Smart Targets:Motivator or Burden?

Centre for Enterprise Research and Innovation (CERI)Nigel Ward

A Practitioner's View of Targets in a Change Environment

Scope

The Role of Measurement in LEAN Improvement.The Change Environment!Concepts of LEAN?The Importance of Measurement?

Difficulties in Providing Valid Targets and Measures.Financial Measures.Non-Financial Measures.

The Impact on Staff Caused by Setting Targets for Improvements.Six Common Reasons why Change Programs Fail.Empowerment, Efficacy and Self-correction.

Key Points.

The Change Environment!

“It has been said that the only people who want to change are babies who have wet diapers.”

Rev. Sharon Patterson, Ph.D.

Concepts of LEAN

Focused on the elimination of all non value-adding activities and waste from the organisation’s processes.

Relies on employees and value.It is a philosophy of continuous

improvement.A set of principles, concepts and

techniques used to improve systems.

Long-term relationships with suppliers.

Changing to:Maximise efficiency.Improve quality and safety.Eliminate unnecessary motion and

inventory.Save time.

Goals Increase Productivity

Eliminate Waste Maximise Resource

Utilisation

Map and Understand

Value Stream

Make the Value Flow

Continuous Process

Improvement

Customer Define

Concepts of LEAN Six Sigma

Six Sigma:A system developed to systematically improve processes by

eliminating defects.Just In Time:

An inventory strategy implemented to improve the return on investment of a business by reducing in-process inventory and its associated costs.

Total Quality:Strategy aimed at embedding awareness of quality in all organisational

processes.Synchronous:

The coordination of events to operate a system in unison.Value Stream Management:

Set of processes through which a group of products or services pass (extends from the receipt of the customer order to the delivery of the product and / or service).

Concepts of LEAN Six SigmaAdding Value to the Customer!

The employee asked me what I wanted.

The employee wrote down what I wanted on a piece of paper.

The employee started to make my sandwich.

The employee taped the piece

of pape

r onto the

bag.

The employee hand

ed me the

paper

bag.

I Paid!

The employee

grabbed

some foil like

paper and

wrapped my sandwich up.

The employee

grabbed a

Styrofoam

container.

The employee

placed

some colour

ful paper in the bottom of the

container.

The employee placed my

nicely wrapped sandwich

in the container.

The employee grabbed a paper bag.

The employee placed the container into the

paper bag.

So which process was the improvement?• From an Employees perspective?• From a Customers’ perspective?

Concepts of LEAN Six SigmaAdding Value to the Customer!

So How Did I Know?One thing was definitely missing from theemployees’ face that made me my sandwich!

A SMILE!

The employee asked me what I wanted.

The employee immediately started to make the sandwich.

The employee grabbed the cardboard box.

The employee place

d sandwich

in box and

closed it.

The employee hand

ed me the

box.

I Paid!

LEAN Six Sigma’s Process Improvement Life Cycle

Six Sigma Tools

DefineProject & Identify Process

AnalyseRoot Causes of Defects

ImproveProcess Performance by Implementing Changes

ControlSystem to Maintain Gains

LEAN Tools

DefineProject & Customer Demand

MapThe Current Service, Production and Information Flows

AnalyseProcess Flow and Wastes

Map Ideal State

ImproveProcess Flow and Eliminate Wastes

ControlWork Pacing and Lead Time

Unders

tan

din

g t

he M

etr

ics

Develo

pin

g t

he S

olu

tion

The Role of Measurement in LEAN Improvement – Deming

“It is important that an aim never be defined in terms of activity or methods. It must always relate directly to how life is better for everyone... The aim of the system must be clear to everyone in the system. The aim must include plans for the future. The aim is a value judgment.”

 “If you can't describe what you are doing as a process, you don't know what you're doing.”

“It is not enough to do your best; you must know what to do, and then do your best.”

“Quality is everyone's responsibility.”“Whenever there is fear, you will get

wrong figures.”

“We must understand variation.”“Profit in business comes from repeat

customers, customers that boast about your project or service, and that bring friends with them.”

The result of long-term relationships is better and better quality, and lower and lower costs.”

