Key Performance Indicator (KPI) Boards (Part 1)

It may be hard to think of a less inspiring title for a Blog, but KPI Boards are HUGE in taking your process to the next level, and I’ll explain how to use them in just a second.  First, however, let me stipulate from the beginning that they can work for everyone, every business, every discipline.  In fact, for a firm to really make things click, you all have to be using them.

Alright, what’s a KPI board?  It’s literally a board.  Whether a fancy cork board or humble piece of plywood, its mounted in the area of the organization it reports on.  It is used to display the health of that organization.

How do we measure the health of an organization?  We post our daily or weekly performance against the metrics cascaded down to that organization from the mission statement.  

In my Blog about Hoshin Kanri (Leading Change at the Speed of Electrons (Part III)), I spoke about the leaders of an organization gathering to agree on what promises the firm’s Mission Statement made and what unit of measure they’d use to determine how they were doing against each.  The senior leaders then posted their own performance and cascaded the metrics down into the organization.  These, then, are the metrics we’ll be tracking on our KPI boards.

I strongly encourage practitioners to post their performance using Run Charts.  Why Run Charts?  Because they examine performance trends over time.  Examine the chart below.  What can we learn from it?

1st - We Understand one of the key things important to this group: First Pass Yield.

2nd - We learn what the goal is that’s been established for the group.

3rd - We can see that the group is improving.

4th - We can see that the group is stagnating just shy of the goal.

Okay seeing this chart, if you were the manager to whom this group reported, what have you discovered?  You’ve discovered that this group has hit a wall and that they need help to get past it.  Does your involvement end there?Absolutely not.  Do you need to lecture the group, or "encourage" them?  Absolutely not.  Ah, your job is to flog them, then, right?  NO WAY!

Your job is to get them to ask for what they need, or go ask them, then find a way to meet their need.  If that’s a new behavior for you, eliminating obstacles, it needs to become an important part of the way you manage in the future.

Here’s a takeaway.  The way to make the KPI board work is to review it often.  So what’s often?  If you’re a VP, you should be visiting your Directors’ boards weekly.  Directors, you should be reviewing the boards of your Managers at least once a week.  If you’re a Manager, you should be reviewing your Supervisors’ boards daily.  If you’re a Supervisor, you should be visiting your Lead persons’ boards hourly.

In my next post, I’ll talk about what you’re going to be looking for and what action your going to take as a result.

Until next post, Get Lean, Stay Lean.  Feel free to drop me a line at: robert@gettingtolean.com

Leading Change at the Speed of Electrons (Part III)

You now know that changing involves making good decisions lower in your organization.  You also know that, to prevent infanticide, you need to first teach managers throughout your organization how to lead.  The final piece is to discuss how that is all pulled together.

The answer is: Strategy.  Toyota calls this piece Hoshin Kanri.  We’ve interpreted it many ways in the US, but the term currently in vogue is True North.

How do we establish True North?  The answer is that we go back to our Mission Statement.  What is it we promised (our shareholders, our customers, our suppliers, our communities and ourselves) we would do?  

An example might help.  If your mission reads “... provide defect-free products on schedule...” we just committed to two things: 1. No defects in our products; 2. Products delivered on time.

How would you measure those?  Defects are easy: 100% First Pass Yield (FPY) and no field returns.  

On time delivery necessitates that we choose whose clock we’re going to use.  I hope you choose to use your customer’s, after all, they are who keeps you in business.  How would we measure On-Time Delivery?  Well, to start, we need to deliver 100% on-time to our customer’s need date.  If we didn’t commit to the need date, we might also track to our committed date, but we’d continue to track the need date, too.

Okay, your mission either states or implies a lot more commitments, but to keep things simple, we’ll stop with just these two.  

Our next task is to establish who is determining these True North objectives.  The answer is the senior site leader and their staff.  

Then what?  They establish how they’ll measure and at what frequency.  They’ll also assign one person from that body (site leader & staff) who will be accountable for each of those metrics.  There needs to be an identity between every metric and one person who will be ultimately accountable for performance against it.  They’ll also set goals and agree to measure performance against each metric at least monthly.

Next, the body will cascade each metric down throughout the organization, assigning accountability to the next layer of managers.  Each person assigned accountability is responsible for tracking their performance against their metrics and posting it publicly on what many call a Key Performance Indicator (KPI) board.

