of that when we're quoting work. But to get back to that discussion and capacity, we also have to be kind of recognizing where we're underutilized within the shop. And we don't want to let that cost accounting lead us to the wrong decisions. That's a challenge that we see sometimes when companies are doing accrual accounting that plays into this as well. But I love that metric that you led with there, Mike, because I think a lot of times it's looking at the leading indicators and the shop. And it could even be something like, I've seen shops look at unplanned callouts. As that can be a significant indicator for them as to what is production going to look like here, for the month, ultimately, what are we going to be able to kind of fill and collect here. And I think any time you get those leading indicators, it just helps you to make a decision. Do we have an issue here with attendance or something that leadership needs to address? That's such a good lead way. And I think everything we talked about in the QDISC model makes perfect sense. And I did actually want to go back to one thing on the safety. I think that's a hard one for a lot of people to track. There's day since last incident, there's those types of things. I know in our environment, I think there's a lot of near misses that certainly go unreported. No one's walking around, go almost cut my finger. But there's a first aid closet that I can hear open and close to. So I know people are grabbing band-aids from time to time. But one of the things I've done on that regard-- and this is more of an annual check, and it's really a big picture. But I'll just-- I'll even just kind of track my-- whatever they call it-- my modifier on my workers' comp. Right. And where I stand against the industry norm. And I know because of tracking that, I know that we do a pretty good job. I don't remember the exact numbers off top of my head right now, but we've even had worker comps audits purely because our modifier is so low for the industry. And they're like, this can't be right. Yeah. And then they come in, they audit, and they're like, no, it's right. So I know we're performing well there, right? So it's something I track, but because I know we're performing well, it's not something I've gone deeper on. Yeah. Versus some of these other things, they expose a problem and I need to dig deeper. So using that as an example in what we've talked about, quality or cost, and so forth. So if I've established this kind of high-level Q-disk model, and again, maybe those are driven by customer expectations and internal expectations, where now can I start to kind of dig deeper into, like, so costs, for example, right? I mean, there's, I think we probably all do or should track our cost to good sold, maybe a little bit different from our S-GNA. But I mean, I have line, I have some light item expectations on my S-GNA, right? And it's just there are things that are not going to be more than a percentage of revenue or whatever that case might be. So how do you recommend people, if they get a good Q-disk, establish, like, where do you then start digging in deeper? I might say I start with kind of the concept that less is more. We don't want to over-complicate things. So it's really deciding on what are the, what matters most. In the article here, we suggest four or five kind of KPIs as a focus in practice. I've seen clients effectively use maybe up to 10 KPIs that they're tracking. And I would separate the KPIs, and some of these are financial measurements. Some of them are non-financial. And I'd separate that a little bit just from kind of the basic financial statement review. Because I think that there are some practices here, and we could look at things like having an annual budget, which can be important, right? Having an expectation for the year and then measuring our actual results against that. So we're looking at things like the S-GNA expenses. We have an expectation for the year. It might be based on starting with last year, but it could be that there's also some initiatives that you planned for the year in areas that you can improve the business. So we kind of have that financial review, and that's imported, and that's kind of looking at the company as a whole, our overall financial results. And then we start to look at, OK, here are these other measurements, these KPIs that we want to track. And we can start with our five categories there. The Q-Disk and there may be some other areas of the business that you want to measure as well, but kind of starting with that framework of, OK, we don't want to overcomplicate this, because if we track too many things, we lose focus on what's important. And I would say another important point here, too, is that the timing of how often do we want to look at things. So I had mentioned unplanned callouts. I mean, that may be something that we want to look at on a weekly basis, or in your kind of metric there of what we have for labor, booked versus what we build. These are things that we want to look at more frequently than that kind of monthly financial statement review. Well, it's kind of interesting. Just again, I'm interested in your opinion on this. So you and I have talked a lot. And the most recent episode you were on with me, we talked about 13-week cash flow. So some of the things I talked about, like even that super high level efficiency thing, right, or utilization. So I put this-- on my 13-week cash flow actually goes, one of the inputs for me is labor hours, that week. And at the bottom of my 13-week cash flow, I have some of these KPIs that I track. So how much did I ship this week? And how much did I-- how many labor hours did I pay? And it gives me that, OK, you were 87%. OK, I'm not worried. Like we did good. To me, I just look at-- I always look at KPIs as like this big pyramid, right? Ultimately, I want to be profitable. Like at the top of the list, I want to be-- I need to be profitable. I don't just want to be profitable. I need to be profitable. Yeah. So there's things that goes into that, right? So when you're talking about budgeting and forecasting, are we hitting our revenue targets? Are we hitting our cost targets so forth? So that branches off to a couple of your financial metrics that you need to do. And then I think when you start seeing problems, or maybe not even