“A system is a network of interdependent components that work together to try to accomplish the aim of the system. A system must have an aim. Without the aim, there is no system.”

“We should work on our process, not the outcome of our processes.”

W Edwards Deming

The Role of Measurement in LEAN Improvement – Ohno

“Costs do not exist to be calculated.

Costs exist to be reduced.” “The key to the Toyota Way and what

makes Toyota stand out is not any of

the individual elements…But what is

important is having all the elements

together as a system. It must be

practiced every day in a very consistent

manner, not in spurts.” “The more inventory a company has,

the less likely they will have what they

need.” “Data is of course important in

manufacturing, but I place the greatest

emphasis on facts.”

“All we are doing is looking at the time

line, from the moment the customer

gives us an order to the point when we

collect the cash. And we are reducing

the time line by reducing the non-value

adding wastes.”“Where there is no Standard there can

be no Kaizen” “Why not make the work easier and

more interesting so that people do not

have to sweat?  The Toyota style is not

to create results by working hard. It is a

system that says there is no limit to

people’s creativity.  People don’t go to

Toyota to ‘work’ they go there to ‘think’”

Taiichi Ohno

The Role of Measurement in LEAN Improvement

Long term goals should drive the deployment strategies.A guiding vision is important for change management.Key long term goals to consider:

Enterprise transformation.Strategic improvement.Problem solving.Cost reduction.Image.

Steven Covey Begin With The End In Mind

The Role of Measurement in LEAN Improvement

Focus on Results by Applying Key Metrics:Get data for the last 5 years.Benchmark your process against the best.Compare your results against your own history.

If there is no perceived urgent need, people will not perceive the need to change and will not change.

Create scorecard /’dashboard to measure baseline metrics.

Set SMART targets for success criteria.

Examples of LEANMeasures

Delivery Performance:• Days Variation.• % On Time.• % Fill Rate.• Days to Process.

Process Stability:• Capacity Consumption.• Unplanned Downtime.• Changeover/Set-up Times.• Process Yield.

Innovation: • Cycle time for New Product

Introduction.• New Products Introduced.• Employee suggestions.

Productivity:• Revenue per Full-Time

Equivalent.• Output per Full-Time

Equivalent.Flexibility:

• Cross Training.• Order to Delivery Cycle Times.• Part/Process Commonality.• Modularity.

Quality: • Certification for Suppliers.• Defects / Rework / Scrap.• Accuracy (BOM, Inventory,

Administration etc).

The Role of Measurement in LEAN Improvement – Pilot Results

Productivity 25 Pieces / Person 40 Pieces / Person 60% Improvement

Quality 4.6% Defects at Final Audit

2.1% Defects at Final Audit

58% Less Defects

Space 9.5 m2 / Person 3.3 m2 / Person 64% Less m2 / Person

WIP 4 Units of WIP Per Unit Produced.

0.3 Units of WIP Per Unit Produced

13 Times Less Units in Inventory

Lead Time 3.7 Days 0.27 Days 93% Reduction

Absenteeism 3.2% Daily 2.1% Daily 33% Reduction

Variation In Process

(Daily Schedule Attainment)

+/- 45% Variation (Daily Schedule Attainment)

+/- 10% Variation(Daily Schedule Attainment)

88% More Reliable Process

(Daily Schedule Attainment)

BEFORE PILOT IMPACTNot-For-Profit Charity Shop

Difficulties in Providing Valid Targets and Measures – Value Stream

Consists of all tasks required to serve a customer and create value……and eliminate waste in the flow of

tasks.

Inflow >>>> Value Stream Flow Process >>>> Outflow

Bruce Baggaley Brian Maskell

Difficulties in Providing Valid Targets and Measures – Value Stream Costing

• Lean measures are intended to provide the process managers with the information required to improve the processes they manage.

• Traditional measures often drive bad or wrong behaviours.• Lean measures focus on driving improvements through measuring the

cost drivers within the process.