Next post, we’ll talk about KPI boards and how to use them as a way to ratchet up performance.  Meanwhile, Get Lean, Stay Lean.

If you have questions or comments, contact me at: robert@gettingtolean.com  Feel free to check out our website at: www.gettingtolean.com

Leading Change at the Speed of Electrons (Part II)

In my last post, I discussed why it was important to make decisions closer to the point of discovery; hence, closer to the point of change.  I explained that, what was needed to change at the speed of electrons, was trained employees.  “Trained in what?” you ask.  Good question.  That's the subject of this post.

Simplistically, good decision-making has two components: 

1. Data gathering & analysis
2. Knowledge of what comprises a good decision

Data gathering seems easy if you’ve done it all your career, but has your organization taught the lower echelon of its employees how to do it?  Chances are high that the answer is “No,” yet those employees are often the ones closest to the point of discovering changes.  So job one is to teach employees how to create Check Sheets of various types.  Don’t just teach them, give them homework and check it.

Once employees know how to gather data, the next trick is to teach them how to analyze it.  The best tools for doing that are Run Charts, Pareto Charts and Histograms.  So, you’ll need to teach them how to use the data they collected to make and interpret those charts.  From this point on, the data should point the way.  Follow the data.

Transitioning from analysis to decision-making is often straightforward, but a good coach can walk employees through the situations that are a little more complex.  Having access to a good coach - especially in the early stages of cascading decision-making downward - is critical.

Okay, you now have employees who can gather their own data, analyze it and make good decisions from it.  Bravo!  You’re halfway there.

The second half of your effort will be more cultural in nature.  You'll need to overcome the mindset of those that sees authority as a zero sum proposition: If I have it, you don’t.  That’s a fallacy, but since so many accept it, let’s run with it for now.  Why is that a problem, and what can you do to change it? 

Most junior leaders, e.g. lead persons, supervisors and managers, often paid a steep price to get to a post where they had decision-making authority.  How probable do you think it is that they’ll just give it up?

So here you are, training decision-makers in the lower rungs of your organization.  What’s going to happen when they try to make a decision that a supervisor or manager or even a director thinks is theirs to make?  Answer: the junior person is going to lose and probably get their ear gnawed off (figuratively speaking).

Why did that happen?  Because before you “empower” your employees, you need to train leaders how to lead, and not just to manage.  You want to press management (decision-making through data analysis) as far down in the organization as you can, leaving those above them more time to do the things only they can do.  Like???

Like look over the horizon and plot the path forward.  The higher in the organization one goes, the greater the percentage of their time should be spent looking forward and blazing trail toward the future: improving processes, products, systems, etc.  

Meanwhile, what’s going on between our new decision-makers and our old ones?  Well, remember me talking about providing coaches?  Who better than the person already used to making the decisions?  

Impress on Supervisors the importance of coaching those below them.  Make it a part of their job description.  Make their success dependent on the success of their subordinates.  Have them hold daily huddles in which subordinates are asked to explain where they think the data are taking them and why.  Praise and encourage good decision-making.  Train or re-train poor decision-making.  

“So, what you’re telling me is that we start at the bottom of the organization and work our way up?”

No, but you’ll have to wait for the next post to get the third and final piece.

Questions or comments?  Contact me at: robert@gettingtolean.com

Leading Change at the Speed of Electrons (Part I)

Leading Change at the Speed of Electrons (Part I)

In an economy that travels at the speed of electrons, organizations that can respond to market changes faster than their competitors have a distinct advantage.  How do you get to be that organization?

The short answer: Train & Delegate.  When change occurs, the closer to the point where the change is discovered that a good decision can be made, the faster your organization can respond.

How’s that different from the norm?  Most command and control companies offer very little opportunity for those close to the action to change things.  Let me give you an example. 

Picture one of your lowest tier employee’s having an idea that will save $200,000 a year; cost to implement is $20,000.  ROI = 1,000% with a return in 1.2 months.  Worth pursuing?

Knowing nothing more, what probability would you assign to the implementation of the idea?  

Let me say, most would guess way too high.  After all, what authority does the employee have to Implement the idea?   

ANSWER: None.  As it turns out, the critical question is: “at what level of your organization does that authority exist?”  The probability of implementation is inversely proportional to how far up the hierarchy one needs to go to get funding approved.  Let me use an example.

