Process Performance Measures Chapter 7 Lean Six Sigma

Process Performance Measures Chapter 7 Lean Six Sigma: Process Improvement Tools and Techniques Donna C. Summers © 2011 Pearson Higher Education, Upper Saddle River, NJ 07458. • All Rights Reserved.

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 Lean Six Sigma: Process Improvement Tools and Techniques Donna C. Summers © 2011 Pearson Higher Education, Upper Saddle River, NJ 07458. • All Rights Reserved.

Process Performance Measures • I’ve always been able to make erroneous decisions very quickly. – Herb Kelleher • Founder, Southwest Airlines Lean Six Sigma: Process Improvement Tools and Techniques Donna C. Summers © 2011 Pearson Higher Education, Upper Saddle River, NJ 07458. • All Rights Reserved.

Process Performance Measures • 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 Lean Six Sigma: Process Improvement Tools and Techniques Donna C. Summers © 2011 Pearson Higher Education, Upper Saddle River, NJ 07458. • All Rights Reserved.

Process Performance Measures • Information is only as valuable as its source. Lean Six Sigma: Process Improvement Tools and Techniques Donna C. Summers © 2011 Pearson Higher Education, Upper Saddle River, NJ 07458. • All Rights Reserved.

Process Performance Measures • You can’t improve what you don’t measure Lean Six Sigma: Process Improvement Tools and Techniques Donna C. Summers © 2011 Pearson Higher Education, Upper Saddle River, NJ 07458. • All Rights Reserved.

Process Performance Measures • Organizations measure what matters. Lean Six Sigma: Process Improvement Tools and Techniques Donna C. Summers © 2011 Pearson Higher Education, Upper Saddle River, NJ 07458. • All Rights Reserved.

Process Performance Measures • Our view was, if we could measure it, we could manage it. – Don England • CEO, C. R. England, Inc. Lean Six Sigma: Process Improvement Tools and Techniques Donna C. Summers © 2011 Pearson Higher Education, Upper Saddle River, NJ 07458. • All Rights Reserved.

Process Performance Measures • 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? Lean Six Sigma: Process Improvement Tools and Techniques Donna C. Summers © 2011 Pearson Higher Education, Upper Saddle River, NJ 07458. • All Rights Reserved.

Process Performance Measures • Measures create a link between philosophy and action. – What does the organization measure, record, analyses, reports, shares throughout the organization, and takes action on. Lean Six Sigma: Process Improvement Tools and Techniques Donna C. Summers © 2011 Pearson Higher Education, Upper Saddle River, NJ 07458. • All Rights Reserved.

Process Performance Measures • 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? Lean Six Sigma: Process Improvement Tools and Techniques Donna C. Summers © 2011 Pearson Higher Education, Upper Saddle River, NJ 07458. • All Rights Reserved.

Process Performance Measures • 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? Lean Six Sigma: Process Improvement Tools and Techniques Donna C. Summers © 2011 Pearson Higher Education, Upper Saddle River, NJ 07458. • All Rights Reserved.

Process Performance Measures • Information enables you to make appropriate decisions. • Inter-departmental relationships can be integrated through the use of information. Lean Six Sigma: Process Improvement Tools and Techniques Donna C. Summers © 2011 Pearson Higher Education, Upper Saddle River, NJ 07458. • All Rights Reserved.

Process Performance Measures • Integrating Customer information, processes and decision-making: – use data collection and analysis to define the customer requirements within the identified market segment. Lean Six Sigma: Process Improvement Tools and Techniques Donna C. Summers © 2011 Pearson Higher Education, Upper Saddle River, NJ 07458. • All Rights Reserved.

Process Performance Measures – 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 integrate all processes. Lean Six Sigma: Process Improvement Tools and Techniques Donna C. Summers © 2011 Pearson Higher Education, Upper Saddle River, NJ 07458. • All Rights Reserved.

Process Performance Measures • Measures of Performance answer the question: – How do we know? Lean Six Sigma: Process Improvement Tools and Techniques Donna C. Summers © 2011 Pearson Higher Education, Upper Saddle River, NJ 07458. • All Rights Reserved.

Process Performance Measures • 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 allocated its assets correctly? Lean Six Sigma: Process Improvement Tools and Techniques Donna C. Summers © 2011 Pearson Higher Education, Upper Saddle River, NJ 07458. • All Rights Reserved.

Process Performance Measures • 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. Lean Six Sigma: Process Improvement Tools and Techniques Donna C. Summers © 2011 Pearson Higher Education, Upper Saddle River, NJ 07458. • All Rights Reserved.

Process Performance Measures • An effective measurement system links actions and plans to the goals and objectives. Lean Six Sigma: Process Improvement Tools and Techniques Donna C. Summers © 2011 Pearson Higher Education, Upper Saddle River, NJ 07458. • All Rights Reserved.

Process Performance Measures • Results (Outcome) measures – Results are the objectives the organization wants to achieve. – Results are what customers hope to obtain by doing business with the organization. • Process measures – Process measures monitor operational activities. Lean Six Sigma: Process Improvement Tools and Techniques Donna C. Summers © 2011 Pearson Higher Education, Upper Saddle River, NJ 07458. • All Rights Reserved.

Process Performance Measures • 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 Lean Six Sigma: Process Improvement Tools and Techniques Donna C. Summers © 2011 Pearson Higher Education, Upper Saddle River, NJ 07458. • All Rights Reserved.

Process Performance Measures • The Balanced Scorecard – (Kaplan and Kaplan) • FOUR areas of focus : 1. 2. 3. 4. Customer Focus Internal Processes Learning and Growth Financial Analysis Lean Six Sigma: Process Improvement Tools and Techniques Donna C. Summers © 2011 Pearson Higher Education, Upper Saddle River, NJ 07458. • All Rights Reserved.

Process Performance Measures • 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. Lean Six Sigma: Process Improvement Tools and Techniques Donna C. Summers © 2011 Pearson Higher Education, Upper Saddle River, NJ 07458. • All Rights Reserved.

Process Performance Measures • Determine – what needs to be measured – and why it needs to be measured – before designing a measure of performance. • PUBLISH definitions for each metric! Lean Six Sigma: Process Improvement Tools and Techniques Donna C. Summers © 2011 Pearson Higher Education, Upper Saddle River, NJ 07458. • All Rights Reserved.

Process Performance Measures • 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? Lean Six Sigma: Process Improvement Tools and Techniques Donna C. Summers © 2011 Pearson Higher Education, Upper Saddle River, NJ 07458. • All Rights Reserved.

Process Performance Measures • 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? Lean Six Sigma: Process Improvement Tools and Techniques Donna C. Summers © 2011 Pearson Higher Education, Upper Saddle River, NJ 07458. • All Rights Reserved.

Process Performance Measures • 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? 10. Have the organization’s assets been allocated appropriately? Lean Six Sigma: Process Improvement Tools and Techniques Donna C. Summers © 2011 Pearson Higher Education, Upper Saddle River, NJ 07458. • All Rights Reserved.

Process Performance Measures • 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. Lean Six Sigma: Process Improvement Tools and Techniques Donna C. Summers © 2011 Pearson Higher Education, Upper Saddle River, NJ 07458. • All Rights Reserved.

Process Performance Measures • 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! Lean Six Sigma: Process Improvement Tools and Techniques Donna C. Summers © 2011 Pearson Higher Education, Upper Saddle River, NJ 07458. • All Rights Reserved.