The Numbers You Need to Know: Thresholds

I recently stopped at a chain bagel shop for a quick breakfast on the road. It’s one we all recognize and I’ve enjoyed their product. The staff at this location are always friendly and engaging and, in today’s workforce challenges, that’s something special. I already had a coffee in the car, so my order was small. As I tried to tip the woman at the window $5 with my order, she told me they are not allowed to receive a tip larger than $2.

Say that again?

This was the first time I had ever heard of an organization capping the amount that their wait staff could earn. I felt sad, angry, and violated all at the same time. There was a part of me that was angered at their telling me what I was allowed to do, but this was really all about her and her predicament. What is this telling both me and her about what was expected or what the business really wanted from the outcome?

The numbers you track

Was it that this organization wanted to stimulate volume? We’ll pay you only this much so that you move more orders through. That doesn’t seem logical to me. As a standalone facility, the traffic is going to be more determined by placement of the building, the hunger of the people driving by and advertising, and the staff has very little if any control over any of this. The woman at the window was gracious and said thank you for thinking of her as she accepted the lower amount. What a rock star.

What numbers do you track and control? We usually refer to these as thresholds, a not-to-exceed or not-to-miss number that you want to ensure you measure. In the moments that I was processing this issue, I went to thresholds being used to control cost or quality and we usually see them as a force for a positive outcome. I couldn’t imagine how this was being used to control those in a positive manner.

thresholds in your organization

The thresholds that you might track or that we want you to track as a manufacturer relate to quality measures. You want to make sure that a certain task your team is performing is done properly so the customer will accept the result, so you establish a threshold metric and have your team measure against it and report. If the threshold is too high or too low (out of range), you provide instructions for the next steps. You may have them measure again or mark the measure and move on. The thresholds here provide guardrails for your process and instructions for things that go “outside the lines.”

You may track minimum and maximum thresholds on inventory. This is done to keep inventory at proper levels for the typical work you do and eliminate the costs associated with too much inventory on hand or not enough inventory and rush shipments to restock.

You need to track the number of man hours you have available on work centers to know the promises that you can make and keep to customers. These thresholds are all about the amount of work you can get done given the equipment, orders and people that you have. This was generally a very stable number at manufacturers pre-COVID, but we’ve seen a strong shift in this as labor shifts and changes post-pandemic.

incentivizing your people

I’m not in favor of limiting what people can make. There, I’ve said it. The most common area you see this is in sales. If I’ve learned anything it’s that salespeople are motivated to make money. True salespeople will want to earn the upside and have the confidence that they can do so. They will take the higher percentage and lower salary because they know that the harder they work, the more they can make. Don’t limit that. Don’t put a cap on the amount they can make. Even if the volume is crushing your team, figure out how to handle it differently.

Similar to this, don’t limit the amount of recognition and reward your production team gets. Let them earn as many free lunches or awards as they can. The volume increase will present a different problem in that you will need to come up with new incentives to continue to drive the behavior. These are all good problems to have.