A leadership roadmap for deploying and managing with metrics · A leadership roadmap for deploying and managing with metrics Thomas Bertels (917) 754 8047 [email protected]

A leadership roadmap for deploying and managing with metricsThomas Bertels (917) 754 8047 [email protected]

February 26, 2008

ABPMP NY Presentation © Valeocon 20092

Agenda

• Process management and metrics• Roadmap for linking strategy, processes,

and metrics• Deploying a measurement system• Managing with metrics• Case Study: Measurement System

Deployment• Survey: Aligning strategy with processes

and metrics• Q&A


What makes a good metric?

• Relevant

• Valid

• Accessible

• Affordable

• Understandable

• Comparable (standardized)

• Consistent

• Impactable


Metrics and Process ManagementMetrics and Process ManagementSu

pplie

rs a

nd In

puts

Products and Services

Custom

ers

Enabling Processes

Core Process

Core Process

Core Process


• Operating processes are designed to meet both customer and business objectives

• Processes are measurable and are continually improved

• Managers and process owners are personally accountable for process performance

• Decision making is based on facts and data• Process priorities and performance are

understood by all associates • Best practices are identified and leveraged

Process Management BenefitsProcess Management Benefits


• Use of lagging financial indicators (e.g. revenue, sales, expenses, headcount, operating margin)

• Actions based on intuition, experience, and guesses

• Reacting to noise• Leading through reward and

punishment• Little or no visibility of trends

and patterns• Little shared accountability

• Balanced use of lagging and predictive / leading indicators – financial outcomes are linked to process capabilities

• Data-based decision making• Managing processes• Asking the right questions • Higher resolution on process

measures • Better resource allocation and

investment decisions• Clear line of sight to

customer and business outcomes

From . . . To . . .

Transformation through Process ManagementTransformation through Process Management


Definestrategy elements

Define core and enabling processes

Assess impact on strategy

Identify business drivers

Validate and quantify drivers

Collect data

Build dashboards

Establish process ownership

Build Process Management Charts

Design reporting systems and disciplines

Implement

Monitor performance

Pursue continuous improvement efforts

Update and renew systems

Measure Own RunMap

Establishing the Right MetricsEstablishing the Right Metrics


Line of Sight RoadmapLine of Sight Roadmap


MAP – Link to Roadmap

Define Strategy Elements

Identify drivers of performance

Define Core and Enabling Processes

Assess Impact on Strategy

StrategicPlan

to “Measure” Phase


Business Strategy –Focusing on What Makes a DifferenceBusiness Strategy –Focusing on What Makes a Difference

• Strategy is as much about what an organization should not do as it is about what it should do.

• Measurement, accountability and improvement should focus on those things that matter the most to the business and its customers.

• Randomly selected operational improvements often have little or no strategic impact.

• Each strategic objective should be – relatively discrete (no overlap) from the others– precisely defined and easily understood– include an assessment of its financial contribution


Strategic Objectives: Example

• Each element of a strategy contributes to the overall financial objectives of the business.

258

02E

Retention

Pricing

Productivity

Share

Growth

Market

Growth

NewProducts

NewGeographies

Ventures

Acquisitions

03E

121 2 (15)3

7 1 2 1 1552003 Core Income Growth


Process Definition: Example

Financial S

ervices

Legal

Other

Site

Initialization

Business

Developm

ent

Staffing

Training IT

Marketing

External C

ustomers

New Order Generation

Order to In-Service

Operational Support Processes

Remarketing

Maintenance and Repair


Strategy-to-Process-Matrix: Example

Strategy Elements and Associated Contribution to Net Income

Pricing $3.8M

Productivity $6.8M

Share Growth $9.9M

Market Growth $5.7M

New Product Offerings

$3.8M

New Ventures

$1.9M

Customer Retention

$4.6M

Business Acquisition

$1.5M

Generate Order

Build and Deliver

Service Equipment

Remarket Equipment C

ore

Proc

esse

s

Business Development

strong — moderate — weak —

Figure 1.


What Do Our Processes Need To Deliver?What Do Our Processes Need To Deliver?

Process

Meets customer demands

Meets business objectives

and


What Do Our Processes Need To Deliver?

Process Performance

Goals

Required Process Capabilities

Customer Demands

Considered critical to customer satisfaction and retention

Stated in objective, measurable terms

Defined and validated with customers, e.g.:

100% on-time deliverycorrect # of capsules in containercustomer service calls answered by agent within 3 rings

Outcomes that will contribute to the accomplishment of each of the Strategy Elements that are linked to the process

Process performance attributes or characteristics that will contribute to the accomplishment of Process Performance Goals


ExampleExample

Order Fulfillment

status information available in real-time

invoiceaccuracy

on-time delivery

delivery time

ease ofdoing

business


Look at it from my point of view…

Business’ view of the process

Customer view of the process

Business Process

Plane Out OfService

Engine Returnedto Wing

EngineArrives

Repairs Engine

Ship Back to the Customer

Remove andShip Engine

Engine Arrives


Look at it from my perspective…

Customer

How well is my process

performing?

