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By Gerald Taylor, Managing Director TPMG
We have heard many definitions for corporate culture. Some academics take an anthropological perspective defining corporate culture as a system of company values, beliefs, norms and customs. Anthropologists believe it is culture that shapes the identity of society. They conclude culture determines how members of the society dress, what they eat, how they worship and overall how they govern themselves. By the same token, business cultures shape the identity of a corporation. It determines how company employees work, how they set priorities and accomplish goals. In effect, corporate culture is the day to day climate that absolutely plays the dominant role in determining the success of the firm. But what is a high performance culture?
At TPMG Consulting we define a high performance culture quite simply as:
The collective and consistent individual decisions and organizational practices that systematically pursue and obtain higher levels of individual and overall productivity. In effect, a high performance culture is one of success. It is the collection of decisions made and actions taken which deliver improvements in results and value. Based on TPMG analytics, in companies with high performing cultures there exists an intense, almost religious focus on four key organizational functions:
- Service: there is a fanatical commitment to meeting the needs, attitudes and perceptions of customers.
- Workforce Engagement: The terms and conditions upon which people and functions relate are very well defined and integrated.
- Performance Analysis: Leaders review, analyze, share and improve performance using data and analytics.
- Leadership: Management creates and maintains formalized methods and practices that promote and reinforce measurable improvement.
We recognize that not all decisions made and actions taken improved results. Like a genome, high performance cultures can be both dominant and recessive. This means a high performance cultures literally exist on a continuum within an organization.
Why does a High Performance Culture Matter?
Before getting into the mechanics of cultivating a winning culture, it is important for all senior leaders to first understand the benefits of a High Performance Culture.
A recent Gallup study uncovered several insights. They concluded high performance cultures inspire high commitment from employees. Their study revealed that companies with a favorable culture attracted and retained talented employees at a measurably higher rate and their employees were more easily inspired to consistently deliver on their organization’s value proposition. Favorable cultures improve performance. Among US healthcare systems, when 8 in 10 of their employees feel connected to their organization’s mission and purpose, they realize a 41% reduction in absenteeism, a 50% drop in patient safety incidents and a 33% improvement in quality. According to a McKinsey & Company study (2013), a favorable culture is a key predictor of revenue, profits, costs and quality of customer service. The bottom line is……employees and teams who most align with their organization’s culture consistently perform higher on internal performance metrics than those who least align.
The Leadership Challenge: Culture Eats Strategy for Lunch!
We all know how it goes…. At the beginning of the fiscal year, senior leaders convene off-site meetings. The goal is to set the stage so the accomplishments for the coming year will out perform prior year’s results. They reflect on organizational performance and most always believe they can achieve more.
For the most part, leaders know their business, their competition and are experienced enough at formulating a winning strategy. Every year they go big and expect things will be different……but the results usually end up falling short of expectation. What continually frustrates them is their company culture. No matter how much they plan, put together policies, or how many consultants they engage…..their day to day climate limits their potential. The one true lesson in both business and government is – culture eats strategy for lunch! This subject is what the coming series of articles is all about: How to Establish and Sustain a High Performance Culture.
In this series, we will provide real world examples of why high performance cultures matter. We will break down the organizational climate and discuss the mechanics of how cultures work and share with you the proven practices we have applied over the past 15 years.
If you would like the series delivered directly to you, feel free to contact us directly by clicking here!
Gerald is the Managing Director of TPMG’s Strategy and Operations Advisory Practice. His expertise includes senior leader advising, strategy and performance improvement.
Gerald Taylor – Managing Director
The purpose of this article is to provide context and insight relating to the topic of organizational change. It is our hope that it provides you the background and perspective you can use to stimulate creative thought and support your change management activities.
I have drafted 6 important questions to address major questions that relate to change management. This article provides concise responses, based on sound primary and secondary research. The questions and responses are as follows:
- What is change in the business context?
- What is the most important thing to know about change and employees?
- Why do employees fear or resist change?
- How does a change agent overcome resistance to change?
- Why do employees remain with companies?
- What can companies do today to satisfy and retain quality employees?