problems, but just leakage at each level, that's going to branch off to, OK, well, if I'm seeing leakage and gross margin, then I need to dig a little bit deeper into cost of good sold. So from there, what do I need to look at? Well, maybe I need to be looking at my labor hours, and maybe I need to be looking at our material purchases or inventory. Those types of things are supplies, right? Like, am I spending too much on tooling? Which is now going to give me a new metric. Well, how do I know if I'm spending too much on tooling? Maybe I've got to dig in and go, OK, are we buying effectively? Are we utilizing all the best methods? And to me, it's just they all build off of-- like I don't create KPIs for the sake of creating KPIs. I create them for the sake of driving the goal above it. Where is my scrapping rework coming from? If it's on target, I'm not digging in as deep for the why that we talked about earlier, right? Right. If I'm hitting those targets, I'm not digging to that next level. If I'm not hitting those targets, why are we having set up errors? Why are we having tool breakage? And-- yeah, so I mean, in my mind, that's how I've done my systems over the years is just starting at that highest level and then just starting to dig down, dig down. It's framing it with what are the big picture goals and then from being in the shop every day. What are the areas that you need to focus? You're right. If we're knocking it out of the park in an area, then maybe that's where we don't need to put our attention there. We need to maintain it. But what are the other parts of the business that we can improve? To your point, ultimately, it's about we need to be profitable. We need to be profitable. We need to grow to create opportunities for our people, to create opportunities as shop owners or leaders. Some of these things, I had mentioned the financial review and then you had mentioned the cash flow, which I love that you've got on there. You've got pretty slick there. You're forecasting the cash is can based on the labor, which I love. But even it might be that cash flow is important. But our KPI could be as simple as we could have cash collections for the week. We kind of know what we need. to collect here to stay on track with that 13 week plan. So let's just just look at it weekly and hopefully drive some, maybe drive some actions or how we're handling our collections practices and we're looking to drive some improvements. Yeah. Now, in the article that you've referenced, which we'll make sure to link to that in the show notes, you know, I read a couple things I hadn't seen before and it brings up, I think a good topic, some of these softer KPIs, right? Like, how in the head do you measure that? You had two in there, one was customer delight and one was employee engagement, I think is what they said. I want to hear a little bit about that because I think there are a lot of soft metrics that we want to measure but we don't know how, right? Like, how do you measure customer delight, right? Like that's more employee engagement. So I'm just curious, maybe some of the examples that you've seen of that and/or other kind of soft numbers and how to measure those. Like in that article, there's, so I mentioned it's Mike Estes from CLA in connection with Phoenix Lighting and they talk about one of the metrics at Phoenix Lighting, which I think may be referencing. There's a customer concerns per million. Yeah. Metric where they're looking at everything customer related, right? It could be an issue with the par but it could be an issue with the purchase order or, you know, invoice wasn't sent to the right, you know, there, whatever the case may be, they're going to measure any customer concern related to that order. So they're tracking that on a kind of per million basis. So we've got 50 incidents out of a million orders or coming up with a baseline there, I think is the key and then looking to improve that. The employee satisfaction or customer employee delight, I don't know, employee satisfaction. Yeah. Yeah, I mean, you see things like certain companies will certainly look at things like, like, turnover, right? But that's after the fact, type of an indicator. But, you know, I've seen companies look at things like personal training programs. So, you know, having a requirement that, you know, everybody within the organization is getting some continuous, you know, development and making sure that employees are on track with that. Some companies might look to do some kind of employee satisfaction type of survey so we could look to kind of take a kind of measurement that way with the survey. But yeah, I think when you get into some of the softer topics, you just have to be a little bit more creative than how do we, understanding what we want to measure, but being creative maybe and how we approach that. Yeah, and I'm glad you brought that up about the employee survey. So, you know, we use ProShopPRP. It actually has a built-in employee survey function. One of the things, and we do it once to twice a year, probably something like that. So, you know, it's kind of a canned survey that goes out to employees about all sorts of working condition things, you know, opportunity for improvement, you know, opportunity for growth, how's my pay, and how's my benefits. And one of the things that's always been frustrating for me since we started doing it is relatively low participation. We probably average half the people fill out the survey. And early on it was super frustrating for me, but after we had done it by our six times, I realized it kind of didn't matter because again, we were getting a trend, right? So, our composite score of those surveys was either going up or down every time we did it, right? Yes, there's people that chose not to do it. That's fine. We don't have that input. I guess I could force it. I've never chosen to force it. But I think it maybe goes a little bit back over talking about earlier, those, you know, lots of times it doesn't matter if everybody participates or not, you're still seeing trends, right? So, whether it's quality data, safety data, when employees satisfaction data, you are seeing trends. Absolutely. Yeah, and I think that's an important point is we know where we are now, right? We're starting here and then, you know, what are the trends? Are we making