How does my customer

measure my performance?

What does my customer expect?

What can we do better?

How does my customer view my process?

Who are my customers?


Y = ƒ (X1, X2, X3, X4,…Xn)

Causal Thinking and Business MeasurementCausal Thinking and Business Measurement

Contact Center ASA

Time to issue resolution

Zero transfersExample Drivers

(Leading Indicators):

Outcome (Lagging) Indicator: Ease of doing business

To what processes are these measures pointing?


Necessary Definitions for Developing Process Tree DiagramsNecessary Definitions for Developing Process Tree Diagrams

Effectiveness or Efficiency GoalA measure used to evaluate the extent to which a process meets a customer expectation or a business efficiency objective:

measures that describes the outcome of a processbig enough to be seen by customers and business leadershipis the effect (y) of the process causes (x)

can be analyzed by looking inside the processcan only be affected by adjusting the process

Effectiveness or Efficiency DriversThe characteristics or attributes of the process that affect theability to meet process effectiveness and efficiency objectives:

measures activities or steps inside the processare enablers of process success or failureare the upstream causes (x’s) of process outcomes (y’s)are derived and validated through measurementare statistical “predictors” of process outcomesare the focus of well-defined improvement projects

Lagging/Outcome Indicators Leading/Predictive Indicators


Example Tree DiagramExample Tree Diagram

indicates drivers that are considered key

Probing Skill of Sellers

Historical Customer Information Availability

Proposal Archive Availability

Sample Product Availability

Sales Call History

Customer Usage History

Competitor Pricing Data Availability

Credit History Availability

Order to Delivery Cycle Time Data

CustomerRequirementsData Accuracy

Fast ProposalPreparationCycle Time

Achieve 65%Proposal Win

Ratio

(key business-facing outcome)

(businessefficiency driver)

(predicting process drivers)


Visibility to those that need itVisibility to those that need it

DISCOUNTDECREASE

20%

ACTIVITY BASED

COSTING

COUNTRY MIXPRODUCT MIX

NEW CLIENTACQUISITION

+10%

DEVELOPEXISTING

5%

REWORK-10%

CYCLE TIME-20%

SCRAP-30%

NEW PRICINGMODEL

REWARD &

RECOGNITION

DELEGATION POLICY

SALES FORCEPRODUCTIVITY

+10%

# OF A PLAYER

+ 5%

MANUFACT. LOGISTICDESIGN

STR

ATEG

Y Increase Margin by 15%A

CB D

President

ME

TRIC

OW

NE

R

A=B/C/D

SVP’s

C=H/I/L

D=M/N/OFinance

TAC

TIC

S NM O

H/I/L=R’s

H/I=S’s

L=TL

VP’sE=P/Q

Pricing M=U/V/Z

HR E=Q M=V/Z

U V Z

EXE

CU

TIO

N

Operation

H LI

Manuf.

Design

Logistics

RLRI

RH

SH TLSI

TOP LINE GROWTH15%

(SAME MARGIN)NO PRICE EROSIONCOPQ REDUCTION

10%

B=E/F/GSales/Mktng Sales

P Q

E GF


from “Map”phase

to “Own”phase

MEASURE – Link to Roadmap

Identify process metrics

Finalize Dashboards

Collect Data

Validate & Quantify Metrics


Measure Phase Deliverables

• Dashboard measures• Operational definitions• Data collection plans• Validated outcome and leading measures• Current performance level• Target performance level• Data displays


Measuring the Critical Few

• Business measurement often tries to track too many measures.

• Many of the measures are not actionable.

• Many measures are given to the wrong people.

• Challenge and justify the current measures.

• Begin with the measures that experience says are important


What’s Wrong with This Picture?

Smoke

Tree

Fence

Chimney AntennaDoor

Window

Stairs

Shrubs

Grass

Porch

Flowers

Roof

Cables

Meter

Sky

Fire

Blue

Green


A Picture Is Worth a Thousand Words…


Dashboards

• Enable pounding away on the problems• Change from a reactive, fire-fighting mode to a preventative,

appropriately acting approach (signal and noise)• Determine capability and limitations of the current processes• Identify and zero in on key factors that drive performance• Prioritize and select improvement efforts


Dashboard Design Considerations

• Specifically designed for target group of individuals

• Structured around the group’s aggregate authority

• Provides leading and lagging indicators• Delivers the data graphically in ways that support

understanding and interpretation• Clearly illustrates upward and downward linkages

between business objectives and key activities• Shows performance against business and

customer goals


• Data often buried in cumbersome legacy systems… or worse, in unmarked databases on different desktops

• Lack of communication and coordination between IT and the business

• Disagreement on how measurement should be defined and calculated

• New measures drives new behaviors and change

• Performance management often tied to old measurement systems

Typical ChallengesTypical Challenges


Elements of a Dashboard Measure

What type of diagram do you want to use to plot the data?

