The Latham Group, LLC
6/19/16The Latham Group, LLC © 2003
1
Performance Measurement for Performance ExcellenceInstitute for Defense and BusinessDecember 15, 2003
John Latham, PhD
719-487-9039 – Office303-362-5734 - [email protected]
Creating Sustainable Results for Multiple Stakeholders
The Latham Group, LLC
6/19/16The Latham Group, LLC © 2003
2
o Focusn Stakeholders & Challenges
o Strategic Leadershipn Strategic Alignment Table
o Execution Excellencen SIPOC Table
o Organizational Learningn Creating an Environment for Learning
Overview of Deliverables
The Latham Group, LLC
6/19/16The Latham Group, LLC © 2003
3
StrategicLeadership
Execution Excellence
BasicSystem
Reacting toProblems
Reacting toProblems
Great services butnot meeting the needsof the key stakeholders
Key stakeholders initiallyvery excited but ultimatelydisappointed when you
can’t executeBoom Bust Curve!
SystematicApproach
SystematicApproach
1
Alignment
Alignment
2
Integration
Integration
3
OrganizationalLearning
Path to Performance Excellence
Adapted from: Tang, V. & Bauer, R. (1995). Competitive Dominance
The Latham Group, LLC
6/19/16The Latham Group, LLC © 2003
4
Performance Patterns and Projections
Decision Level
Business System Map
Measurement Map
Strategy Map
Results Level
Action Level
Processes and Projects
Objectives and Timeline
SuppliersPartners Processes Customers
Employees
Investors
Alignment
The Latham Group, LLC
6/19/16The Latham Group, LLC © 2003
5
FocusThe Key Organization Factorso Stakeholderso Challenges
The Latham Group, LLC
6/19/16The Latham Group, LLC © 2003
6
Stakeholders
Suppliers & Partners Customers
Workforce
Operations
Investors
Products &Services
The Latham Group, LLC
6/19/16The Latham Group, LLC © 2003
7
CUSTOMERS:
WORKFORCE:
INVESTORS:
OPERATIONS:
Output
SUPPLIERS & PARTNERS:
Output
Stakeholders
The Latham Group, LLC
6/19/16The Latham Group, LLC © 2003
8
Strategic LeadershipThe Enterprise Perspectiveo Scorecardo Strategic Alignment
The Latham Group, LLC
6/19/16The Latham Group, LLC © 2003
9
CUSTOMER RESULTS:
Customer SatisfactionCustomer DissatisfactionComparisonsCustomer LoyaltyPositive ReferralsCustomer Perceived ValueCustomer RelationshipsProduct and Service performance
WORKFORCE RESULTS:Employee Well-beingEmployee Satisfaction/Dissatisfaction(Employee Survey, Turnover, etc.)
Employee Development(Courses completed, On the jobperformance improvements, cross-training, etc.)
Work System Performance(Innovation/suggestion rates, supervisory rations, etc.)
INVESTOR RESULTS:Financial Performance(ROI, Asset Utilization, OperatingMargins, Profitability, Liquidity, Debt to Equity, Value-added per employee, etc.)
Economic ValueMarket share/PositionBusiness GrowthNew Markets Entered
ORGANIZATIONAL EFFECTIVENESS:
DesignProduction(Productivity, cycle time, scrap, etc.)
DeliverySupportRegulatory and LegalCorporate Citizenship
Output
SUPPLIER & PARTNER RESULTS:
Supplier Performance(Timeliness, Rejects, Reliability, etc.)