Understanding that the only way for that idea to get implemented is that:   

A.   The idea be escalated to the management level with the authority to spend $20,000; AND,

B.   Everyone along the way says “Yes.” 

Simple probability theory says that, for each level the idea has to go up the chain, the probability of it being implemented is reduced by 50%. 

Until the approval level is reached, each level can only promote the idea upward, or squelch it.  I call these outcomes “Up Arrow” and “No.”  

Two outcomes.  With no other knowledge, we assign each a 50/50 chance of success.  Remember: Only the “Up Arrow” leads to the potential of implementation.

So, if the employee agrees to promote the idea upward, they choose the “Up Arrow”, which has a 50% probability.  To get past the 2^nd level (the employee’s boss), the probability drops another 50% (50% x 50% = 25%).  To get from the 2^nd to the 3^rd level, it drops another 50% (50% x 50% x 50% = 12.5%), and so on. 

Think about that.  In most organizations, that means that, by the time the idea even gets to the Manager level, the probability of it being implemented has been reduced to 12.5%.

Few managers I know have the authority to spend $20,000.  So, in your organization, at what level does that authority exist?  What’s your probability of success?

Before moving on, let me ask you, how many of your employees have been told “No” enough times that they no longer wait to be told?  They no longer even suggest improvements.  The probability of success for the ideas of those employees is 0%, because they choose “No,” right out of the gate. 

How many of your employees have grown skeptical of a system that rarely even pays them the courtesy of a response?  In those cases, the employees stop having good ideas.  They see themselves as being hired for their hands.  They put in their time and go home.  As W. Edwards Deming would say, “What a waste.”

Is all lost?  Hardly, but you’ve got some work ahead.  What would you have to do?  Ah, that will have to wait until my next post.

Questions or comments?  Contact me at: robert@gettingtolean.com

Leading Change: Setting the Vision for the Path Forward

Leading Change: Setting the Vision for the Path Forward

“Where there is no vision, the people perish”

Proverbs 29.18

If you’re like most senior leaders, you’re buried in minutiae: paperwork , eMail, meetings and phone calls.  When you have time, you sift through data to see how things are going.  If they aren’t going according to plan?  Then more meetings, eMails and phone calls.  The question begs to be asked, when do you find time to lead?

If you believe leading is important, I hope I don’t need to convince you that managing is not leading.  Both are needed, but without leadership, the organization bumps along as best it can, never really achieving greatness, and sometimes, not even goodness.

As the quotation from Proverbs predicts, “… the people perish.”  And who are the people?  It’s your organization.  Your organization perishes when you don’t have a vision for where they’re going.

How do you change that?  First, acknowledge that, if you do nothing, things are likely to get worse, not better.

Next, you need to shed load.  You need to start training those below you to shoulder more of your burden. 

How?  You begin to mentor and coach them.  Explain what’s really important and what is less so.  Anything that originates below you (that you’d typically end up handling), have your subordinates bring to you, but then, ask them how they’d resolve the problem.  If their answer is good, send them off to do it.  If not, explain why, give them a better approach, and then send them off to execute.

As your subordinates begin to shoulder more of what had been your load, you now have time to look forward.  What are you looking for?  Industry trends, technology trends, market trends.  You’re looking over the horizon and planning where to go next.

You now make time to discuss these trends with your colleagues, your staff and with those industry experts whose opinions you respect.  You make time to think deeply about the trajectory of the future and what your organization will need to do to lead it.

When you’re ready, you bring your staff together and conduct a Hoshin Kanri event.  It’s the subject of another blog and my upcoming book, but it’s a process to help your organization determine its strategic plan, what some call True North.  Once your plan is complete, you begin assigning people or teams responsibility for pursuing each element of the plan.  They’ll report to you no less frequently than once a month until the plan is achieved, then you’ll set a new plan, or more ambitious goals for the old one.

In the space of a few months, you’ve:.

·      Turned your personal focus from the “tyranny of the inconsequential many,“ to a plan to achieve the critical few.

·      Demonstrated to your direct reports how to cascade important decision-making responsibility downward, and grew their capabilities.

·      Developed new capacity in your own day and, no doubt, grown closer to the image you’ve always had of a great leader.

·      Made time in your day to Go and See for yourself what’s really going on in your organization.

·      Set the expectation that, in the future, your staff and their direct reports are going to move from a model of reactive management to proactive leadership.

All in all, not a bad day’s work.