Where do you want to be when?

What is the current value?

How will you go about collecting and recording the data (what metric? when? includes? excludes?)

Which dashboard indicator do you want to measure?

Definition

Example

Rolling 52 week period I/MR control chart. Back-up data to include individual new product monthly order control charts for same period.

$1.2MM per week throughout 2005

$1.45MM in 2005 week 7

Actual, aggregate weekly orders, in dollars, for any product introduced within previous 12 months. Does not include acquired products or level 2/3 new service releases

New Product Revenue

How Displayed

Goal Performance

Level

Current Performance

Level

Operational Definition

Business or Process Measure


Control Charts for ManagementControl Charts for Management

“Failure to use control charts to analyze data is one of the best ways known to mankind to increase costs, waste effort and lower morale.”

—Dr. Donald J. Wheeler


Control Charts

• The control chart (“Process Behavior Chart”) is the main tool to distinguish common from special cause variation

• Control Charts display variation over time• Control limits are the Voice of the Process

Observation

Indi

vidu

al V

alue

24222018161412108642

95

90

85

80

75

_X=84.26

UCL=93.46

LCL=75.07

I Chart of Common


OWN – Link to Roadmap

Establish process ownership

Build Process Management Charts

to “Run”Phase

from “Measure” Phase

Design reporting systems disciplines


Process Management Leadership and Teams

Recruiting Training &Development

InformationManagement

FinancialProcesses

Process Owner

New Product Development

Team MembersMaster Black Belt

Demand Generation

Supply Chain

Executive Leadership

Core and EnablingProcess Teams

Level 2 ProcessTeams

Process Owner Team MembersMaster Black Belt

Process Owner Team MembersMaster Black Belt


PerformanceReporting &

Dialogue


Dialogue


Dialogue

Leader-ship

Leader-ship

CorePMTsCorePMTs

PMTsPMTs

StrategicGoals

ProcessGoals

Coordinated Action throughout Business

Business strategy communicatedStrategy & CTQs defined in process termsProcess data collected and translatedProcess as well as financial performance reportedLocal and company-wide improvements identifiedLocal and company-wide improvements achieved

Sub-ProcessGoals

DMsDMs


RUN Phase Roadmap

Update and Renew Systems

Monitor & Report Performance

from “Own”Phase

Implement

Pursue Continuous Improvement


Dashboard Reviews

Process data & measurement

Performance against goals

Analysis of performance gaps

Process improvement plans

Status of improvements

Leverage of best practices


Methods for Driving Improvements

Reduce Process Variation

Drive Pull and Eliminate Non-Value

Six Sigma(DMAIC)

Lean Thinking Design for

Six Sigma

Clean Sheet for New Process Design

Best Practices

Benchmark and Leverage

Kaizen-EventsJust Do It!

Right People and a Bias for Action!

You Know What to Do - GO!!

Right Problem . . . Right Tools


When Should the System Change?

• Are the goals and targets still valid?• Are we improving? • Have improvement goals been

achieved?• Are we driving the right behaviors?• Are there new opportunities for

improvement?• Has the business environment

changed?• Have our customer expectations

changed?• Are the reporting processes

effective?


• Dashboard well established• Group savvy about the drivers of each metric• Team know how to influence the dials • Well established, structured review process• Continuous planning to close the gap relative to goals• Effective mechanisms to address root cause issues• Periodic updates and refreshing

Way of Life

• Old reports discontinued• Regular review meetings • Sporadic improvement projects based on gaps • Understands the nature of the underlying processes

Adoption

• Business has a dashboard but still looks at old reports• No clear action plan • Old patterns for reacting to bad news

Early Behaviors

Measurement System EvolutionMeasurement System Evolution

Survey


Line of Sight Diagnostic: Summary

Summary of data from 442 RespondentsTargetval

Strategy Alignment

Participative, Integrated Culture

Leadership Visibility and Suppor

Cause and Effect Thinking

Customer Focus

Strategy Definition

Fact-Based Skills andCompetencies

Process Orientation

Business Measurement

Process Management/Accountability

Strategy Alignment 3.2Participative, Integrated Culture 3.2p y ppCause and Effect Thinking 3.1Customer Focus 3.2Strategy Definition 2.9Fact-Based Skills and Competencies 3.3Process Orientation 3.2Business Measurement 2.1Process Management/ Accountability 2.2


If you can’t measure it…how likely is it to get done?

0

20

40

60

80

100

120

140

1 2 3 4 5

T he strategy is def ined in measurable, o perat io nal terms


If we don’t know what the customers want, how can we know how we are doing?