Cost Reductions
Output
Top Level Measurement Map
The Latham Group, LLC
6/19/16The Latham Group, LLC © 2003
10
CUSTOMER RESULTS:
Contractor Performance Assessment CPARAward FeesCustomer Site SurveyExternal SurveyMean Time Between Corrective Maint. Maintenance Man-hours/Flight hour
WORKFORCE RESULTS:
Training HoursRecognition Events Per EmployeeEmployee Productivity – Revenue/EmpEmployees Believe in QualityEmployee SurveyRecord able Injuries/1,000 EmployeesGrievances
INVESTOR RESULTS:
Return on Sales (ROS) % Improvement Return on Net Assets (RONA) % ImpNet Asset Turnover Cost of QualityC-17 Unit Cost
ORGANIZATIONAL EFFECTIVENESS:
Time in hours to construct each C-17Rework and Repair HoursDays Lost (Late Completion)Production Span Time ImprovementProcess Improvements (Quality, Timeliness, Efficiency, Cycle time)
Output
SUPPLIER & PARTNER RESULTS:
Number of Preferred SuppliersTotal Number of SuppliersSupplier Rejection RateSupplier On-time Delivery PerformanceSupplier Costs
Output
Boeing Airlift & Tanker
The Latham Group, LLC
6/19/16The Latham Group, LLC © 2003
11
Ass
ess
Annual Strategic Planning Process
CustomersShareholders Suppliers EmployeesCommunities
Source: Quest for Excellence March/April 2003
Com
mun
icat
e
Compensation& RewardsEmployeesCustomersShareholders Suppliers Communities
Motorola CGISS Se
t & D
eplo
y
AllAssociates
Personal Commitment
CorporateScorecard
CGISSScorecard
The Latham Group, LLC
6/19/16The Latham Group, LLC © 2003
12
Needs, Wants,Desires
Strategic Objectivesand
Timetable
Short- and Long-termAction Plans/Initiatives
Performance TargetsProjections
with Comparisons
What do they needto be successful?
When do you planto achieve the
objectives?
What improvementprojects will
make it happen?
How does thiscompare with others?
Want do they want?
Stakeholders Strategy ActionsMeasures
Decision Level
What are the desiredoutcomes in qualitative
terms?
What are the keyProcesses?
How can you measurethe outcome(s)
Results Level Action Level
Who are your key Stakeholders?
Where do you want to be - Vision?
How will youget there?
How will you knowwhen you get there?
Wants & Needs
Alignment
Strategic Alignment Table
The Latham Group, LLC
6/19/16The Latham Group, LLC © 2003
13
Stakeholders Strategy ActionsMeasures
Strategic Alignment Table
Customers
Employees
Operations
Suppliers
Investors
The Latham Group, LLC
6/19/16The Latham Group, LLC © 2003
14
Execution ExcellenceThe Process Perspectiveo Value Chain - SIPOC
The Latham Group, LLC
6/19/16The Latham Group, LLC © 2003
15
OutputsInputs
CustomersSupplier
Events
PerformancePatterns
Structure& Systems
People & Operations
Looking Below the Surface
The Latham Group, LLC
6/19/16The Latham Group, LLC © 2003
16
Value Chain Approach - SIPOC
Supplier and Partner
In-Process Measures
Incoming Product and
Service Quality Measures
In-Processes Measures
Product and Service Quality
Measures
CustomersSatisfaction
Measures by Segment
Measurement
Suppliers and Partners
InputsProducts and
Services
ProcessesValue CreationAnd Support
OutputsProducts and
Services
Customer Segments -
a.k.a. Primary Beneficiaries
Execution
Supplier Process
Requirements
Input Requirements (Features and
Functions)
Process Requirements
Features and Functions
CustomersRequirements by
Segment
Design
The Latham Group, LLC
6/19/16The Latham Group, LLC © 2003
17
SIPOC Table
Process Measures Incoming Product & Service Measures In-Process Measures Product & Service Quality
MeasuresCustomer Satisfaction
Measures
Process Requirements Input Requirements Process Requirements Features & Functions Customer Requirements
Suppliers & Partners Inputs Processes Products & Services Customers by Segment
The Latham Group, LLC
6/19/16The Latham Group, LLC © 2003
18
Organizational LearningThe Improvement Perspectiveo Stoplightso Ultimate Trend Chartso Relationshipso Environment for Learning
The Latham Group, LLC
6/19/16The Latham Group, LLC © 2003
19
Level ComparisonTrend
Level of performance isEqual to or slightly betterthan the target
Trend is favorableYou’re on bottom butclosing in on the comparison
G
Level of performanceis slightly less than target Trend is flat
You’re on top but thecomparison is closingin on you!
Y
Level of performanceis considerably lower than the target
Trend is unfavorableYou’re on bottom andthe comparison is leaving you behind
R
You’re on top and leaving the comparisonbehind
Level is much better thanthe target.
