《Integrating The Lean Enterprise》Strategic Measurement in the Lean Enterprise

Strategic Measurement in the Lean Enterprise October 30. 2002 Professor Debbie Nightingale

Strategic Measurement in the Lean Enterprise Strategic Measurement in the Lean Enterprise October 30, 2002 Professor Debbie Nightingale

Metrics Serve Multiple Purposes f Performance control systems can serve two purposes, to measure and to motivate H Mintzberg, The Structure of Organizations, (1979) Debbie Nightingale, MIT O 2001

2 Metrics Serve Multiple Purposes Metrics Serve Multiple Purposes “Performance control systems can serve two purposes, to measure and to motivate.” H. Mintzberg, The Structure of Organizations, (1979) Debbie Nightingale, MIT © 2001

Metrics Are Measurements you can Use o Metrics are meaningful, quantified measures e To be meaningful, a metric must present data or information that allows us to take action Helps to identify what should be done Helps to identify who should do it ● Metrics should be tied to strategy and to“core” processes-they should indicate how well organizational objectives and goals are being met through disciplined"core"processes o Metrics should foster process understanding and motivate individual, group, or team action to continually improve the way they do business. Measurement does not necessarily result in process improvement. Good metrics always do. Debbie nightingale, MIT O 2001 3

3 Metrics Are Measurements You Can Use Metrics Are Measurements You Can Use z Metrics are meaningful, quantified measures z To be meaningful, a metric must present data or information that allows us to take action – Helps to identify what should be done – Helps to identify who should do it z Metrics should be tied to strategy and to “core” processes - they should indicate how well organizational objectives and goals are being met through disciplined “core” processes z Metrics should foster process understanding and motivate individual, group, or team action to continually improve the way they do business. (Measurement does not necessarily result in process improvement. Good metrics always do.) Debbie Nightingale, MIT © 2001

When Assessing a Metric System Ask the Following Types of Questions Does it clearly define what constitutes business excellence? Does it provide the information required to set aggressive yet achievable strategic objectives and stretch goals? Does it accurately portray our progress and probability of achieving both long-term strategic objectives and near-term milestones? Does it identify the root causes of barriers? Does it focus the organization on the priority improvement needs? Does it drive the behavior and actions required to achieve the objectives? Does it align work with value? ● Is it easy to use? Does it involve everyone?

4 When Assessing a Metric System Ask When Assessing a Metric System Ask the Following Types of Questions the Following Types of Questions z Does it clearly define what constitutes business excellence? z Does it provide the information required to set aggressive yet achievable strategic objectives and stretch goals? z Does it accurately portray our progress and probability of achieving both long-term strategic objectives and near-term milestones? z Does it identify the root causes of barriers? z Does it focus the organization on the priority improvement needs? z Does it drive the behavior and actions required to achieve the objectives? z Does it align work with value? z Is it easy to use? z Does it involve everyone? Debbie Nightingale, MIT © 2001

What Are The characteristics of a <Good Metric? o Easy to get ● Answers the questions o Produces the desired results Debbie Nightingale, MIT @2001 5

5 What Are The Characteristics of a What Are The Characteristics of a “Good” Metric? “Good” Metric? z Easy to get z Answers the questions z Produces the desired results Debbie Nightingale, MIT © 2001

AGoodp Metric satisfies 3 Broad criteria 1. Strategic 2. Quantitative 3. Qualitative

6 A “Good” Metric Satisfies 3 Broad Criteria A “Good” Metric Satisfies 3 Broad Criteria 1. Strategic 2. Quantitative 3. Qualitative Debbie Nightingale, MIT © 2001

Strategic A good metric should Enable strategic planning and then drive deployment of the actions required to achieve strategic objectives Ensure alignment of behavior and initiatives with strategic objectives o Focus the organization on its priorities Example: How fast do we need to develop and market new products to grow 20 percent per year?

7 Strategic Strategic A good metric should: z Enable strategic planning and then drive deployment of the actions required to achieve strategic objectives z Ensure alignment of behavior and initiatives with strategic objectives z Focus the organization on its priorities Example: How fast do we need to develop and market new products to grow 20 percent per year? Example: How fast do we need to develop and market new products to grow 20 percent per year? Debbie Nightingale, MIT © 2001

Quantification of Metrics is Critical When you can measure what you are speaking about, and express it in numbers, you know something about it; but when you cannot measure it, when you cannot express it in numbers, your knowledge is of a meager and unsatisfactory kind Lord Kelvin

8 Quantification of Metrics is Critical Quantification of Metrics is Critical “When you can measure what you are speaking about, and express it in numbers, you know something about it; but when you cannot measure it, when you cannot express it in numbers, your knowledge is of a meager and unsatisfactory kind.” - Lord Kelvin Debbie Nightingale, MIT © 2001

Quantitative A good metric should Provide a clear understanding of progress toward strategic objectives o Provide current status, rate of improvement, and probability of achievement o Identify performance gaps and improvement opportunities Example: What is the cycle time of our product development process? Where does the process need improving the most? Debbie Nightingale, MIT @2001

9 Quantitative Quantitative A good metric should: z Provide a clear understanding of progress toward strategic objectives z Provide current status, rate of improvement, and probability of achievement z Identify performance gaps and improvement opportunities Example: What is the cycle time of our product development process? Where does the process need improving the most? Example: What is the cycle time of our product development process? Where does the process need improving the most? Debbie Nightingale, MIT © 2001

Qualitative A good metric should Be perceived as valuable by your organization and the people involved with the metric Example: Is the effort and cost of collecting the data reasonable? Is the information timely and actionable? Debbie nightingale, MIT O 2001 10

10 Qualitative Qualitative A good metric should: z Be perceived as valuable by your organization and the people involved with the metric Example: Is the effort and cost of collecting the data reasonable? Is the information timely and actionable? Example: Is the effort and cost of collecting the data reasonable? Is the information timely and actionable? Debbie Nightingale, MIT © 2001