Performance Measurement for Performance Excellence

The Latham Group, LLC

6/19/16The Latham Group, LLC © 2003

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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



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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



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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

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Alignment

Alignment

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Integration

Integration

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OrganizationalLearning

Path to Performance Excellence

Adapted from: Tang, V. & Bauer, R. (1995). Competitive Dominance



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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



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FocusThe Key Organization Factorso Stakeholderso Challenges



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Stakeholders

Suppliers & Partners Customers

Workforce

Operations

Investors

Products &Services



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CUSTOMERS:

WORKFORCE:

INVESTORS:

OPERATIONS:

Output

SUPPLIERS & PARTNERS:

Output

Stakeholders



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Strategic LeadershipThe Enterprise Perspectiveo Scorecardo Strategic Alignment



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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



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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



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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



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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



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Stakeholders Strategy ActionsMeasures

Strategic Alignment Table

Customers

Employees

Operations

Suppliers

Investors



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Execution ExcellenceThe Process Perspectiveo Value Chain - SIPOC



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OutputsInputs

CustomersSupplier

Events

PerformancePatterns

Structure& Systems

People & Operations

Looking Below the Surface



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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



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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



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Organizational LearningThe Improvement Perspectiveo Stoplightso Ultimate Trend Chartso Relationshipso Environment for Learning



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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



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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



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Level Trend ComparisonPerformance Measure Target

Stop Light Chart



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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



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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



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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



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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



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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



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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

Performance Measurement for Performance Excellence

Documents

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