A Practitioner's View of Targets in a Change Environment

1. Smart Targets:Motivator or Burden?Centre for Enterprise Research and Innovation (CERI)Nigel Ward A Practitioner's View of Targets in a Change Environment

2. 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.

3. 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.

4. 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

5. 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).

6. Concepts of LEAN Six SigmaAdding Value to the Customer!

7. Concepts of LEAN Six SigmaAdding Value to the Customer! • So which process was the improvement? • From an Employees perspective? • From a Customers’ perspective? So How Did I Know? One thing was definitely missing from theemployees’ face that made me my sandwich! A SMILE!

8. LEAN Six Sigma’s Process Improvement Life Cycle Understanding the Metrics Developing the Solution

9. The Role of Measurement in LEAN Improvement – Deming W Edwards 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.”

10. The Role of Measurement in LEAN Improvement – Ohno TaiichiOhno • “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’”

11. 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. Begin With The End In Mind Steven Covey

12. 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.

13. 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).

14. The Role of Measurement in LEAN Improvement – Pilot Results Not-For-Profit Charity Shop BEFORE PILOT IMPACT

15. 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

16. Difficulties in Providing Valid Targets and Measures – Value Stream Costing Production Labour Production Materials Production Support Inflow >>>> Value Stream Flow Process >>>> Outflow Operation Support Facilities & Maintenance All Other Value Stream Costs • 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.

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

18. Difficulties in Providing Valid Targets and Measures – Performance Measurements John Seddon Michael George

19. Difficulties in Providing Valid Targets and Measures – Assumptions John Seddon Michael George

20. Difficulties in Providing Valid Targets and Measures – Measuring in a LEAN Way Traditional View The financial and customer metrics reflect the outcomes of the processes a company deploys and the people running those processes! Financial LEAN View Measuring the effectiveness of the people and key drivers of delight for the business and the customers will ultimately result in outstanding ‘top level’ performance! Customer Process People

21. Difficulties in Providing Valid Targets and Measures – Customer Value Customer Perceptions of Value (Quality and Satisfaction) (After Zeithamlet al, 2006))

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

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

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

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

27. 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

28. The Impact on Staff Caused by Setting Targets for Improvements John Fisher's Personal Transition Curve 2003

29. 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.

30. 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

31. The Impact on Staff Caused bySetting Targets for Improvements • 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.

32. 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.

33. 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!

34. 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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