Lean Metrics

I gave a presentation at the Industry Week Best Plants Conference in April on choosing and using lean metrics. I believe a number of attendees were hoping to simply get a list of metrics they could take back and start using in their own organizations. I told them that I didn?t have such a list because the process of selecting and choosing metrics is more important than the actual metrics you choose.

Selection of metrics is a leadership task. You can?t assign the selection of important lean metrics to lower level managers, no matter how knowledgeable about lean concepts they might be. Nor can you assign the selection to consultants or outsiders; this means you can?t import someone else?s list of metrics. You have to choose your own.

Second, it?s a task that to which you must devote a fair amount of time. A single two-hour meeting won?t get the job done. You?ll need to spend twelve to sixteen hours at it. Not all at once, of course, but count on it to take that long to do a good job of selecting, defining, and developing your metrics. Here?s how you go about it.

BRAINSTORM
Get your leadership team together and brainstorm a list of possible metrics. Remember, brainstorming means there are no bad ideas. If someone says your company ought to measure lunchroom vending machine revenues as a lean metric, write it down. If there are metrics given to you by your corporate headquarters that you can?t ignore, include those. The point here is to get everyone on the leadership team involved in creating the metrics.

POLL THE LIST
Now it?s time to narrow the list of metrics. Everyone has three to five tallies. (If the list is short, give them three tallies. A long list gets five tallies.) Everyone puts tallies next to the metrics he or she likes best. What if a manager likes more than five metrics? Too bad. The point is to force choices. Shouldn?t you discuss the brainstormed list before polling? No. Discussion will come later.

Cross off metrics that get no tallies; this shows that no one in the group has an interest in that metric. Notice which metrics get large numbers of tallies. Keep any metric that gets even one tally; more tallies indicate more interest in a particular metric. Even one tally means that someone feels that metric is important and should be considered.

DISCUSS WHAT?S LEFT
Now is the time to discuss, argue about, define, refine, amend, augment, and modify the list of metrics. The steps up to this point will take a couple of hours. The rest of your time will be spent on this step. You should end up with a list of ten to fifteen metrics. You should have general agreement (if not strong unanimity) that the metrics you?ve chosen will be related to the progress of your lean initiative.

Up to this point, I?ve encouraged you to have as few criteria as possible for what your brainstorm. In this phase, though, you do want to have some confidence that your discussions and deliberations will provide you a useful set of metrics so some guidelines are in order.

Everyone on the team should be confident that your set of metrics will reflect the performance of your operation and will show the impact of its lean efforts. Some metrics show activity rather than performance, e.g., amount of product made or shipped. Other metrics may get better or worse for reasons apart from progress in deploying lean methods and concepts, or may be too distantly related to lean efforts to show much change except over the longer term, e.g., revenues or market share. Still other metrics might be too narrow to be of much utility except to a specific department or function, e.g., picking productivity in the warehouse. This isn?t to say that these sorts of metrics should never be used, but be aware of their shortcoming and make certain you have a good reason for including them.

You should end up with a total of nine to fifteen metrics. There?s nothing sacred about this range, but fewer than nine may mean that you aren?t casting your measurement net widely enough to tell how well you are performing overall. Many more than fifteen may mean that you have metrics that really aren?t than vital. Once again, however, it?s up to you to decide what the right number of metrics is for your lean implementation.

I?ve avoided being too prescriptive with respect to exactly what metrics you should select, but it?s appropriate to provide some general suggestions.

For instance, some of your metrics should show you how well your suppliers are performing. Examples of these might be suppliers? on-time delivery and product quality. Other metrics should show how well you are serving your customers. On-time delivery and customer rejects might be included here.

Measures of raw material, work-in-process and finished goods inventory are all useful because they show whether you are truly getting leaner or simply using inventory to cover up problems. Metrics for internal process and operations are myriad, but measures of scrap and equipment and tooling availability should be included. Finally, you should have some measures of employee satisfaction and well-being. Included among these might be safety, turnover, or absenteeism.

WHAT?S NEXT?
A primary use of your metrics is communication. It?s important, then, to turn each metric into a graph that can be posted where everyone can see it. You?ll also need to educate everyone as to the definitions of the metrics and how to read the graphs, i.e., ?Are we getting better when the graph line goes up or goes down?? Update and re-post the graphs at least monthly.

I?ll talk more next month in detail as to how you can make the best use of your metrics for lean improvement.

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Rick Bohan is the principal of Chagrin River Consulting, LLC, Chagrin Falls, OH, www.chagrinriverconsulting.com. For questions or comments on this column, contact Rick at 216-409-9056 or [email protected].