Nominal Conditions: An Easy Concept with a Difficult Answer

So you want to make your business as efficient as possible, right? Of course you do! Let’s say you’ve already been actively on your way: You’ve been reading up and implementing systems as you read about them, studying lean production and continuous improvement and making strides towards realizing these goals. You’re doing well, but if you’ve left out consideration for nominal conditions, you’re missing a key element.

What are Nominal Conditions and What Do They Do?

Nominal conditions represent your normal and desired operating rates. These can (and should) apply to everything from hiring new employees, to unit production over a given span of time, to new client acquisition, to any other operations related to the growth and success of your business. Knowing nominal conditions allows you to evaluate the performance of any given element of your business. Let’s take, for example, an assembly line employee who produces an average of seven products per hour on a normal day. Today, you notice he has only been pushing through four or five per hour, far below his nominal output. When nominal conditions are disturbed, you have an immediate indication of a problem and it takes the guesswork out of knowing when to step in. Maybe you talk with the employee and find out there has been a death in the family, or that he was up all night because his child had to go to the emergency room and he didn’t get any sleep before coming in again. With this knowledge, you can make a sound decision about sending an employee home, asking them to take a break, or taking other administrative action before a problem occurs (such as an injury due to exhaustion, etc.).

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Nominal Conditions Can be Easy

In some cases, identifying nominal conditions for a process is easy. In the example above, monitoring units produced in an hour is not a difficult task, but what about something more complex? How about new client acquisition. Let’s say you have someone managing the accounts of your clients and for a number of months or year’s things stay about the same. Are these ideal conditions? Maybe they are, and the success rate of this employee is fairly standard for the industry. Maybe, however, it’s not. Or perhaps you have made your company more efficient in recent years and can take on new business, but because the conditions of your business in the past had accommodated a certain level of business, the employee hasn’t reached out to as many potential contacts as they could. What’s normal? One new client per month? One per year? Two per week?  Without knowing nominal conditions, it can be difficult to judge success.

Think of it like this:  If you didn’t know how much money was coming into your business and how much was going out each month, you’d have no idea whether your business was sustainable or bringing in any profit at all. For this reason, not having an accounting department or someone in charge of financial monitoring is viewed as completely crazy, and rightly so!  You need to take this same view of all other processes in your business; without knowing their nominal conditions and/or values, you’re flying blind in those areas, and that’s no way to run a business.

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