Continuous Improvement is a mindset, the improvements sought are on their own often tiny, seemingly irrelevant in isolation. The point is in the compounding of the improvements over time that delivers the improved outcome. Proclamations from the CEO, group ‘Love-ins’ and slogans on the lunchroom wall have no impact.
It is also true that not all improvements are easy to measure. How do you measure the culture that supports and feeds continuous improvement?
However, there are things you can measure that will be leading indicators of CI
- Cycle time. Measuring the cycle time of processes, seeking to shorten them is always an indicator of improvement. Almost all improvement activities I have seen and been involved with use time as a measure of performance.
- Product quality. A common problem with measuring quality is defining just what the term means. To me it is very simply compliance to specifications, which is generally easy to measure, once you have agreed the specs. The most common tool is a ‘Control chart’ that graphs the upper and lower limits of acceptable adherence to specifications. It can be used equally well to measure the tolerances on a machine output, to cycle times of any process, and responses to a lead generation program.
- Customer satisfaction. Asking customers is a good place to start. There is plenty of research around that indicates that the degree of customer satisfaction an enterprise thinks they are delivering, and what the degree is when their customers are asked differs wildly. Independent surveys can be very informative, and tools like the net promoter score framework, can deliver the numbers sought by the corner office. To me the very best measures are the rate of return customers and lifetime customer value compared to industry peers.
- Ratios. Driven by the strategic priorities, every business will have the opportunity to employ differing ratios that reflect the alignment with the strategic priority. For example, revenue/employee, right-first-time/installations, new customer revenue/total revenue, the list can go on. However, the catch is to have as few KPI’s as possible, cascaded through the organisation that enable the drivers of success to be made very visible. For example, a former client instigated a company wide KPI of Gross margin/employee. This KPI was used company wide, and within individual functions and work groups through the organisation. It focussed company wide attention on activities that drove revenue and the COGS.
- Employee generated ideas. Have a formal process of encouraging, gathering, sorting, and acting on the ideas coming from the front line. It is always the case that those closest to the action see the opportunities better than those further up the line. Engage them in genuine process improvement, which as a huge side benefit. This sort of employee engagement builds a robust culture. A culture that measures, celebrates, and implements small ideas is the real engine of continuous improvement.
- Employee satisfaction. The old wives saying ‘happy wife, Happy life’ applies equally to employees. Happy, motivated employees are perhaps the best way to ensure that customers are well treated, and therefore return, and are prepared to refer you.
- Financial ROI. The last in this list, but most obvious and most often used. You make an investment, you want a return, and the accountants will deliver up a way to count it. Benefit divided by Cost of implementation. The challenge is putting some numbers around the benefit. At best these measures are appropriate in specific circumstances where there is some hard capex being made to improve one of the above parameters.
Header cartoon courtesy of GapingVoid.com
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