The body of this article will provide analysis and conclusions from prevailing management literature and from TPMG’s consulting practice. Should you have any additional questions, feel free to contact me directly at email@example.com.
CHANGE IN THE BUSINESS CONTEXT
What is change in the business context? A business context is the strategy, structure, procedures, technology, systems, and objectives employees function within. Organizational change involves altering or transforming the business context or significant portions of the business context from its present state to some future condition. Appropriate drivers of change to the business context include:
- Changes in Strategy: Shifts in direction and resources toward new business or market opportunities.
- Changes in Technology: Advances in internal operations for the sole purpose of improving cost, quality or operational productivity.
- Changes in Structure: Improvements in the hierarchy to improve the speed, quality and efficacy of decisions and actions.
- Changes in Culture: Counter measures undertaken to rid negative attitudes or behaviors that serve no useful purpose.
What ever the change, it can be likened to a rock being tossed into still waters. Change can cause ripple effects throughout an organization, often with unintended consequences.
THE SIGNIFICANT THING TO KNOW ABOUT CHANGE AND EMPLOYEES
What is the most important thing to know about change and employees? Change to the business context is disruptive and produces stress for employees. The introduction of new ways of performing a task can produce intellectual and emotional strain. New technology or procedures establish new learning curves for employees. Changes to the business context can also introduce new relationships into the work environment. When this occurs, storming and interpersonal conflicts between employees create sources of stress. Regardless of the reasons or the intensity of a change, the impact of the change causes stress. . A common reaction to organizational change is resistance from those whose jobs may be directly impacted. Management must be certain that the benefits of the change are worth the cost of the tension placed on the employee.
FEAR AND RESISTANCE TO CHANGE
Why do employees fear or resist change? Employees fear and resist change simply because they will be asked to do something new. This is even more true for older, more experienced employees. These veterans of the workforce can resist change because they are more intellectually and emotionally invested in the current context to accommodate a change. Younger employees, however, may be more comfortable doing their job with a new twist.
Change for middle managers and supervisors can cause a loss of power or diminished influence in their sphere of responsibility – so they will resist. Additional reasons for fear and resistance to change are illustrated in the force field analysis in figure 1.0.
OVERCOMING RESISTANCE TO CHANGE
How does a change agent overcome resistance to change? The first step in successfully implementing a change to the business context is communicating a solid and compelling business reason for the change. Management must be certain that the need to change is greater than the need to stay the same. Employees need to know that the change is either provoked by a threat to the business or by an added value that will simplify their daily efforts. If employees perceive a change will be worth the effort, they can be persuaded to “do the right thing.” Before introducing a change to the business context, management must be prepared to ask and respond to tough questions. They must ask themselves:
- What is the reason for the current policy, procedure or system we want to change?
- What will happen if the current policy, procedure or system is changed or eliminated?
- How do we minimize the risk of doing away with the old and installing the new one?
- What is the link between what we are proposing and the company’s strategy?
- How can I address the concerns of those attached to the old way of doing things?
It is imperative that management not only have a solid business reason, but also a solid moral argument for change. For example, a utility company often uses their field service technicians, who typically perform sophisticated maintenance work, to perform low skilled tasks because it provides the service techs with a break from the hard work of the day. The company’s senior management team decided to create a lower skilled, lower paid job category to specialize in performing the lower skilled duties. This change was preceded by a pilot study which found matching higher skilled work with higher skilled employees and lower skilled work with lower skilled employees increased the overall service order productivity 60% while reducing operational cost by more than 35%. Senior management’s business reason was solid. Their moral argument was articulated in terms of the employees’ long term financial needs. Senior management argued that this improvement in productivity would save the company more than 1 million dollars a year. These savings, over time, will increase the value of the company and thus each employees’ investment in company stock. They conveyed that the long term value of the company and financial security of employees was greater than the need for some employees need to “take a break” during the day.
Additional prescriptions for overcoming resistance to change include:
- Demonstrate Leadership: Employees respect strong, smart and effective leadership. The leaders should create, in the mind of the affected group, a tangible picture of the future state of the business context and the reasons why.
- Create options for those adversely affected by the change: A workforce trusts a management team who looks out for their employees. If management takes care of their people, their people will take care of them.
