Effective Performance Measurement
Effective performance measurement is not difficult; what is difficult is creating a positive measurement and reporting culture in a organisation. The culture can be moulded with the right systems in place. So what are the steps to creating an effective performance measurement and reporting system?
Step 1 Define what it is you do
What exactly is the purpose of your department / organisation. What are the inputs, processes, outputs and importantly what are the outcomes. What drives you, what objectives are you aligned to. Are you customer focussed or are you internally (financially) focussed? Be honest about why you exist. By defining why you exist you can understand what to measure.
Step 2 Understand what you need to measure. These are your KPI’s
This sounds simple! Too many organisations get this wrong though. You need to define the few things, that when done right will assure success. No more than five and no less than three – they should measure:
- Effectiveness – Does the outcome match the objective?
- Quality – Does the output meet the specifications / customer requirements?
- Efficiency – Was the process completed in schedule and within budget?
This will give you a balanced view of your performance both technical (output) and effectiveness (outcome). It’s is important that those accountable for the measure can influence the results. It’s no good holding someone accountable for the output of a production cell when the operators do not report to them as they have limited influence over the result.
Step 3 Spread the word
If you’re expecting others in the department or organisation to report on their performance it’s important they understand why they are reporting. Tell everyone what happens to the data, how it assists with decision making. In essence you are engaging your team so they understand where they fit into the bigger picture.
Follow these simple steps and you can have an effective performance measurement system. Remember what Peter Drucker said “What gets measured gets managed”.
FIFO in the real world
First in, first out simply is a term used to describe a system of using the oldest raw materials before using newer raw materials. This is useful and important for a couple of reasons:
Raw material traceability is the major reason; by controlling what raw materials we use and when we use them we can control the life of that raw material throughout its lifecycle. This is important in most manufacturing organisations and is critical in many. In the event of a recall from the raw material supplier we can recall a smaller quantity of our output if we have good FIFO controls in place. Without these controls we would have to recall a far greater sample of our outputs which will damage not only our financial position but also and more detrimentally it will damage our brand and reputation.
Secondly, many raw materials have a shelf life; with FIFO control we can reduce our wastage, and improve the quality of our outputs by always using the freshest of inputs. This will provide more consistent processes; even for long shelf life raw materials there can often be some deterioration without “going off” this deterioration will have an impact on your process control.
So how do we use FIFO? I’ve seen many different systems used for FIFO, from the very basic to extremes of complexity. Some organisations use software applications for batch control, others rely on their kanban system for stock control. From my experiences there is no real “best method”, but there is best practice (best practice is proven by process measurement). Most of the high performing organisations in FIFO are relying on more simple systems for their FIFO control; simple lanes, card systems, even warehouse matrices over technology. While it is true, software can provide more consistent accuracy, it is very dependent on data entry being accurate and is often removed or away from the place of storage. A simple live system at the place of use and/or storage is the way to go.
Yesterday, I had to go to the doctor; I made an appointment by phone, went to counter and registered on their system, and sat in the waiting room. There were about 5 doctors on duty and about 12 customers in the waiting room. Rather than each free doctor taking the next file in line the doctors were allocated patients as they registered (some were seeing certain doctors others were not). One doctor while I was waiting saw 5 patients (many of these had appointment times after mine), the doctor who I was queued with saw only 2 before me. Some patients were waiting longer than others. Bad FIFO
Today I had to have a blood test at the pathology next door. They don’t take appointments so I walked up to the desk to register but the desk was unattended. Instead there was a simple numbered ticket. I took ticket number 5 and sat down to wait. There were 2 pathologists on duty and 5 of us sitting in the waiting room. Each number was called in turn and the patients seen in the order they arrived. As there were 2 pathologists on duty they serviced the patients in quick time and each patient waited about the same time; if one patient took longer the next pathologist would see the next in line. Good FIFO
Now, I realise in a doctors office there can be emergencies that take precedence and extend the waiting times; and some patients need to see certain doctors, however by assigning the cases early they are inadvertently extending the average waiting time and creating a bottle neck.
Accountability in the workplace
One of the most frequent complaints I hear is the lack of accountability throughout organisations. Often, these complaints come from the lower management and below on the org chart. Having a low level of accountability in a business creates broad problems and can stifle productivity, innovation and improvement. In essence the organisation cannot operate effectively whilst this problem exists. It’s not only those directly involved with the action who suffer though, operations upstream, downstream and even in parallel streams suffer.
So why is accountability so difficult to get right? There are many reasons; a couple of the main are:
- Poor performance monitoring.
