Some Data Is Too Expensive to Gather

January 7, 2008

Data costs a lot of money to produce and much of it has no value.
 
Many businesses are wasting money on data collection and report generation that could be better spent elsewhere . Often the first step toward resolving a problem is to take measurements. While this may seem like a logical approach, it’s really a huge waste of money.
 
I’ll stipulate that you need data to measure progress. But why do so many managers launch a new spreadsheet series every time they identify a problem? A case in point is a recent client experiencing problems with frequent lost production due to equipment failures. My idea was to conduct some observations over a period of 4 days to see if anything obvious was happening to cause the lost production. My proposal was rejected in favor of a Six-Sigma Black Belt’s.
 
My proposed cost to identify the problem was $3,500. The client was losing about $60,000 per day to equipment failure so $3,500 seemed reasonable to me. The Black Belt wanted $50,000 for the first month, then another $25,000 per month for two subsequent months. I lost. But they liked me enough to apply my skills on a different project. The client accepted the $100,000 proposal from the Six-Sigma guy.
 
This “expert”, let’s call him Six, spent the entire first month creating spreadsheets. The client loved it. Lots of data that no one could understand accompanied with colorful graphs that everyone understood. The conclusion was that the client was losing about $60,000 a day to lost production due to equipment failures. Uh, I thought we knew that at the start. Ah ha! We now have a very elegant means to measure our improvements! The next step was to create databases. Six needed lots of databases. And the maintenence guys needed new laptops so they could enter data into all the new databases. I won’t go into the costs of new laptops and maintenance hours lost to data entry. Suffice to say that the maintenance guys spent at least half their work day entering data on the laptops. Sorry to report I am not exaggerating.
 
At the end of the ninety days, the client had a lot of data and a lot of graphs showing the lost production. Naturally, the graphs gave a great picture of the problem. Some days, even some weeks, were better than others. It was very interesting stuff. Six didn’t want me near his big project but the client did. He asked me to review the spreadsheets and offer some input. So, I looked at it and found some math errors and some false assumptions. I also noticed that many of the measurements were not taken at the correct point in the cyle which distorted the data. The client really didn’t want to hear about that because overall he was very impressed with all the colorful graphs. We started having meetings to review the graphs.
 
Then, the client had a brilliant idea. He decided to pay a rather large bonus to the maintenance guys if the production loss improved through the reduction of equipment down time. More cost. Things improved a little and the bonus checks were paid out every month. The client was pleased to be making some progress.
 
My little project was easy so I had some spare time to spend with the maintenance guys. It took me about 3 days to figure the problem. All the maintenance was performed at night and in remote field locations. The guys weren’t doing the work. One guy just slept in his truck. He liked the new system because he collected a lot of overtime to do data entry in the nice, clean office and he got a $3,000 bonus if fewer things broke down that month. Great system.
 
I made a paper checklist of the required daily maintenance routine. If the guy checked the box that he put oil in an engine and I checked that engine’s oil level the next day and found the oil level seriously low, I knew the work wasn’t done.
 
Before I passed out the forms, I worked for a few days with the guys to get a good understanding of their situation. Though the job paid well, I wouldn’t want it. So I looked for ways to make their job easier. I found a lot of ways to save them time. They trusted me and we worked well together. Needless to say, things improved drastically.
 
Six got all the credit. In fact, the client hired him full time at a huge salary. You just can’t beat pretty graphs. A year later both Six and the boss of the entire region were fired for wasting money.
 
The moral of the story is this. Yes, in business we need measurements. Measurents can tell us if we are on the right track. But it’s very important to measure the right thing and to start measuring at the right time. I found my first clue to the problem by looking at the consumption of maintenence materials. We sure weren’t using much oil. I just looked in the shop every morning and made a mental note of the amount of oil available for maintenance. I didn’t make a database or produce a graph. I just looked.
 
If a big problem pops up at your business, start with observation. You’ll probably find the problem pretty quickly. Make some changes and see if things get better. Then you can start measuring your progress.
 
Chris Reich, Author of TeachU’s Business Talk Blog
 

Chris Reich

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