April 2019

The Other M in S.M.A.R.T. Goals

by Bill McDaniel

In developing leaders to be more effective, our team at Academy Leadership consistently stresses the importance of goal setting. We know that goals tend to focus teams on what is important. When your team participates in an integral part of the decision-making process, they are motivated. They become engaged. The team accomplishes the mission.

Goals need to be smart. Of course, you say. That is a no brainer. What we teach is that smart is an acronym of which you have perhaps heard. Specifically:

  • Specific
  • Measurable
  • Agreed-Upon
  • Realistic &
  • Trackable

I submit that there is another equally important concept that begins with M. That is, Meaningful to the Customer.

This is a true story.

In the early 90s the Alaska Railroad Corporation (ARRC) was in negotiations to renew their freight contract with MAPCO and the rail service to their refinery in North Pole Alaska. North Pole is on a 20-mile spur from the northern terminus in Fairbanks. The AARC's contract was to ship MAPCO's refined petroleum product from the refinery to their tank farm in Seward. From there it was shipped out on ocean going oil tankers to their customers. The total railroad run was a little north of 500 miles brimming with breathtaking scenery and wildlife.

Much to AARC's surprise the negotiations did not start well and quickly deteriorated. MAPCO was not happy with the service. They made it known that they were seriously negotiating with trucking companies to ship their product. It also just happens that 500 miles is right at the cusp where railroad transport starts to outpace trucks in cost. So the truck option was a wash. They also threatened another alternative. MAPCO is an acronym for Mid-Atlantic Pipeline Corporation. It should be noted that the AARC is owned by the state of Alaska. However, it operates, to include its accounting, as a private corporation with no governmental subsidies. Loss of this contract was existential to AARC as MAPCO comprises over 40% of their revenue.

AARC countered with a host of superb metrics demonstrating the quality of the freight service. In freight transportation, the metrics boiled down to On Time — Damage Free. The railroad was spot on. They firmly believed that they knew how to measure and how to make improvements based on those measurements. Moreover, railroads certainly know what's best. What was MAPCO talking about? AARC soon discovered that they were not measuring what was most important to the customer.

MAPCO definitely cared about the "damage free" metrics vis-à-vis their product. However, they really didn't care about how much time the North Pole to Seward run took. Twelve hours was just fine, and so was twelve days. They had a huge tank farm in Seward and they could easily store petroleum awaiting loading onto the tankers for a long time. However, time did matter to them! AARC was taking way too much time at their refinery loading the tank cars. The railroad was in their way and disrupting their operations. The time from when they opened the gate for the switch engines to when they closed upon departure was the metric that was significant to them.

Once the AARC understood that this was the crucial metric, a Quality Improvement Team was formed between MAPCO and the AARC. Actions taken included placing a fulltime AARC operations manager at North Pole. The time in and out of the refinery was reduced, exceeding expectations, to two hours or less. The contract was renewed for twenty years with inflation included.

When you measure, make sure you know what is important to the customer.