- Over Communicate: Employees respond effectively when they know what, why and how they will participate in the change. Communicate, in as many modes as possible, the true need and the logic behind the change. Over communicate!
- Move slow, as much as time permits: Employees who do not feel out of balance when change comes will be better positioned to help facilitate the change.
Think about when cities construct stop lights in new intersections. They first erect the post. Four weeks later they connect the stop lights (non working). Weeks later they turn on the lights, but blinking, to serve as caution lights. Then weeks later, they make the stop lights functional.
- Provide Resources: Ample resources are of particular importance if the change involves moving to a more sophisticated system. Management can head off much resistance by committing enough resources to train people to use new technology.
- Manage the change: Employees trust and respect a management team that can create and professionally execute a change plan.
A final strategy for implementing change, we recommend only as a last resort. Mandate compliance to the change. Such a coercive action often happens when change must come quickly or when change is undesirable to the affected group. Pressing or forcing change can increase resistance to change, making the manager or change agent’s job more difficult. Managers and change agents sometimes have no choice but to force change onto an affected group.
RETAINING A SATISFIED WORKFORCE
Why do employees remain with companies? Retaining a hardworking, motivated workforce is not a difficult matter. As a manager, one merely needs to understand the sources of employee dissatisfaction, the sources of satisfaction and respond accordingly.
To that end, a company can be guided by theory. In the 1950’s, Frederick Herzberg proposed the most relevant theory of employee motivation – Herzberg’s Two Factor Theory of Motivation. His theory implied that a satisfied employee is motivated from within to work harder and a dissatisfied employee is not self-motivated4. Herzberg’s research uncovered two classes of factors associated motivation – employee satisfaction and dissatisfaction. These factors are outlined in table 1.0.
Table 1.0 Herzberg’s Two Factor Theory of Motivation
Factors Mentioned Most Often by Dissatisfied Employees
Factors Mentioned Most Often by Satisfied Employees
|1. Company policy and administration||1. Achievement|
|2. Supervision||2. Recognition|
|3. Relationship with supervisor||3. Work itself|
|4. Work Conditions||4. Responsibility|
|5. Salary||5. Advancement|
|6. Relationship with peers||6. Growth|
|7. Personal life|
|8. Relationship with subordinates|
Herzberg developed a list of dissatisfiers by asking a sample of 200 employees to describe job situations in which made them feel exceptionally bad. Herzberg’s research revealed dissatisfaction tended to be associated with complaints about the job context. He then asked the same sample of 200 employees to describe job situations in which made them feel exceptionally good about their jobs. His survey concluded that satisfaction tended to be focused on the nature of the job itself. The responders articulated that the opportunity to experience achievement, receive recognition, work on an interesting job, take responsibility and experience advancement and growth was at the top of their list.
What Herzberg concluded in the 1950s still has relevance today. By insisting that satisfaction is not the opposite of dissatisfaction, he encouraged managers to think carefully about what actually motivates employees. The implications are simple to understand. By providing competitive pay, good working conditions, and the like, a company can, at best, eliminate dissatisfaction. A workforce requires interesting, meaningful, and satisfying work to be motivated.
Unfortunately, many corporations and executives see things differently. A job factor survey from 1993 asked a sample of employees to rank certain facets of their job in order of importance. The survey then asks the same of a sample of managers and executives. The results are listed in table 2.0.
Table 2.0 Contrast of Employee and Manager Ranking of Work Factors
|Factor||Employee Rating||Manager Rating|
|Good Working Conditions||
|Loyalty to Employees||
|Help with Personal Problems||
This study published the Advanced Management Journal found if managers hope to be successful at motivating their employees, they must align their actions closer to those factors that their employees think are important.
What can companies do today to satisfy and retain quality employees? One of the most altering decisions an employee can make is to change companies. If companies lose good employees, 9 times out of 10, they deserve it.
Companies should first do their best to eliminate all sources of dissatisfaction:
- Employees will stay with a leadership team they can trust. Supervise employees fairly and nurture good relations between managers and their employees.
- Employees will stay with a leadership team they respect. Manage and administer the company’s policies, procedures and resources with professionalism.
