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Continuous Improvement Metric

Discussion in 'Lean, Six Sigma and DFSS' started by chris83, Sep 2, 2016.

  1. chris83

    chris83 New Member

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    Hi all,

    Just thought I would throw this out there as a topic of discussion.

    In many organizations we are always looking to improve and use various methods to faciliate this, such as Sigma, Lean Mgmt, promoting a culture of learning, knowledge sharing etc.

    But how do we metric this to senior leaders to show this continuous improvement, sometimes it often hard to quantify it.

    Thoughts?

    Have a great long weekend.
     
  2. Andy Nichols

    Andy Nichols Moderator Staff Member

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    Only 1 metric. $$$$$ (or insert your currency)
     
  3. ncwalker

    ncwalker Well-Known Member

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    I second. In an operation with a rigorous application of 6 sigma, every project has a "project charter." Basically a statement of the problem on steroids. One important thing it does, however, is prevent scope creep. The second thing it does, that gets understated, is it ties $$$$ to the project. Some sort of before/after cost. And it must be demonstrable. This helps in a few very important ways:
    1) If it is REAL HARD to calculate the costs in $$$$, why are your doing the project? How do you know it really is a "problem?"
    2) After you do this a few times, your organization gets a better sense of the true metrics that bridge the gaps from measurable things on the shop floor to costs.
     
  4. RoxaneB

    RoxaneB Moderator Staff Member

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    Why must there be a metric for continual/continuous improvement?

    You could go with $$$, but not every improvement or innovative idea will have a direct correlation to $. Employee morale, employee engagement, client experience...these have some intangible benefits to them that are not always easily defined by a black-and-white formula that leads into financial ROI. Yes, you could talk about decreased absenteeism, reduced usage of the employee benefits package, return client purchases, but it's never going to be an exact dollar value and - to be honest - I'm not sure I want to put a price tag on employee or customer loyalty.

    The other "problem" with this one metric for CI is when do you cut off the correlation to ROI? 3 months after go live? 6? 9? 12? 24? At what point does the cost savings/avoidance of a project become part of the organization's daily business?

    Another possible issue is the work that is needed to calculate the $. If Process A is performing at 85% efficiency and a team improves it to 87%, 89%, 93%, 86%, 95% over the next five months (if that's your cut-off point), is there a formula or person who will calculate the financial equivalent for the 2%, 4%, 8%, 1%, 10% improvement for each month. And what about the cost of the team to do the improvement project - is that taken into consideration? Additional technology? I suppose this is why accountants were invented. ;) (side note - I worked for a company that required the site controller to verify the savings/avoidances for each improvement project that was entered into our global innovation competition)

    I am realistic enough to appreciate that senior leadership wants to see the $ - so if you can, give them what they want but then show all of the projects that influenced that final dollar value. Put the $ front and centre of the slide or paper or white board and then draw lines outward for each improvement project. For each project show what its main (financial or not) metric was (before and after the project) and, presuming you have a cut-off point, what the cost savings/avoidances are associated with the sustained performance. But it should be stressed that this is an estimate only and that the true value of the CI cannot be calculated.
     
    Atul Khandekar, Andrej and MCW8888 like this.
  5. Bev D

    Bev D Moderator Staff Member

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    Deming said: not all things that can be counted matter and not all things that matter can be counted.
    I would add "are we cost control professionals or quality professionals?

    I know that management likes to see the $ figures but many of the important $ figures are incredibly difficult to quantify. We used to have some sophisticated COPQ metrics that were not straightforward and were incredibly time consuming to calculate. we abandoned them once most of the organization 'got it' that poor quality costs a lot of money. Those who didn't get will never be swayed by facts - their opinion is a rock solid foundation upon which they stand. we have quantified the revenue loss of a Customer who leaves us.We do have predictive models to determine if a Customer is about to leave us and to identify the drivers of that loss. These were not straightforward nor easy to develop but they did open leadership's eyes to the true cost of poor quality. and we do solve and prevent problems based on that fundamental paradigm. In areas where people believe that 'high quality' is too expensive, we don't solve problems. Fundamental paradigms are simply not susceptible to facts and data...they can be changed in some when they experience the new paradigm for themselves.
     
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  6. ncwalker

    ncwalker Well-Known Member

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    I don't know, guys. I've never had problems tying these things to $$$$.

    These initiatives are either going to save time, save material or save parts.

    If you can determine the time you save, you just need to know the bill rate of the process, which you should know. Then you can translate time into $$$$.

    If you can count the parts you save, you should be able to get cost of rework, cost of scrap, etc.

    My experience is you can at LEAST get that. And usually the financial costs wind up being understated. Even if I'm not making BAD parts and do a project to get more capable, my mean time between setup adjustments should increase. I can translate that to $$$$.

    I don't agree with Deming on this one. If it matters, that implies I would notice a change. At the very least, I should be able to put a Likert scale on it. Even if it were just a feeling.

    Now, if your assumptions and model is incorrect, your going to get a bad result.