Steep or exponential improvement trendP
Stop Light Chart Definitions
The Latham Group, LLC
6/19/16The Latham Group, LLC © 2003
20
Level Trend ComparisonPerformance Measure Target
R G RSupplier Performance Index
G G GPartnership Contribution to Scale
R R RTotal Expenses
G G GEBITDA
Y Y RCustomer Satisfaction
R Y RCustomer Complaints
R R RTotal Sales
G G GRepeat and Referral Sales
G G GProduct/Service Quality Index
R Y GCost of Poor Quality
P G GEmployee Satisfaction
Y Y REmployee Well-being Index
Stop Light Chart - Generic
The Latham Group, LLC
6/19/16The Latham Group, LLC © 2003
21
Level Trend ComparisonPerformance Measure Target
Stop Light Chart
The Latham Group, LLC
6/19/16The Latham Group, LLC © 2003
22
10% < Target
Purple Zone
10% > Target
Target
Q1 Q2 Q3 Q4
20%
40%
60%
80%
100%
Green Zone
Yellow Zone
Red Zone
Level
Level of performance isEqual to or slightly betterthan the target
Level of performanceis slightly less than target
Level of performanceis considerably lower than the target
G
Y
R
Level is much better thanthe target.P
Target Forecast Line
Stop Light Level in Relation to the Goals
The Latham Group, LLC
6/19/16The Latham Group, LLC © 2003
23
1. You’re on top and leaving thecomparison behind
2. You’re on bottom but closingin on the comparison
3. You’re on top but the comparisonis closing in!
4. You’re on bottom and the comparison is leaving you behind
P
RY
G
Dominant On Track
Impending Danger Danger Worsening
Your PerformanceComparison Performance
Four Comparison Situations
Converging
ConvergingDiverging
Diverging
The Latham Group, LLC
6/19/16The Latham Group, LLC © 2003
24
Example:
Figure 7.3.1% of Employeesthat rated companyas a “good” or“great” place towork.
Sources: AnnualEmployee Survey and Fortune’s 100Best Companies to Work For.
95 96 97 98 99
20%
40%
60%
80%
100%
85%
78%
OrganizationActual Trend
Industry Benchmark
Actual Trend
OrganizationForecast
IndustryBenchmarkForecast
Organization‘00 Target
00
95%
1. Trend of actual performance to analyze the impact of improvement efforts overtime.2. Trend of comparison (e.g., Industry Benchmark) to analyze the changing gap between organization and
relevant comparison to assess if: (a) we are closing in on the competition; (b) they are closing in on us; (c) the competition is leaving us behind; or (d) we are leaving the competition behind.
3. The current levels of performance with actual percentages for both company and the comparison to determine how large a gap exists today.
4. Target for our future performance based on organization action plans.5. Forecast of organization and comparison performance.6. Clear label with source(s) of data.
The Ideal Performance Graph
The Latham Group, LLC
6/19/16The Latham Group, LLC © 2003
25
EmployeeTurnover
Rate
EmployeeSatisfaction
Survey
EmployeeExperience/Skill Base
Numberof R&D
“Partners”
SupplierPerformance
# Supplier“Partners”
Amount ofResearch andDevelopment
ProductQuality and
Performance
ProcessImprovement
Projects
# NewEnhancedProd/Serv
ServiceQuality
Product &Service
Offerings“Menu”
OperationsValue
Perceivedby Customer
RepeatBusiness
ReferralBusiness
First TimeSales
CustomerComplaints
GrossSales
Revenue
Operating& CapitalExpenses
NetIncomeCash
Cost ofCapital
(Interest Rate)
Measurement Map - Relationships
The Latham Group, LLC
6/19/16The Latham Group, LLC © 2003
26
A leadership change and the introduction of a ‘hold the aircraft’ approach, where aircraft didn’t move down the assembly line or out of the factory until they met quality standards, began the fight-back, which was also represented by a shift in focus away from the production schedule, towards production quality (but the schedule improved as well ¾ see the illustrations below)
Boeing Airlift & Tanker Example
Aircraft numberP-1 P-10 P-20 P-30 P-40
Time (in hours) to construct each C17
Time spent fixing mistakes
Correlation between quality and performanceA focus on quality drives improvement in schedule
Hou
rsx
100 ,
000
0.96 correlation
The Latham Group, LLC
6/19/16The Latham Group, LLC © 2003
27
2. Strategy
3. Performance Measurement
4. BusinessSystem
5. Analysis ofResults
6. Review ofPerformanceand Progress
7. Translationof Findings into
Actions
8. Action andAccountability
Dialogue & DecisionsAlignment Analysis Follow-through
1. How are we doing in the eyes of our stakeholders including: investors, overseers, public, customers, employees, suppliers, partners, and other stakeholders?
2. What is the explanation for this performance?3. What can we do about it?4. Where should we spend our time and money?5. How can we make sure that the investment achieves the desired results?
1. StakeholderNeeds, Wants,
Desires
Organization Performance Review