Is Your Measurement System Effective?

You should not need an MBA to understand the numbers in your company. – Jean Cunningham

Why does your organization employ people? An obvious answer is that employees do work. Why do they do work? They do work so the business can produce something that customer values. Team members, then, could be as prolific as possible and paid little, but the business will still fail if no one wants its products or services.

Lean cultures have embraced this truth, and their measures of performance reflect that- this is known are the lean measurement system. Instead of using pure economies-of-scale measures that are far removed from the customer (i.e., labor hours per X), they use economies-of-time measures that are tied directly to what the customer wants (the perfect order).

Measure the Performance of the Process, Not Peopleadam and melrose

People are there to manage processes, so lean measurement systems need to measure how the process is performing. Further, they need to measure what the customer defines as valuable.

  • How fast should the process be? Fast enough to deliver what the customer wants when the customer needs it.
  • How many should we make? As many as the customer needs.
  • How many employees should work per shift? As many as needed to fulfill demand-based takt time, which is producing to the beat of customer demand.

In situations where customer demand is not always visible, such as a retail sales forecast or a hospital emergency room, process performance is pegged as closely to demand as possible, and measures are added/adjusted to maintain flow and stability to balance variability. For example, if the customer is a chain of retail stores and the producer makes seasonal products, they could adjust takt time to increase throughput during peak demands months. And a hospital might have a practice of scheduling “floating” cross-trained employees during peak emergency room hours.

Let those working the process come up with their own lean measurement system. This can be a big step forward in enabling people to own their work and think deeply about how it could be improved.

Create Metrics That Enable Monitoring and Improvement of the Entire Value Stream

If your organization is measuring activity or behavior unrelated to the value stream, ask why. Likely, these will be measures of an individual performance, and they just as likely will be wasteful and harmful. The reality is that once you tell a performance that their livelihood will depend upon how they do X/Y, they will focus on X/Y rather than value-stream or process performance.

In the lean measurement system, performance metrics should measure the entire value stream – over all first time quality, overall inventory in the system, overall lead time and other value stream metrics.

Measuring individual performance will:

  • Have a negative impact on the overall business
  • Mark problems
  • Cause firefighting and instability

Measuring Inputs and Outputs; Articulate Cause and Effect

It’s common for businesses to emphasize measure of outputs, such as sales per quarter. But what are the inputs that go into top-line sales, and if we improve them, will we improve sales?

Spend some time reflecting on the inputs that go into your organization’s major outputs. You might realize that some things that are assumed to be inputs are really not. The same output would have happened without them. Is this a necessary process then?

This reflection will also prepare you for the inquiry and advocacy that will need to take place to align the entire organization with value-stream thinking. To do this, you’ll need to understand and be able to articulate that cause-effect relationship between inputs and outputs.

Tell the Story through the Lean Measurement System

When you metrics tell a story through a visual display – such as a dashboard, it’s easier to create dialogue around problem solving. Be we must caution against a mistake we see repeatedly. Don’t fall in love with your dashboard the way the Wicked Queen falls in love with her mirrored image in Snow White. Gazing at a dashboard is wasteful.

When lean teams review performance by looking at numbers, the end goal of measurement is action, it’s also an example of reflection, which needs to be part of everyone’s standard work in lean culture.

Posted by LeanCor Supply Chain Group

LeanCor Supply Chain Group is a trusted supply chain partner that specializes in lean principles to deliver operational improvement. LeanCor’s three integrated divisions – LeanCor Training and Education, LeanCor Consulting, and LeanCor Logistics – help organizations eliminate waste, drive down costs, and build a culture of continuous improvement.

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