0

20

40

60

80

100

120

140

160

1 2 3 4 5

I have a c lear understanding o f custo mer requirements and specif icat io ns I am aware o f o ur perfo rmance against custo mer expectat io ns


Even if the organization does not encourage the use of data, individuals like to keep score

0

20

40

60

80

100

120

140

160

1 2 3 4 5

T he o rganizat io n rewards and enco urages the use o f data to suppo rt decisio n makingI have meaningful, act io nable data fo r the pro cesses with which I am invo lved


It is dangerous to assume cause and effect without validating that assumption

0

20

40

60

80

100

120

140

160

180

1 2 3 4 5

C ause-and-effect measures are tested and stat ist ically validated Our business data includes measures o f cause-and-effect relat io nships inside business pro cesses


How can we improve processes if we don’t talk to others involved in the process

0

20

40

60

80

100

120

140

1 2 3 4 5

T he relat io nship between pro cess perfo rmance and business o utco mes drives o ur impro vement ef fo rts M y department discusses perfo rmance measures and co rrect ive act io ns with o ther functio nal areas


0

20

40

60

80

100

120

140

160

1 2 3 4 5

P ro cess perfo rmance data is a standard element o f regular business repo rt ingWe use pro cess measures to evaluate the success o f co rrect ive act io ns


If you would like to try it out yourself…

Go to www.valeocon.com/los

• Summary view across all dimensions

• Detailed recommendations for each dimension

• Can be used to measure perceptions in different parts of the same organization

• Can be used to benchmark against BIC and others in your industry

HOW TO READ YOUR RESULTS

Strategy Alignment

Your Score 1 2 3 4

4.6

Leadership Visbility & Support

Your Score 1 2 3 4

4.3

The responses you supplied were clustered into the 10 different categories you see on the chart above, and were then averaged and graphed as follows:

Strategic plans should provide guidance regarding business priorities and the operational contributions needed to achieve

HIGH: The entire organization views the leadership level as “visionary” in the ability to define and execute strategy. Moreover, each part of the organization understands its role with respect to the overall strategy, and believes itself to be involved, to an appropriate degree, in the development and execution of strategy. Business objectives have been translated into process and individual goals, creating alignment across the business. The impact of improvement efforts at the process level can be linked to improved business results.

Executive-level leadership needs to see the business processes as vehicles for change, and stay actively involved in developing and communicating the business strategy. Effective strategic planning creates alignment and shared responsibility among the senior executives and includes specific goals and objectives. The strategic planning activity cannot be delegated to the planning staff - it is a key leadership task.

HIGH: The organization universally understands the business straegy as a natural extension of “corporate mission.” Business objectives have been translated into process and individual goals, creating alignment across the business. The impact of individual improvement efforts at the process level can be linked to improved business results. In other words, every level in the organization has a clear line of sight to business impact and attainment of strategic objectives.

1 2 3 4 5

4.0

5: Strongly agree4: Somewhat agree3: Neutral2: Somewhat disagree1: Strongly disagree

DISTRIBUTION

YOUR AVERAGED SCORE FOR THIS

CATEGORY

RANGE OF ALL RESPONSES

FOR THIS CATEGORY

(±1 ∪ ∀

4.3


Getting it right: Suggestions for deploying a measurement system

Validate the measurement system to ensure the right metrics get measured correctly`Educate the users of this system on how to manage with the new systemEstablish accountability and ownership at the right management levelsSet goals for each metric consistent with the business priorities and strategyHelp leadership teams identify and launch appropriate improvement efforts to close performance gapsDevelop a framework for sharing lessons learned across the businessAddress the human behavior aspects of this deploymentDefine a plan for updating and extending the systemManage the risk of rolling out a new measurement systemDevelop a comprehensive communication strategy aimed at maximizing understanding and acceptance

Appendix: About Valeocon


Differentiators

• Senior, seasoned professionals with management experience

• Focus on key industries: life sciences, financial services, consumer goods, energy

• Global capabilities, international experience, local presence

• Integration of technical and cultural perspective• Explicit transfer of expertise, skills, and

knowledge to the client • Emphasis on achieving measurable results


Core Services

• Simplify work• Improve existing processes • Establish process management systems• Improve supply chain performance• Design & deploy improvement programs

• Develop innovative products, services, & processes

• Create & implement a systematic process for innovation

• Formulate innovative value propositions


Representative Clients


Valeocon Americas20 ConsultantsOffices: New York, Mexico City

Valeocon Europe50 ConsultantsOffices: Hamburg, Milan, London, Paris

Valeocon Asia-Pacific5 ConsultantsOffice: Tokyo

Footprint

Documents

A leadership roadmap for deploying and managing with metrics · A leadership roadmap for deploying and managing with metrics Thomas Bertels (917) 754 8047 [email protected]