- Most employees will put forth a good faith effort if they are being paid fairly for the value of their effort. Pay competitive wages and compensation.
- Provide life time employment. If employees don’t have to worry about their future with the company, they can concentrate on becoming more competent and productive.
- Provide an environment that is safe and an environment that has the resources for employees to get their job done well.
These steps should go a long way toward eliminating dissatisfaction.
In order to encourage job satisfaction and employee retention, companies should do their best to provide the following:
- Provide work that has identity in the workplace and significance to the value chain. Jobs which directly relate to generating profits, (i.e., customer service, field services, billing, collections) are all value creation jobs with identity and significance to the financial health of the company.
- Seek advice and council from employees regarding changes. Management may learn hidden details of the business, and employees feel important and appreciated for their input.
- Provide employees with feedback about their performance. Employees want to know that they are making a contribution to the success of the business.
Provide training and employee development. If employees believe a company is interested in their future success they will be interested in the future success of the company.
No matter how experienced you are at analyzing data, communicating about your results can be a tremendous challenge.
So it’s not surprising that “Effectively Reporting Your Data Analysis” was one of the best-attended sessions at the inaugural Minitab Insights Conference last month.
The presenters, Benjamin Turcan and Jennifer Berner of First Niagara Bank, have a great deal of experience improving efficiency and enhancing revenue at their organization. They’ve also mentored many new data analysts and helped them learn how to present the findings from their analyses. In their presentation, they raised 5 questions that can help analysts communicate more effectively.
1. Who are you talking to?
The importance of knowing your audience was a central point of their presentation. When you deliver information, whether as a written document or as a presentation, it’s important to tailor it. Berner pointed out that we do that naturally when we talk to people.
For example, suppose you’re in an auto accident. The call to your family might go like this: “Hey, I was in an accident. Don’t worry, I’m fine, but I’m going to be late for the picnic.”
You also need to call your insurance company. The agent will want to know if anyone was harmed, but doesn’t need to know you’ll be late for the picnic. (Nor that you didn’t really want to go to the picnic anyway.) She will need specifics about the cause of the accident, the contact information for the other driver, the license plate of the other car, etc.
Your presentation is different for your family and for the insurance company. You tailor the information to suit each audience’s needs and concerns. The same should be true when you present the results of your analysis. Think about who your audience is, what information is most relevant to them, and how best to deliver that information so they will have the best chance of understanding it quickly.
To get further into this mindset, answer these specific questions about your audience.
2. How much do they know about what you’re analyzing?
One thing is for sure—your audience doesn’t know as much about your analysis as you do. In the session, Berner pointed out:
“You know that content inside and out, backwards and forwards because you’ve lived it for so long. But the people you are speaking to or writing to won’t know that content as well as you do.”
That means you need to look at the information with a fresh pair of eyes. How much of what you know do they need to know?
Imagine a friend calls to tell you he was in an accident. You know nothing about the accident until he tells you. You might assume that he was driving his usual car, but you don’t know that until he confirms it. Maybe he borrowed a friend’s car. Maybe he borrowed your car! (You knew you should never have lent him that key.) If so, he’ll be tailoring that information very, very carefully.
Similarly, if you’ve been analyzing a part-making process and you’re reporting your findings to the employees who actually make the parts every day, it’s probably safe to assume they’re going to intimately understand and care about every step of that process. You may need to share the detailed analysis you performed for each task. But your report to the C-level executives may require only a summary that provides the bottom line, quickly.
3. How much do they understand about analysis and statistics?
Stop me if you’ve heard this one. An insurance agent calls a customer and says, “Sorry sir, but your car was a total loss.” To which the customer responds testily, “No it wasn’t! I got several good years out of that car.” The customer didn’t understand that in the vernacular of the auto insurance industry “total loss” means something very specific—that repairing the car would cost more than its value before the accident.
Similarly, when reporting statistical results, think about what the audience understands and what they do not. For example, if your audience is not familiar with capability analysis, reporting that Ppk was 0.80 probably won’t be clear. (“Is that good?”) Instead, you could say the data suggest there are about 11,000 defective parts for each million that you create. (That’s a rounded value for the expected “overall” PPM [10969.28], as shown below.) Clearly, that’s not good.
