Metrics is another hot management topic these days. How can we measure how efficiently our shop runs versus the rest of the world? We’ve all heard the alternate definition of MIPS – “Meaningless Indicator of Processor Speed.” Compound that with a new favorite efficiency metric in the industry – Dollars per MIP. If the industry average for your size shop is $458 per MIP, and your budget shows your costs are $472 per MIP, should you be worried because your costs are above average?
Here’s a clue – take a look at every one of the shops whose data contributed to that average of $458 per MIP. Roughly 50% of those shops had costs that were above $458 per MIP. The other 50% were under $458 per MIP. That’s just how averages work. If the average was $458, but the high was $795 and the low was $289, then is the difference between $458 and $472 significant?
The more meaningful question is, where do you fall within the distribution of data points on that metric? If you’re not in the upper quartile, there’s probably no reason to panic. If you’re in the upper 10% of the distribution, then you need to look deeper. Look to see if your cost accounting includes things that aren’t part of the data included in the survey. But that’s another topic, so stay tuned.