When Productivity Measures Backfire: How a Food Distributor Cut Costs 23% by Measuring What Actually Matters

Imagine this scenario: You've just implemented comprehensive productivity metrics across your operation. Every department now has clear, measurable targets. Keystrokes per hour, cases handled, delivery times—everything is being tracked with precision.

Six months later, your costs have gone up, customer complaints have skyrocketed, and your teams are more frustrated than ever.

This is exactly what happened to a food distributor when growing competition forced them to get serious about cost reduction. They had all the right intentions and what seemed like all the right measures. What they discovered was something that challenges conventional wisdom about performance improvement: sometimes measuring productivity actually destroys performance.

The Logical Trap: When Obvious Solutions Create Bigger Problems

The distributor's leadership team faced a familiar challenge. Margins were shrinking, and 75% of their operating expenses came from employee compensation across three core departments:

1. Front Office: Taking orders and handling customer inquiries
2. Warehouse: Loading delivery trucks based on incoming orders
3. Delivery: Getting products to customers on schedule

Their solution followed standard operational playbook thinking: measure what matters, set targets, and drive efficiency. They implemented metrics that seemed perfectly reasonable:

Front office staff would be measured on keystrokes per hour, call length, and calls handled. Warehouse teams would track cases handled, loading time, and labor hours per case. Drivers would focus on delivery route completion time.

The logic was bulletproof. The results were disastrous.

Instead of the expected cost savings, they saw cost-per-case increase while customer satisfaction plummeted and employee resistance surged. What looked like a measurement success was actually a systemic failure.

The Reality: Measuring the Wrong Things Drives the Wrong Behaviors

While productivity increased in the front office and warehouse according to their new metrics, driver productivity plummeted. More troubling, the overall system performance degraded as each department optimized for their individual measures without regard for the customer experience or cross-departmental impact.

What really happened:

1. Front office handled more calls faster—but error rates increased
2. Warehouse "handled more cases of food just to be handling them"—but damage increased
3. Trucks were loaded faster—but in ways that made driver unloading more difficult
4. Drivers tried to increase delivery speed—but experienced more accidents and injuries
5. Tensions among departments escalated as each blamed others for problems

The fundamental flaw became clear: the measures focused on departmental efficiency rather than customer value, creating a system that worked against itself.

ALULA's Approach: Start with What the Customer Values

Rather than continue tweaking individual department metrics, ALULA helped management reframe the entire measurement approach around a simple question: What does the customer value?

Customer priorities were straightforward:

1. On-time deliveries
2. Accurate deliveries (correct items, undamaged)

This led to a critical insight: To deliver what customers valued, the work of all three departments was interdependent and nearly inseparable. The process had to flow seamlessly from accurate order-taking through logical truck loading to efficient delivery.

The New Measurement Approach: Alignment Across Stakeholders

ALULA worked with leadership to develop measures that reflected this interconnected reality:

Aligned Metrics:

1. Drivers: Number of "perfect deliveries" completed
2. Warehouse: Number of cases "shipped and delivered perfectly"
3. Front Office: Accuracy of orders and number of "perfect deliveries completed"

Notice how these measures transcend traditional organizational boundaries and create shared accountability for the customer outcome.

The Chain Reaction

The new measurement approach immediately drove different behaviors:

1. Warehouse personnel began asking drivers how they preferred trucks to be loaded
2. Drivers started providing constructive feedback and reinforcement after each delivery
3. Front office staff took more care with order accuracy and reinforced drivers based on customer feedback

This wasn't feel-good teamwork—it was systematic behavioral change driven by measurement alignment.

The Results: Short-Term and Long-Term Impact

Immediate improvements (first two months):

1. Cost per case dropped 4%
2. Consistent improvement in customer satisfaction ratings
3. Sustained improvement in on-time, accurate deliveries
4. Apparent decrease in warehouse "efficiency" (they handled fewer cases and took longer to load each truck, but this was actually optimal for the overall system)

Long-term transformation (15-month period): As management continued working with employees to refine process-oriented measures for inventory, maintenance, and driving habits, the results compounded:

1. Stock rotation improved
2. Shrinkage (lost or damaged products) diminished
3. Fuel consumption and unscheduled maintenance reduced
4. Redeliveries decreased significantly

The bottom line: 23% reduction in cost-per-case over 15 months—achieved without staff reductions and accompanied by increases in individual compensation linked to improved center performance.

The Science Behind the Success

This transformation illustrates three critical principles about performance measurement:

1. Stakeholder Alignment Drives System Performance - When measures emphasized only shareholder interests (cost reduction), the system optimized for departmental efficiency at the expense of customer value and employee engagement. Aligning all stakeholder needs—customers, shareholders, and employees—created sustainable improvement.
2. Behavioral Measures Must Reflect Work Reality - Traditional organizational boundaries rarely reflect how work actually flows to create customer value. Effective measures must capture the interdependent behaviors that drive end-to-end performance.
3. What Gets Measured Consistently Gets Improved Consistently - By tracking collaborative behaviors with the same rigor as production metrics, the organization created accountability and momentum for sustained change.

The Broader Application: Beyond Food Distribution

While this case comes from distribution operations, the principles apply across industries and functions. The key insight is universal: performance improvement happens when measurement systems align individual behaviors with customer value creation.

Consider your own operational challenges:

• Are departmental efficiency measures driving system-wide effectiveness?
• Do your metrics encourage the cross-functional collaboration required to deliver customer value?
• Are you measuring the behaviors that matter most for sustained performance?

Key Insight

The Food Distribution case demonstrates that measurement isn't just about tracking performance—it's about shaping the behaviors that create performance. When you measure what drives customer value and align those measures across all stakeholders, you create the conditions for breakthrough results.

The 23% cost reduction didn't happen by accident. It happened because leadership systematically identified and measured the behaviors that matter most: those that create value for customers while engaging employees and delivering sustainable returns for shareholders.

Want to explore how behavioral measurement could transform performance in your operations? Learn more about ALULA's approach to creating stakeholder-aligned measurement systems that drive sustained operational excellence.