Keep in mind also that, just like other industries, statistics has its own vernacular that includes specialized meanings for very common words. Will your audience understand statistical jargon?
4. How will your audience react?
Suppose an ice cream truck strikes your vehicle. Your insurance agent explains that, because of the “Frozen Confections” clause in your policy, you’re not covered. You’re not going to be too happy. If the agent is smart, he’ll be prepared to quote the specific part of the policy that lets them off the hook. (If you’re smart, you’ll start shopping for a different insurance company.)
Similarly, if you’re reporting results that you know some people may not like, you should anticipate push-back and be ready to answers questions like, “Are you sure these data are valid?” or “Why should I believe you?” You may also want to look for ways to frame potentially negative information as an opportunity, rather than a problem.
5. Why should your audience care?
How will your audience use the information that you deliver? I once lost a car to a collision myself. When informed, my son used this information to lobby hard for his preferred replacement vehicle. I explained that while “Bugatti Veyron” is a really cool name for a car, we were going to look at cars with boring names, because I cared about the price more than the name.
Similarly if you want your analysis to spur an executive into action, you may want to work out some rough dollar figures about how much money the company stands to save. So in addition to reporting the number of defective parts, as we talked about above, you might also calculate that improving the process could save the company an estimated $250,000 in rework or scrapped parts annually.
You spent a lot of time and effort on your project and your data analysis, and sharing what you learned should be a rewarding culmination of those efforts. Taking some time to think about your audience and answer questions about what they need to know about your analysis will help ensure a better experience and better outcomes. Benjamin Turcan and Jennifer Berner’s presentation at the Minitab Insights Conference provided a great reminder of how important these questions are!
by Matthew Barsalou, guest blogger
For want of a nail the shoe was lost,
For want of a shoe the horse was lost,
For want of a horse the rider was lost
For want of a rider the battle was lost
For want of a battle the kingdom was lost
And all for the want of a horseshoe nail. (Lowe, 1980, 50)
According to the old nursery rhyme, “For Want of a Nail,” an entire kingdom was lost because of the lack of one nail for a horseshoe. The same could be said for the Galactic Empire in Star Wars. The Empire would not have fallen if the technicians who created the first Death Star had done a proper Failure Mode and Effects Analysis (FMEA).
A group of rebels in Star Wars, Episode IV: A New Hope stole the plans to the Death Star and found a critical weakness that lead to the destruction of the entire station. A simple thermal exhaust port was connected to a reactor in a way which permitted an explosion in the exhaust port to start a chain reaction that blew up the entire station. This weakness was known, but considered insignificant because the weakness could only be exploited by small space fighters and the exhaust port was protected by turbolasers and TIE fighters. It was thought that nothing could penetrate the defenses; however, a group of Rebel X-Wing fighters proved that this weakness could be exploited. One proton torpedo fired into the thermal exhaust port started a chain reaction that led to the station reactors and destroyed the entire battle station (Lucas, 1976).
Why the Death Star Needed an FMEA
The Death Star was designed by the engineer Bevil Lemelisk under the command of Grand Moff Wilhuff Tarkin; whose doctrine called for a heavily armed mobile battle station carrying more than 1,000,000 imperial personnel as well as over 7,000 TIE fighters and 11,000 land vehicles (Smith, 1991). It was constructed in orbit around the penal planet Despayre in the Horuz system of the Outer Rim Territories and was intended to be a key element of the Tarkin Doctrine for controlling the Empire. The current estimate for the cost of building of a Death Star is $850,000,000,000,000,000 (Rayfield, 2013).
Such an expensive, resource-consuming project should never be attempted without a design FMEA. The loss of the Death Star could have been prevented with just one properly filled-out FMEA during the design phase:
The Galactic Empire’s engineers frequently built redundancy into the systems on the Empire’s capital ships and space stations; unfortunately, the Death Star’s systems were all connected to the main reactor to ensure that power would always be available for each individual system. This interconnectedness resulted in thermal exhaust ports that were directly connected to the main reactor.
