In Toyota Kata Mike Rother wrote, “When we hunt for wastes or opportunities to improve and make a list of action items, we are focusing on the question, ‘What can we do to improve?’ That question is actually too easy, and it automatically leads us to lists and a scattershot approach. The more focused question is, ‘What do we need to do to improve this process?’ Admittedly, this is a more difficult question.”
He was writing about the practice of simply creating a ‘To Do’ list of everything and anything anyone can come up with to improve a process. It seems to me that a big driver of this is driving the plant with generic metrics. When we define Cost, Quality, Lead Time, Delivery and Safety as the metrics, with nothing tied to the strategy, and nothing concerning how those metrics are to be improved, we are asking for the “scattershot Approach” Mike wrote about.
It is also the antithesis of the Management by Means Tom Johnson wrote about, and the epitome of Management by Objectives he so roundly criticized.
Metrics have to be derived from strategy. That strategy should determine how we want to improve metrics, giving some structure and focus on the critical elements of the process. Take, for instance, a client company with three value streams:
A is a value stream selling into a very mature, slow growth market, in which they already have a dominant share. The only real path to improving profits is through cost reductions.
B is a value stream with a new product that has been very well received by the market, and the company has a very small share of that market. No one is saying the product needs improvement or that it is too expensive. They market simply wants more of it. The critical driver of success in this value stream is throughput – identifying and breaking through constraints and increasing the volume and velocity through the plant.
C is a value stream providing after-market support. They rarely lose sales due to price and virtually never due to quality. They lose sales when a customer needs a part, however, and they don’t have it on the shelf; and they lose sales for non-stock parts because their lead times are unacceptable. The key to profits is growth through improvements in availability and shortening lead times.
Three value streams in the same company – all in pursuit of profits, but each with a different key performance improvement necessity to get there. Of course they want costs and lead times to go down, and for quality to improve – everyone does – just like everyone loves their mama and everyone salutes the flag. But they don’t want to get to the end of the year and find that Value Stream B reduced costs and improved quality, but can’t ship any more machines than it does now.
When you manage by the five Golden Metrics – cost, quality, delivery, cycle time and safety – and you drive them all with equal enthusiasm, you most often get people working at cross purposes (along with all of the conflict and political insanity that follows from having people working at cross-purposes with each other). The cross-purpose effect is compounded by screwball accounting that equates cost with headcount, driving people to do all manner of silly things that submarine what other people are trying to do with cycle times, quality and delivery.
And of course it is more nuanced than simply hanging a bunch of strategically derived metrics on each process and managing from them. It is more a matter of making sure ach person in the process knows the strategic objectives, and they concentrate on collecting data and burning little gray cells thinking of improvements most directly impacting the performance of the process in the areas that are most important.
Metrics are grossly over-rated and over-used; while clearly defined strategies that identify the aspects of processes that have the greatest impact of strategy is too often ignored. Mike’s ‘Scattershot Management’ is the result of managing by broad numbers, and bad numbers at that.