Perfect order, DIFOT, inventory days of supply; the list of operational supply chain metrics goes on. Google “supply chain metrics” and you’ll be greeted by thousands of suggestions for measuring supply chain performance, almost all of which focus (quite rightly) on operational data.
Yes almost all root causes of performance issues lie in areas untouched by operational KPIs–areas like organisational culture, leadership behaviours, and something called cultural entropy.
Is entropy measurable? Yes, it is if you go about it the right way. First though, you need to understand what entropy is in a business/supply chain context, and how it can impact your supply chain performance.
Entropy is the Enemy of Engagement
To keep it simple, you can consider entropy as the degree to which your company’s employees are disengaged.
Since employee engagement contributes directly and significantly to performance, the presence of entropy should not be tolerated, but few companies are particularly good at eradicating it.
This is not really surprising since measuring entropy is not necessarily easy—but it can and should be measured, and the results acted upon.
What’s Involved in Measuring Entropy?
In order to measure entropy, you must develop a baseline and relevant metrics from scratch, which first means identifying what employee engagement looks like in your company’s supply chain organisation.
To do that, you must know which leadership behaviours foster engagement, and which ones encourage entropy … and to do that, you must have a clear vision and strategy for your supply chain; one which aligns completely with your company’s business strategy.
In short, you must build a picture of the organisational culture that you wish to create and maintain in your supply chain, or at least, in the parts of it that you can control.
This may all sound like using a sledgehammer to crack a nut, but it’s not and this is why:
- Entropy directly impacts supply chain performance
- The causes of entropy typically relate to organisational culture
- Leadership behaviours play a vital role in development of organisational culture
Cultural entropy typically appears and thrives under the following conditions:
- When an organisation has no clear culture, vision, or values
- When the organisational culture has evolved without guidance from leaders
- When managers and employees behave in a way which is misaligned with cultural expectations
So you see, to measure and eliminate entropy, increase engagement and as a result, improve supply chain performance, you must ensure that everybody in your supply chain organisation shares, lives, and breathes the same values and that those values support your company’s mission.
How to Develop Entropy Metrics (The Short Version)
There is not sufficient space in a post of this length or indeed, of one ten times longer to include a guide to measuring entropy and engagement, but the process can be summed up in a list of six key steps, which go something like this:
1. Define a number of core values that should drive and define your supply chain organisation. Five or six values should be sufficient, but of course you can have more or less … whatever works.
2. Now define some clearly demonstrable behaviours that indicate a leader/manager is living your chosen values. You should identify five or six behaviours for each of the values. Your entropy metric will use these “leaders’ behaviours” to assess the engagement/entropy levels of employees.
3. Develop an employee survey. This survey should explore employees’ perception as to how closely their leaders’ behaviours match those defined during step 2. The survey will need to have a scoring mechanism, which will become the basis for your entropy metric.
4. Conduct your survey and collate the entropy score.
5. Begin working with your supply chain managers to adjust their behaviours and start driving down the entropy score.
6. Watch your supply chain performance climb as employees become more engaged in your mission and vision.
Of course the process is not quite that simple, but the steps above are fundamentally accurate and should give you a general idea of what’s involved in measuring cultural entropy.
Keep Your Supply Chain on its Best Behaviour
Industry-leading supply chain performance can’t be attained through operational policies, processes, and procedures alone. Some performance factors depend upon organisational values, employee attitudes and leadership behaviours.
These factors may less tangible and hence, harder to quantify, but don’t let that be an excuse for inattention. Remember; you can’t improve what you don’t measure, and sometimes your company will hit supply chain performance obstacles which don’t respond to process-related solutions.
When that happens, try switching your focus from “best practices” to “best behaviours” and taking a close look at the softer side of supply chain management. The effort can often pay off, leading to hard and very tangible improvements in supply chain performance.