The designers knew that an explosion in a thermal exhaust port could reach the main reactor and destroy the entire station, but they were overconfident and believed that limited prevention measures–such as turbolaser towers, shielding that could not prevent the penetration of small space fighters, and wings of TIE fighters–could protect the thermal exhaust ports (Smith, 1991). Such thinking is little different than discovering a design flaw that could lead to injury or death, but deciding to depend upon inspection to prevent anything bad from happening. Bevil Lemelisk could not have ignored this design flaw if he had created an FMEA.
Assigning Risk Priority Numbers to an FMEA
An FMEA can be done with a pencil and paper, although Minitab’s Companion software for executing and reporting on process improvement has a built-in FMEA form that automates calculations, and shares data with process maps and other forms you’ll probably need for your project.
An FMEA uses a Risk Priority Number (RPN) to determine when corrective actions must be taken. RPN numbers range from 1 to 1,000 and lower numbers are better. The RPN is determined by multiplying severity (S) by occurrence (O) and detection D.
RPN = S x O x D
Severity, occurrence and detection are each evaluated and assigned a number between 1 and 10, with lower numbers being better.
Failure Mode and Effects Analysis Example: Death Star Thermal Exhaust Ports
In the case of the Death Star’s thermal exhaust ports, the failure mode would be an explosion in the exhaust port and the resulting effect would be a chain reaction that reaches the reactors. The severity would be rated as 10 because an explosion of the reactors would lead to the loss of the station as well as the loss of all the personnel on board. A 10 for severity is sufficient reason to look into a redesign so that a failure, no matter how improbable, does not result in injury or loss of life.
The potential cause of failure on the Death Star would be attack or sabotage; the designers did not consider this likely to happen, so occurrence is a 3. The main control measure was shielding that would only be effective against attack by large ships. This was rated as a 4 because the Empire believed these measures to be effective.
The resulting RPN would be S x O x D = 10 x 3 x 4 = 120. An RPN of 120 should be sufficient reason to take actions, but even a lower RPN requires a corrective action due to the high rating for severity. The Death Star’s RPN may even be too low due to the Empire’s overconfidence in the current controls. Corrective actions are definitely needed.
Corrective actions are easier and cheaper to implement early in the design phase; particularly if the problem is detected before assembly is started. The original Death Star plans could have been modified with little effort before construction started. The shielding could have been improved to prevent any penetration and more importantly, the interlinks between the systems could have been removed so that a failure of one system, such a an explosion in the thermal exhaust port, does not destroy the entire Death Star. The RPN needs to be reevaluated after corrective actions are implemented and verified; the new Death Star RPN would be 5 x 3 x 2 = 30.
Of course, doing the FMEA would have had more important impacts than just achieving a low number on a piece of paper. Had this step been taken, the Empire could have continued to implement the Tarkin Doctrine, and the Universe would be a much different place today.
Do You Need to Do an FMEA?
A simple truth is demonstrated by the missing nail and the kingdom, as well as the lack of an FMEA and the Death Star: when designing a new product, whether it is an oil rig, a kitchen appliance, or a Death Star, you’ll avoid many future problems by performing an FMEA early in the design phase.
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Lucas, George. Star Wars, Episode IV: A New Hope. New York: Del Rey, 1976. http://www.amazon.com/Star-Wars-Episode-IV-Hope/dp/0345341465/ref=sr_1_2?ie=UTF8&qid=1358180992&sr=8-2&keywords=Star+Wars%2C+Episode+IV%3A+A+New+Hope
Opie, Iona and Opie, Peter. ed. Oxford Dictionary of Nursery Rhymes. Oxford, 1951, 324. Quoted in Lowe, E.J. “For Want of a Nail.” Analysis 40 (January 1980), 50-52. http://www.jstor.org/stable/3327327
Rayfield, Jillian. “White House Rejects ‘Death Star’ Petition.” Salon, January 13, 2013. Accessed 1anuary 14, 2013 from http://www.salon.com/2013/01/13/white_house_rejects_death_star_petition/
Smith, Bill. ed. Star Wars: Death Star Technical Companion. Honesdale, PA: West End Games, 1991. http://www.amazon.com/Star-Wars-Death-Technical-Companion/dp/0874311209/ref=sr_1_1?s=books&ie=UTF8&qid=1358181033&sr=1-1&keywords=Star+Wars%3A+Death+Star+Technical+Companion.