incremental improvement to the business, right? Are we making progress on that goal of profitability or improving the bottom line or, you know, whatever the kind of the big picture goals are? Whatever we now, where do we want to go in, using the KPIs and data to make decisions to help us get there? I would just add, you know, it's definitely this is a process of iteration. So, you know, if somebody's new to using KPIs, I'd encourage you to start and you're going to track certain things and then you're going to say, "Hey, I don't know that this is important and it's okay." And you can go and say, "I want to track something else instead." And that's the way the process is going to go here to really get down to what's important to measure in the business. And when you figure that out, then it's going to change, right? Because the goals of the business are going to change or the environment that you're operating is going to change. Yeah, and I think that's such a, as we wrap up, I think that's a great way to encourage people to get started is, you know, it's keep it simple, right? And don't track too much stuff that no one can keep up with everything you're tracking. The other lesson that I've learned over the years that I was not doing a good job at Hillat, and I think we're a lot better now than we were, but still not perfect, is, you know, make sure to really communicate to everyone on your team how they can affect the KPI, right? So, your shot floor guy maybe does not need to understand how you're tracking a KPI related to purchasing, right? Or something like that. But they do need to understand how they affect like that simple efficiency calculation I described earlier, right? Like, hey, we're tracking, we're trying to be 85% or better. That means that every hour of your day needs to be built towards making out of every hour, 85% of it, which is 51 minutes or something I can't remember with enough. Yeah. Needs to be productive, right? Spinnell needs to be turned in, put in parts on a pallet, whatever, you know, whatever their job is. And because for the longest time, I was tracking all these KPIs and I would grow frustrated that this didn't happen, this didn't happen. And I had told someone why what they're doing, I had told them what they're, what I'm asking them to do is important because in some ways it gives me the data I need to make good decisions. But I never explained to them why it was important and why that decision they can make this way or the other is going to affect that number. So I've really tried, I'd say over the last year and a half to really align everybody's individual roles and let them understand how they affect our overall KPIs. And not alone, I'd say I saw a pretty good improvement just every single person understanding how they affect whatever numbers they affect. Some numbers they don't affect. They don't need to, they don't need nobody. They don't need to worry about them. Yeah. The ones that they can affect, the more they understand it, the more they performed in a way that affected the KPIs positively. I love that, Mike. And I think on that, why I mean the individual communications really important, certainly any, many all-hands types meetings, these are, right, this is great opportunity to share kind of what it is that we're measuring why they're important and how we're doing. I've always found that this type of information is really well received in all-hands meetings. Yeah. We want to know, everybody wants to know how we're doing. Some companies will even tie some of these metrics maybe into bonus plans and things like that to create that sense. We're working together collaboratively on these goals. Yeah, and I think that's a critically important piece. I actually have kind of undone that internally right now with the goal of re-establish these some very direct KPIs to a bonus plan. ours were a little too complicated. Yeah. So I kind of unwound it. Again, part of it was they didn't understand the KPIs. They didn't understand how they affected KPIs. So they just, we based it on some big numbers that rolled up that people didn't understand how them making a decision one way or the other affected that top number, right? So trying, I've actually, I'm kind of redoing mine now to break that down a little bit more. So that it's not six calculations removed from their daily operations. Yeah, right. Yeah. They know what I did the day affects my numbers this way, you know, type thing. But yeah, I mean, I think the more you can tie a compensation to re-bonus plans or anything to some of these KPIs, I think you just get triple the effect of the positive results of it for sure. Yeah, amen. I love keeping it simple. And yet your point has to be things that the team has the ability to impact. And know how to impact, right? Yeah. Hey, it's Paul from Making Chips. If you've been burned by recruiters who don't understand manufacturing, you are not alone. That's exactly why we created higher MFG leaders. We're not just recruiters, we're current and former shop owners, and we know what it takes to lead in this industry. Whether you're hiring your next operations leader, sales manager or production supervisor, we'll help you find someone who actually fits. And more at makingchips.com/higher. like you should just go follow their stuff anyway they put out so much great content for manufacturers whether it's about KPIs or taxes or you know whatever the case might be inventory management. I mean all sorts of great articles all the time so I would definitely encourage you just to go follow their stuff. Of course a lot of you have heard from John before but John go ahead and tell people how they can find you if they've got some questions on this. Yeah absolutely Mike appreciate that and I'm happy to help with any questions here on KPIs as I mentioned it's a process of iteration and happy to help support you on your journey you can find me at it's John J.O.N. three letters my parents knew I wasn't smart enough to spell a four letter word so it's john.hu's at claconnect.com and again happy to help with any questions. Yeah and if you don't track you down there just call it me and I'm happy to connect you guys as well so yeah with that thank you everybody for listening and John thanks again for being on the show. Thanks Mike thanks for having me always a pleasure.