Inflow >>>> Value Stream Flow Process >>>> Outflow

Production Labour

Production Materials

Production Support

Operation Support

Facilities & Maintenance

All Other Value Stream Costs

Difficulties in Providing Valid Targets and Measures – Example of a Value Stream

Difficulties in Providing Valid Targets and Measures – Performance Measurements

Traditional Measurements Lean Six Sigma Measurements

• Labour Efficiency.• Machine Utilisation.• Cost Variances Versus Standard.• Earned Value.• Departmental Budget Focus.

• Throughput.• Cycle Time.• First Time Quality.• Inventory Turns.• Value Stream Focus.

John Seddon Michael George

Difficulties in Providing Valid Targets and Measures – Assumptions

Traditional Measurements Lean Six Sigma Measurements

• Make More Product.• Build Inventory.• Utilise Resources to the Max.• Optimise Department Efficiencies.• Track Direct Labour.• Allocate Other Costs.

• Eliminate Barriers to Flow.• Focus on Value Stream Rather

Than Departments.• Continuous Improvement and

Teamwork.• Eliminate Waste, Inventory and

Over Production.

John Seddon Michael George

Difficulties in Providing Valid Targets and Measures – Measuring in a LEAN Way

Financial

Customer

Process

People

LEAN ViewMeasuring

the effectiveness of the people

and key drivers of delight for

the business and the

customers will ultimately

result in outstanding ‘top level’

performance!

Traditional View

The financial and

customer metrics

reflect the outcomes of

the processes a

company deploys and the people

running those

processes!

Difficulties in Providing Valid Targets and Measures – Customer Value

Customer Perceptions of Value (Quality and Satisfaction)(After Zeithaml et al, 2006))

Before Change (Measured)

Data Box

  Trigger What causes people to start doing something for the customer  

  Done How do we know when an item has been completed?  

  Manual Cycle Time (Minutes / Item and Cost / Item) How many seconds of manual work are done on each item?  

  Change Over Time (Minutes / Item and Cost / Item) How long does it take to change from one item to another?  

  Chargeable Waiting Time (Minutes / Item and Cost / Item) Waiting time where employee is unable to continue work.  

 Non-Chargeable Waiting Time (Minutes / Item and Cost / Item)

Waiting time where employee is able to continue work on another item/process.  

  Total Flow Time (Minutes / Item and Cost / Item) How long does it take to flow - start to finish time (waiting or being worked on)?  

  Assumed Cost / Minute Calculated using average capitation rate for those involved in process.  

  Assumed Volume / Year Calculated using average volume of items process.  

  People per Item of Work How many people work in the area?  

  WIP Pieces How many items are in the area (being worked on or waiting)?  

  Direct Cost of Materials Cost of materials involved in either directly supporting or making item.  

  Cost per Item and Total Cost Item/Year Total cost of servicing and/or manufacturing item and total annual cost.  

  % Yield 1st / 2nd / 3rd Time ThroughHow many items are defect-free the first time (no rework required)? Used to calculate amount of rework.

 

  Volume and Cost / Year Including ReworkCalculated using average volume of items process plus number of items having to reworked due to poor yield.

 

  Cumulative % YieldHow many items are defect-free the first time (no rework required)? Used to calculate amount of rework.

 

           

  Customer Value Add (CVA) (Minutes, %, Cost)Activity in process that is essential to deliver customer requirement (External Focused).

 

  Stakeholder Value Add (SVA) (Minutes, %, Cost)Activity in process that is essential to deliver stakeholder requirement eg but are required for financial and/or legal reason (Internal Focused).

 

  Business Value Add (BVA) (Minutes, %, Cost)Activity in process that is required by business to improve VA, that has the potential to add future value to the customer or stakeholder.

 

  Non-Value Add (NVA) (Minutes, %, Cost)Activity in process that add no value from customer or stakeholder perspective and are not required for financial and/or legal reason?

 

  Type Notes Process Step 1  

           

Difficulties in Providing Valid Targets and Measures – Example of a Value Stream

Difficulties in Providing Valid Targets and Measures – Example of a Value Stream

Difficulties in Providing Valid Targets and Measures – Example of a Value Stream

Difficulties in Providing Valid Targets and Measures – Examples of Value Streams

Customer Value Add (CVA) (%)

Stakeholder Value Add (SVA) (%)

Business Value Add (BVA) (%)

Non-Value Add (NVA) (%)

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

Value Add (%)

Current State

Proposed State

Future State

Non-Value Add (NVA) (Minutes, %, Cost)

Activity in process that adds no value from customer or stakeholder perspective and are not required for financial and/or legal reason?

