Why does your organization employ people? An obvious answer is that employees do work. Why do they work? They work so the business can produce something that a customer values. Team members, then, could be as prolific as possible and paid little, but the business will still fail if no one wants it products or services.
Lean leadership cultures have embraced this truth, and their measures of performance reflect that. 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 (i.e. the perfect order).
Here are three ways that lean leadership based cultures create effective measurement systems:
1. A culture of lean leadership measures the performance of the process, not people.
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 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 stored and the producer makes seasonal products, they could adjust the takt time to increase throughput during peak demand months, And a hospital might have a practice of scheduling "floating" cross-trained employees during peak emergency room hours.
2. A culture of lean leadership creates 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's performance, and they just as likely will be wasteful and harmful. The reality is that once you tell a person that their livelihood will depend upon how they do X/Y, they will focus on X/Y rather than value-stream or process performance.
Performance metrics should measure the entire value stream - overall first-time quality, overall inventory in the system, overall lead time and other value-stream metrics.
3. A culture of lean leadership measures inputs and outputs.
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 the cause-effect relationship between inputs and outputs.
Want to learn more about effective measurement systems? Try our Lean Leadership online course.
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.Facebook LinkedIn Twitter Google+