    I'd be real interested in an example that you could not assign a cost too. (Barring the trivial solution of you just don't measure one of the needed variables).
     
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  7. Andy Nichols

    Andy Nichols Moderator Staff Member

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    Philosophically, I agree with Bev and Roxane. However, I'd suggest that in the grand scheme of things, most of the low hanging fruit from improvements have $$ signs on them...
     
  8. Bev D

    Bev D Moderator Staff Member

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    Quotes are funny things. They are concise cute sayings that remind us of complex things. (e.g. you can't judge a theory by it's quote) it takes a deep understanding of the topic before the quote has value or meaning.

    A feeling isn't countable. nor can you put a dollar figure to it. What Deming was talking about was the intangibles of Customer Satisfaction and Employee Morale. Can you perform a survey and get a likert scale - sure. but these are notoriously unreliable for many reasons. (one of which is that the 'scale' intervals don't have the same meaning to each person so the MSA on this would be terrible) They can be directional 'on average' but they are hardly specific enough to be actionable. And as soon as someone wants to impose a dollar value before taking action, you are stuck. Customer and employee actions that lead to quantifiable actual loss is often delayed and affected by other factors. for example it's hard to quit when the jobless rate is high; it's hard to quantify the effect of 'not doing your best because you just don't care; Customers wont' leave until they can; and how do we predict loss of revenue growth at a dis-satisfied Customer?

    My point was that yes we can dollarize many things, and it can be useful if the organization 'gets it'. but the naysayers will not be swayed by any of that. they have their paradigm and facts won't get in their way. Those who believe that quality costs more than it saves will argue you debate your figures, ignore you, or whatever it takes to do what they want to do. So the key is to understand what you are trying to accomplish by publishing cost figures. cost is an output. quality and waste are inputs. why wouldn't we look at metrics regarding the inputs? they are actionable...
     
  9. RoxaneB

    RoxaneB Moderator Staff Member

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    True, but what about a mature CI program that has addressed much of that low hanging fruit, biggest bang for the buck and other financial clichés? How do you explain to management five years down the road (and there might be new faces in the group) WHY the continuous/continual improvement dollars are trending lower and lower? How do you keep them engaged in the idea that CI is culture, a philosophy, adds value and sometimes goes beyond a balance sheet?

    Causation and correlation...if a team improves a process on a line where I work, and my output improves (in quality and/or quantity), one would presume that the two variables are related. However, what if I told you H.R. spoke with me the week before that I needed to improve or else I'd be let go and for the next little while I'm going to be on probation? Or that one of my parents was sick and I was focusing on work just so that I wouldn't think about my parent?

    Or, to use a service example. Imagine we have a call centre and, like many call centres, we aim to decrease the amount of time people spend waiting in the phone queue. We develop a lovely telecom system that identifies free agents. Yay us. Queue time decreased. But what if agents are also spending less time with clients, being abrupt, just to get off the one call so that they can answer the next one in the queue? Congrats on improving the wait time, but your overall client experience just went down. Money "gained" for your CI metric but money lost in other areas.

    As Bev said, we can "dollarize" many things. Our role is to help them see beyond the $$$ and discover the real value of CI to the organization. WHY is there a need to publish CI in terms of $$$? What are you really trying to communicate to senior leadership?
     
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  10. ncwalker

    ncwalker Well-Known Member

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    Yes. I call them "bumper sticker philosophy." And I agree, they only have meaning if you understand the context. The problem is, there's a whole pile of people out there who don't do this. And the meaning comes from the quote itself.

    I disagree. I can approach a naysayer with all the good statistics I want. And they frequently glaze over. But if I can approach with a demonstrable $$$$ effect, I render them moot. Because their boss will side with me. :)

    I would pose, that if you are working with an organization who has cleaned up all the low hanging fruit, they HAVE an understanding of the culture of CI and the need to monetize it is vastly diminished. You don't get to the point of no low hanging fruit without adopting SOME rigorous sustainable problem solving. PPS, Six Sigma, PDCA, something.

    I really disagree with this one. It costs money. You don't buy a Rolex to time the cooking of an egg. CI will get you to a point of acceptable margins. If I have a 20% scrap rate and spend $100k on CI and that gets me to 95% that's a big win. That last 5% will be tough. Maybe I'll spend another $100k. But what if I have to spend $1M? I'd be better spent putting that money into R&D into a neighboring process/product and expanding my "bite" into the market.
     
  11. Bev D

    Bev D Moderator Staff Member

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    well we have different experiences. I don't throw 'statistics' at people - not even sure what this means. and I have experienced a lot of people who simply aren't influenced by the $ argument no matter how well it is researched, compiled and presented.

    and dollars without the other important balancing metrics (such as Roxanne's customer call center example) can be very destructive and end up costing you far more than you ever thought possible.
     
  12. ncwalker

    ncwalker Well-Known Member

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    There is no doubt about one thing - not every tool works every time. :)

    That's why these discussion are good. We get ideas of what works and what doesn't.
     

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