Business Value Add (BVA) (Minutes, %, Cost)

Activity in process that is required by business to improve VA, that has the potential to add future value to the customer or stakeholder.

Stakeholder Value Add (SVA) (Minutes, %, Cost)

Activity in process that is essential to deliver stakeholder requirement eg but are required for financial and/or legal reason (Internal Focused).

Customer Value Add (CVA) (Minutes, %, Cost)

Activity in process that is essential to deliver customer requirement (External Focused).

The Impact on Staff Caused by Setting Targets for Improvements

Six Common Reasons why Change Programs Fail:Failure to Create a Sense of Urgency.

If people do not understand why change is needed, then they stay in their comfort zones.

Failure to Create a Coalition for Change.You have to get the 'movers & shakers' on board at the beginning.

Failure to Understand the Power of Vision and to Communicate it Powerfully, Through Word and Deed.

Failure to Remove Obstacles to Change.They hold you up, and exhaust the energy and resources

Failing to Achieve ‘Quick Wins'.They prove it is not only possible, but relevant.

Declaring Victory Too Soon.If you do not keep at it, it vanishes overnight.Change has to become embedded, habituated and part of the culture.

John Kotter

The Impact on Staff Caused by Setting Targets for Improvements

John Fisher's Personal Transition Curve 2003

The Impact on Staff Caused by Setting Targets for Improvements

Empowerment, Efficacy and Self-correction:Successful culture and organisation change requires high levels of

empowerment for people and work teams.The empowerment is necessary for the system to self-correct at the

lowest levels.High directive, bureaucratic systems that attempt to correct at high

levels are inherently unstable.Motivation:

All of this ties in to motivation.People and teams who believe they have control of their situation work

harder and perform better.They take pride in their efforts.Pride gives meaning to their work and their lives.

The Impact on Staff Caused by Setting Targets for Improvements

Fully Engage Leaders in LEAN Six Sigma:Require leaders to be highly visible in leading LEAN Six Sigma.Structure engagement in key deployment activities.

Lean Six Sigma Goal Setting:Identify the most serious business problems.Set explicit LEAN Six Sigma goals.Link to pay and job performance appraisals.

Understand the Business Goals and the Major Organisation Drivers:Get leaders to understand their customer requirements.

Put Deployment Accountability Where it Belongs:Executives and managers need to own LEAN Six Sigma and targets.The policy deployment strategy needs to get executive ownership

quickly.

Peter Scholtes

Keep them Simple:People must understand them for them to be effective.People must trust the measures - most powerful if people create them

for themselves.Ensure they are Timely:

Frequency should be based on needs of the process.Real-time, hourly, by shift, by day, by week, etc.

Use Fewer than You Think:Select the top 6 to 8 key metrics that drive overall performance.

Measurements Must be in Place to Drive Improvement:Provides the motivation for change

LEAN Six Sigma Measures Change as the Business Changes:As the processes improve, so too must the way we measure success.

The Impact on Staff Caused bySetting Targets for Improvements

Smart Targets: Motivator or Burden?Key Points

Performance measurements that motivate LEAN Six Sigma actions.

A valid assessment of the financial impact of lean manufacturing improvement.

Replacement of standard costing with costing of the value stream.

Driving the business from customer value.Challenge the status quo.Create a compelling vision.Establish shared values.Enable others to act.Model the way.Encourage the heart.

Smart Targets: Motivator or Burden?Key Points

• Every morning in Africa, a gazelle wakes up; it knows it must run faster than the fastest lion or it will be killed.

• Every morning in Africa, a lion wakes up; it knows it must outrun the slowest gazelle or it will starve to death.

• It doesn’t matter whether you are a lion or a gazelle; when the sun comes up you had better be running!

Smart Targets:Motivator or Burden?

Centre for Enterprise Research and Innovation (CERI)Nigel Ward

A Practitioner's View of Targets in a Change Environment

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