As Joseph Juran said, “If you don’t measure it, you can’t manage it.” On the other hand, don’t measure it if you don’t intend to use the information. The measure loses credibility. Once the strategy and its related goals are established, a set of measures must be put in place that assures we’re achieving the appropriate goals. Start with high-level business measures that reflect accomplishment of the goals related to the strategy. Some examples that Beta uses include unit cost of production, return on net assets, gross profit per product line, and so on. These are lagging indicators, and a bit like looking in the rearview mirror to see where you’ve been. As such, these lagging indicators should be “cascaded” down through middle management to the shop floor, where you’ll need some leading indicators. These are the things that you must do to improve the lagging indicators. Some examples here include process conformance and control, planning and scheduling compliance, housekeeping, average component life, and so on. For example, if I want my unit costs to decrease in order to increase my gross profit and return on net assets, I have to spend less. To spend less, I have to eliminate the defects that are resulting in the failures that induce the extra costs. To do that, I have to improve the consistency of my processes—less variability, higher quality, less waste. To do that, I have to measure and improve my process conformance. Leading indicators measure your ability to do the right things day to day. Lagging indicators measure the results of doing the right things day to day. Finally, whether a measure is leading or lagging can depend on where you are in the organization. Leading for one might be lagging for another.
Reward good behavior. Whatever you reward, tolerate, or subsidize, you’ll get more of it. The federal government has demonstrated this principle for decades. On a personal level, as parents, we’ve known for years that our children will find the limits of our tolerance, and then exercise them. For our purpose, however, rewarding good behavior is more appropriate. This is not about pay for performance, since the data generally say that pay for performance does not work very well and its effects are not lasting. Perhaps “reinforce” would be a better word to use than reward, since rewards are usually associated with money. Reinforce those behaviors that have resulted in improvements in the leading or lagging indicators. This includes doing things like thanking people for a job well done, having them do a presentation to the boss, announcing the results of their efforts in a newsletter, asking their opinion on a problem area, facilitating their participation on improvement teams, and so on. Showing your respect and appreciation for a job well done motivates more effectively than money or banners.
Challenge bad behavior. Any time you go through a change process, you can expect some “casualties.” Jim Collins believes that we need to get the “right people on the bus” and the “wrong people off the bus.” Getting the wrong people off the bus will result in “casualties.” If despite your best effort to engage people in the change process you find that some are simply unwilling to make the changes needed, then swift action must be taken to make sure people understand how serious the need for change is. Tolerating foot-dragging, recalcitrant behavior, and passive-aggressive behavior (agreeing but not acting) will scuttle any effort to change the organization. This is particularly true if these behaviors are being exhibited by people in leadership positions. When action is taken in this regard, the people must still be treated with dignity and respect.
Tip from What Tool? When? A Management Guide for Selecting the Right Improvement Tools by Ron Moore