Lean six sigma process improvement tools and techniques by donna summers chapter 07

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Process Performance

Measures

Chapter 7

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Lean Six Sigma: Process Improvement Tools and Techniques

Process Performance Measures

• Facts are the most important thing in

business Study facts and do more than is expected of you.

– Frederick Hudson Ecker

• Chairman Metropolitan Life Insurance

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• I’ve always been able to make erroneous

decisions very quickly.

– Herb Kelleher

• Founder, Southwest Airlines

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• Knowledge is what we get by evaluating

vast quantities of information…and adding something a little extra-creativity,

judgment, experience, and thought.

– Dominic Tarantino

• Former chairman, Price Waterhouse World Firm

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• Information is only as valuable

as its source.

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• You can’t improve what you

don’t measure

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• Organizations measure what

matters.

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• Our view was, if we could measure it, we

could manage it.

– Don England

• CEO, C.R England, Inc.

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• Organizations measure what they value

– What does our organization value?

– What does the organization measure?

– What measures does the organization

use to make decisions and take action?

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• Measures create a link between

philosophy and action.

– What does the organization measure, record,

analyses, reports, shares throughout the

organization, and takes action on

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• How do we know what is important?

• How do we do what we do?

• How will we do what we said we would

do?

• How do we know we did what we said we

would do?

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• What role does information play in creating

an effective organization?

• How does the analysis of information

support customer satisfaction?

• How does the analysis of information

support a healthy bottom line?

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• Information enables you to make

appropriate decisions.

• Inter-departmental relationships can be

integrated through the use of information.

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• Integrating Customer information,

processes and decision-making:

– use data collection and analysis to

define the customer requirements

within the identified market segment.

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– Translate requirements into major design

parameters to develop, produce, deliver, and

service the product that meets the customer

requirements.

– Complement these primary processes with

support activities such as finance, accounting, personnel, etc

– Design the information requirements

necessary to manage each process and to

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• Measures of Performance answer the

question:

– How do we know?

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• Performance measures enable an

organization to answer the following

questions:

– How well is something performing its intended purpose?

– Is the organization able to measure the

impact of the changes being made?

– How does the organization know that it has

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• An effective measurement system enables an

organization to:

– determine if the activities occurring within the

company support the achievement of company goals

and objectives

– determine whether or not those goals and objectives

move the organization closer to the stated vision

– see where the organization is and where it is going.

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• An effective measurement system links actions and plans to the

goals and objectives.

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• Results (Outcome) measures

– Results are the objectives the organization

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• The Balanced Scorecard

– Using measurements from four areas

integrates the key business measures into a

few manageable indicators of performance so that management is able to quickly access the short and long-term health of the organization from several points of view

• Kaplan and Kaplan

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• The Balanced Scorecard

– (Kaplan and Kaplan)

• FOUR areas of focus :

1 Customer Focus

2 Internal Processes

3 Learning and Growth

4 Financial Analysis

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• Barriers to Installing Measurement

Systems

– Lack of leadership

– Individuals are fearful of having specific,

measurable objectives to achieve

– Lack of focus on what’s important to the

organization.

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• Determine

– what needs to be measured

– and why it needs to be measured

– before designing a measure of performance.

• PUBLISH definitions for each metric!

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• For Effective Measurement Systems:

– Leaders must demonstrate their commitment

by holding people accountable for measures

– Leaders must show persistence and

perseverance to work through data integrity

issues.

– Real life advice - How about a metric that

measures the accuracy of the metrics?

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• When developing measures consider:

1 What do we need to know?

2 What are we measuring now?

3 How does what the organization needs to

know compare with what it is currently measuring?

4 How is this information being captured?

5 Is the information currently being captured

useful and actually being used?

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• When developing measures consider

(Con’t) :

6 Are these measurements being captured over time?

7 Do the identified, selected, and measured factors

reflect what the customers need, require, and expect?

8 Can these selected factors be acted upon within the

organization?

9 Can the impact of the changes made be measured?

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• Measurement Systems allow effective

organizations to:

– Determine that a gap exists between desired and

actual performance

– Determine the root cause of the gap

– Determine the necessary corrective action to

eliminate the root cause of the gap

– Determine whether the corrective actions eliminated

the root cause and closed the gap between the actual and desired performance.

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• HOW MANY METRICS ?

- Balanced Scorecard method using METRICS =

- about 10 metrics for your Business Unit,

5 for your group and 5 for

individuals

Any more than that, your focus gets lost!

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