Be on Alert for Red Flags


Be on Alert for Red Flags
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Best Practices

I am sure that you have many key performance indicators (KPIs) that you and your staff are watching on a regular basis and that you rely a lot on these KPIs to inform you of how the business is doing. You may be looking at these KPIs versus targets that you and your team have set, or you may be looking at indicators for changes in performance. 

This practice is wholly appropriate, and these bulk indicators are highly valuable. However, there can still be problems lurking below the surface, so this column explores some “red flags” for which you may want to be on alert, as they can be useful signs of trouble.

In the safety area, the early warning signs of trouble are in the “unsafe incidents or observations.” These unsafe things may be reported on safety surveys, submitted during safety meetings or brought to attention by some other mechanism you may employ for safety reporting. If you see a big uptick in the number of unsafe incidents, this is a red flag (e.g., an indication that people are taking their eye off the ball). This should prompt some intervention that could include special safety meetings to discuss what is happening as well as management communications. Conversely, I would also be concerned about a big tick down in the number of unsafe incidents, as it could be an indication of less reporting or fewer safety activities happening in the field.

I have worked in sales management at different levels and in different companies over the years, and I regularly would travel to visit customers with salespeople who reported to me. Often, the salespeople would take me to the largest customers, which made sense, as these were customers for which multi-level relationships were important to establish and nurture. 

However, I also periodically wanted to visit some of the smaller customers, or customers where perhaps things weren’t going well. If these customers were never “available,” that would be a red flag for me. This could indicate that the customer had an issue with our company or with the sales representative, and it could be something that needed to be investigated further. 

Regular ongoing late pay behavior by a customer could also be a red flag. Of course, it could indicate the customer was having financial problems, which may require action or at least closer monitoring by sales and finance. But it could also indicate some kind of systemic problem with the way the customer was being billed or with the supply chain. Such problems could lead to customer dissatisfaction over time if the root cause of the issue is not identified and fixed. 

In the procurement area, a red flag that I observed was that there was a large dollar value dispute with a major supplier that was not resolved for months and months. As I probed the issue with the responsible buyer, it turned out to be a dispute over a price change in a raw material. After several meetings and some forensic investigation, the issue was resolved, and it led to deeper discussions of the overall relationship, which proved productive for both sides. 

Another red flag that I experienced in procurement was the existence of significantly different prices for certain raw materials in different regions. There can be valid reasons for this situation, but it can also indicate a weakness in the procurement process, systems or communications. 

In the supply area, I would take a close look at what sort of customer satisfaction KPIs you are tracking.  You may be measuring the number of customer complaints as well as the amount of time it takes to close out such complaints to the satisfaction of the customer. These are valid data to be watching and trending. 

You may also be tracking on-time delivery to the customer and setting improvement goals for this area, which is also appropriate. In all areas, though, I would ensure that you are actually measuring data that is linked to customer satisfaction and not just generating massive amounts of data that feed the system. 

Along these lines, if you are closing out customer complaints in a timely fashion but the complaints recur, it may be that the close-out process is more focused on speed than on quality of the outcome. You may want to find a way to rate complaints according to seriousness from the customer viewpoint. It is a big red flag if your supply data for a particular customer are improving but the customer satisfaction is not.

In all areas, growing head count is a red flag. Over time, technology and organizational improvement should result in fewer people needed to do the same amount of work. Of course, head count can increase if the organization has decided to invest more in a specific area, such as to complete a significant project, expand a product line or explore a major growth opportunity. You should be able to figure out how much of any head count increase has to do with such significant investments and analyze head count for the base organization. No doubt you are tracking and managing budget, but managing headcount can give you additional levers to pull regarding organizational efficiency.

As you look at some of these or other red flags that may emerge, you should consider the level at which you need to address the improvement. In some cases, the issue can be as simple as dealing with the performance of an individual who may need training, coaching or an improvement plan. In other cases, the issue may be more at a systems level, and you may need to put in place better tools, practices or technology in order to implement an improvement. 

Sometimes the issue can be one more of mindset or focus, especially if you are new to the organization and are introducing a new direction or strategy. Deal with those red flags in your company, as they may reveal flaws that your bulk KPIs are

Sara Lefcourt of Lefcourt Consulting LLC specializes in helping companies to improve profits, reduce risk and step up their operations. Her experience includes many years in marketing, sales and procurement, first for Exxon and then at Infineum, where she was vice president, supply. Contact her at or (908) 400-5210.

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