Key performance indicators (KPIs) are critical to ensuring a project team has the performance data it needs to sustain improvements. With KPIs, a team can evaluate the success of a project against its established goals.
Types of Metrics
There are two types of metrics to consider when selecting KPIs for a project: outcome metrics and process metrics.
Outcome metrics provide insight into the output, or end result, of a process. Outcome metrics typically have an associated data-lag due to time passing before the outcome of a process is known. The primary outcome metric for a project is typically identified by project teams early on in their project work. This metric for most projects can be found by answering the question, “What are you trying to accomplish?”
Process metrics provide feedback on the performance of elements of the process as it happens. It is common for process metrics to focus on the identified drivers of process performance. Process metrics can provide a preview of process performance for project teams and allow them to work proactively to address performance concerns.
Example of Selected KPIs
Consider an example of KPIs for a healthcare-focused improvement project:
- Project: optimizing hospital patient length of stay
- Outcome metric: hospital patient length of stay (days)
- Process metrics: discharge time of day (hh:mm); time discharge orders signed (hh:mm); time patient education completed (hh:mm); discussion of patient at daily discharge huddle (percentage of patients)
In the example above the project has one primary outcome metric and four process metrics that compose the KPIs the team is monitoring. Well-crafted improvement project KPIs will include both outcome metrics and process metrics. Having a mix of both provides the balance of information that the team needs to successfully monitor performance and progress towards goals.
Teams should develop no more than three to six KPIs for a project. Moving beyond six metrics can dilute the effects of the data and make it more challenging to effectively communicate the progress of a project.
Questions to Help Select KPIs
Common questions coaches can use with teams to generate conversation about potential KPIs include:
- What does success look like?
- How will it be known if performance is trending away from goals?
- What data would the stakeholders and sponsors be most interested in?
- What data is available to the team?
The 3Ms: Meaningful, Measurable and Manageable
Coaches should keep the three Ms of crafting KPIs in mind when working with teams.
- Meaningful: KPIs should be meaningful to project stakeholders. Developing metrics that those closest to the project team find useful without getting feedback from a broader group of stakeholders can be a recipe for stakeholder disengagement. The KPIs a team selects need to resonate with the stakeholders closest to the process and the problem. The team will know it is on the right track when it has KPIs that stakeholders want to know the current status of and are discussing progress toward the project goals with their colleagues. Meaningful KPIs make excellent additions to departmental data walls for use in daily huddles and to support the efforts of leaders to get out on the floor and speak directly with employees. leader rounding.
- Measurable: KPIs should be easily measurable. Sometimes teams can get stuck trying to identify the “perfect” metric for measuring progress toward their project goals. In this pursuit, the team may lose sight of metric options that are already available or automatically reported. Sustainable KPIs should be relatively easy to obtain updates for. If a metric requires time-consuming auditing, or is not readily available to the project team, groups should think twice before selecting it as a KPI. Data that is challenging or time-consuming to obtain is not likely to be regularly updated and reported to stakeholders. Providing timely and accurate updates on KPI performance is an excellent way to support the sustainability of improvements and spark conversations about additional opportunities to enhance processes and reach the team’s goals.
- Manageable: KPIs should include metrics that are within the sphere of management control and influence for the project team. If the team selects metrics that include measuring process elements that the team has no control over, then they are not going to be measuring what matters. Teams should select KPIs that are within the scope of their project, are reflective of a successful outcome and are performance drivers for their work. Sometimes nice-to-have or might-be-interesting metrics can sneak onto the KPI list for project teams. These additional metrics are not needed; the team should focus in on the metrics that will provide accurate feedback on its performance.
Remember that successful KPIs:
- Include a balance of outcome metrics and process metrics.
- Total three to six metrics.
- Are developed with the 3Ms in mind.
Crafting KPIs is an important step to guide teams through a continuous improvement process. A coach needs to keep the team focused on what success looks like and how best to measure it.