Last month I shared the importance of workflow management, the smooth flow of controlled work allowing us to complete a great deal of quality work in a short period of time. So, how do you know? How do you know that your process is smooth and flowing? How do you know that you are delivering high quality work in a short period of time? How do you know? Four words that create one of my favorite questions for people when they are touting some new process or bragging about how great their operations run.
To answer the “How do you know?” question we need two things:
- Key Process Indicators (KPI)
- a forum to review and discuss performance.
With KPIs in place and the space to retrospect and discuss improvement ideas we have what I call Performance Review which is the fourth section of the CI Framework.
We often misuse the phrase Key Process Indicator. This is not just data or a compiled metric. It is a positional indicator against some agreed to measure of progress or baseline performance. To have a KPI we need to collect data from our processes. That means part of our workflow management needs to produce recorded data that can then be used for performance review. We need to have a meaningful measure of what is “good.” This might be a team goal, a corporate goal, a customer specification, a design specification, an industry benchmark, or any other standard that can be used for comparison. Finally, we need a trend. Time is an essential characteristic in answersing “how do you know.” This is because the answer changes over time. We cannot just point to a single instance of time and say we are good. We need to understand the natural variation of our process in relation to the goal. If we want to get fancy, we can use Statistical Process Control (SPC), but I have found for most business applications this is not necessary. A dashboard of metrics with stop light shading against the goals and follow-up trend charts with 12 to 20 data points is enough to have an effective KPI.
Collecting data is not enough. Too often I have seen organizations make the mistake of creating too many KPIs, or worse, creating KPIs because the data is available but not at all meaningful to the operation of the business. We need meaningful KPIs and the time and space to discuss the performance. Only through the review and discussion of performance is the KPI effective. Be careful not to post KPIs all over the office and on digital monitors that people rarely look at or act upon. This just amounts to wall junk.
Performance review must be a frequent gathering of individuals who have an interest and can impact the KPIs that are leading indicators to the results of the organization. This means that performance review is not simply an executive function. It must occur at all levels and in all departments of the organization. The sales team may participate in the engineering or operations performance reviews, but they also need to have a review of their own. The executive team may review the performance of cross-company initiatives and their impact on KPIs like production yield or on-time delivery, but the shipping team must also have the time and space designated to review the performance of getting today’s shipments out the door.
Performance review is where the improvement in the Continuous Improvement Framework starts to get real traction. Through collection of work management data and compilation into metrics, the organization can establish improvement goals to be tracked and trended over time. This is not a happenstance activity, but a formal function for all teams. If you recall, it is a responsibility outlined in Team Governance. It creates an opportunity for cross-functional sharing of performance and a platform for collaborating on areas of weakness in the organization to begin identifying improvements.