To be accountable there must be an action or task to be held accountable to. Too often I see these actions constructed in a way which makes them difficult to measure progress or performance effectively. Just as often I see a good action setup with poor measures or indicators attached. Both of these are caused by ineffective planning.
More frustrating, and thankfully less frequent, I see good planning in place without effective use of the measured data. The quote “What gets measured, gets managed” (Peter Drucker) is one of my favourite quotes, and it’s almost perfect. Unfortunately I’ve noticed people using this quote to say “it’s getting measured, so it must be managed” NO! It’s not automatic! The data must be used in the management process.
- Poor management and leadership
I won’t go into the management vs leadership discussion here but I will point out that there are too many managers lacking effective people management skills. Challenging your staff, holding them accountable is a positive management task. If this is practised consistently without exception your team and those around yours will be higher performing, more efficient, more effective and will have a higher morale.
Simple rule to accountability: Be consistent and don’t overcomplicate it.
Performance Measurement in Government
In April 2012 the Victorian Auditor General’s Office (VAGO) published a report on the performance measurement and reporting in Victorian Local Government. This report follows the analysis of 10 Councils across the state and follows previous similar reports. The major findings of the report are the lack of defined actions and initiatives in the planning across the councils leads to a poor performance measurement culture.
This is in drastic contrast to a similar report from Western Australian office, which although outlines improvement opportunities does praise the improvements made in the state of Western Australia since the previous report.
It seems the Victorian counterparts either haven’t grasped the recommendations from the 2008 report or alternatively have decided not to implement the recommendations. The failure to achieve the standard of planning and reporting recommended by VAGO is having a direct impact on the efficiency and effectiveness of the services delivered by councils across the state. The really bad news is the standard of performance reporting recommended by VAGO is far from being a benchmark and will in fact still ensure government performance remains below best practice.
In order to meet the growing demands on Local Government to improve the value provided to their customers it is vital these agencies bring in fresh, high performing talent from the private sector to increase the knowledge base and begin new learning and development programs. It is no longer enough to be the highest performing in Local Government; councils must strive for best practice comparable to world class organisations.
Lean in Government – Why so difficult?
Having spent some (not a lot) time implementing Lean Systems in the government sector it is apparent that there is a perception within government that the value of a system, report, method etc is dependant on a) the cost and B) the difficulty. If a system has a high capital cost and is difficult to implement then it must be more effective and valuable than a low cost and easily implemented system.
This is very much a misconception that must be broken if lean thinking is ever going to be highly effective in the government sector. Look at the world’s greatest exponents of lean and you will see a common trait of their systems. The world leaders ensure their systems are easily accessible and easy to understand to enable the systems to be utilised by every employee within the organisation. They don’t rely on big budgets to bring in expensive external consultants to evaluate or review their processes only to offer expensive fixes. The staff think lean as part of their everyday work; this creates an environment of continuous improvement.
The essence of lean is to eliminate or reduce waste from the processes and systems from the value stream. For this to be effective it is critical this mindset be shared throughout the organisation; from the very top to the very bottom. Bringing in external facilitators at high expense to is not lean. Training employees and teams on the lean philosophy and tools and making lean a part of every employees daily working life is what lean is about. Only when this change happens at the top will lean start to become effective.
So how can this happen? Easily, the solution is to implement lean thinking from the top. When government management teams go beyond seeing lean as an opportunity to reduce costs and see it for the waste elimination system that it is the change will occur.
Lean in Government – Can it work?
What makes it so difficult to implement a lean system in a Government department?
Whether you call it Lean, Six Sigma, Continuous Improvement, Business Excellence or Best Value we really are talking about the same outcome. A robust system focussing on delivering consistent value driven outcomes to the customer – in the case of a Government department the customer is the community at large in some cases and individual community members in other instances.
Just about every tool used in any other manufacturing or service organisation will work just as well in a Government department, I have found the biggest factor to address is the long standing mindset of being a Government employee. Unfortunately, many employees (across all levels of the organisations) have lost sight of why they are there. They have lost sight of the customers and the need to deliver value.
What can we do about it? Well we need to address two problems.
- Who is the customer? Develop a customer profile with the team you are working with. Who is the customer? What do they want from your service? Go further and ask customers what they like and don’t like about the service.
- How much does the service cost and what would a similar service cost from the private sector? Now there are some Government departments who’s service cannot be benchmarked against private sector, however all departments can and should be measured.
With these questions answered, you can now develop how your service should look (future state), perform a gap analysis, create an action plan and finally implement the changes.
There are two outcomes you need to achieve through this process.
- A culture shift in the employees
- Provide a better value and quality service to the customers