Measuring Activity vs. Measuring Performance
I like to read the comments under articles that I read online. I was just checking comments under this very good IndustryWeek article, Next Generation Lean: Lean Processes Need to Continuously Improve. Down in the comments section, “Lone Star” had this to say:
Flawed implementations occur when companies rollout Lean as a project or program that measures activity such as, number of Kaizen events, 5S audit scores, A3’s completed, Process Maps produced etc.
Most of my work is at small companies so counting Kaizen events and A3’s completed isn’t something that I espouse. I think this sort of thing is done at larger companies where it might be important to see if a particular operation is falling behind the plan in some way. (“The Wichita Falls plant has conducted only one kaizen event so far this year while the others have completed at least five. Let’s find out if they need some help.”) At least, I hope that’s how such activity measures are being used. But it’s just as likely, I suppose, that such measures are being used as performance indicators for the lean initiative as a whole, i.e., the more kaizens carried out and the more A3’s on file, the more successful the lean initiative.
That prompts the question: Why would anyone use such activity measures as indicators of lean effectiveness? The answer, at least in part, lies in the fact that too many companies don’t have good operational performance measures to begin with. Developing such measures “from scratch” is a tough proposition so activity measures that are easy to initiate and easy to track, e.g., number of kaizen events, are used instead.
I once had a client that has successfully implemented lean methods and practices. At one point, it created a “scrap team” whose objective was to come up with ideas for reducing scrap within the plant. The team spent several weeks in meetings just trying to decide how to measure scrap. It was successful in reducing scrap eventually because it was willing to put in the time and effort to develop a good measure. In my experience, not all companies are so willing to do that.
The cycle, then, is this:
- Companies don’t have good operations performance measures or the measures they have don’t really tell them anything,
- Lean initiatives use activity measures that are easy to track,
- Lean activities don’t seem to be impacting operations outcomes in positive ways,
- Lean activities cease.
Before the first kaizen is conducted or the first A3 is filled out, senior management needs to deliberate and discuss answers to the question: “What do we want from lean and how will we know when we get it?” The answers to that question inevitably lead to the organization’s metrics and whether they are able, in their present form, to measure the impact of lean.
I had another client who had set as a lean target, savings of $75,000 annually. I asked the management team how it had come to that number. They answered, “We figured it was as good as any other number. ” When I further asked, “What counts as a cost savings?”, they didn’t really know. So…management had committed the lean initiative to a performance target that was, in essence, meaningless to the managers who had set the target.
Too often, in such cases, management decides that it’s the fault of lean, not its own lack of initiative with respect to providing good metrics, that’s at fault. They complain of lean “over-promising and under-delivering”.