performance management performance measurement participative goal setting benchmarking balanced...

PERFORMANCE MANAGEMENT

Performance Measurement• Participative goal setting• Benchmarking• Balanced scorecard• Basis for continuous improvements

Structure and Deployment• The process review• Metrics philosophy• Metrics Selection and Design• Commitment and reward

3-2

WHY PERFORMANCE MEASUREMENT

Management By Facts

SELECT PROBLEM

ANALIZE PROBLEM

ID ROOT CAUSE

PLAN & X ACTIONS

CONFIRM RESULTS

FINE TUNE

PARETO DIAGRAM HISTORGRAM

SCRAP REWORK

C & E DIAGRAMDATA COLLECTION

GRAPH

CONTROL CHARTS

CHECK SHEET

SCATTER DIAGRAM

“Without data, you're just another opinion.”

TIME

AFTERBEFORE

ACTION 1 ACTION 2

3-3


Establish Foundation for Continuous Improvement– Identify and size critical customer complaints– Research and track world class performance– Establish world class benchmarks– Create relevant performance measurements– Establish performance tracking and reporting– Equate customer perception to reality

Equate Customer Perception to Reality– Always use historical data when meeting with customers

3-4


A Basis for Achievement Recognition and Reward

Annual Personal Performance Recognition

Quarterly Team Achievement Award

Monthly Individual Achievement Award

Weekly Individual Achievement Award

Best-to-Date Celebration

3- 5

The Where and What of the Balanced Scorecard

TimelyProduct

Development

TimelyMaterials

Availability

On-Time Prod’n andShipments

InventoryEffectiveness

Engineering Documentation

Review

Forecast andMaster Schedule

Review

Linearity and Resource

Review

Receiving and Stock/Issue

Review

Total Customer

Satisfaction

ExcellentInternalQuality

ValidMaterialCosts

TimelyDirect LaborAvailability

Feedback andCorrective

Action Review

Cost of QualityReview

Cost Accounting

Review

Resource andCapacityReview

Yes Yes Yes Yes

YesYesYes

No No No No

NoNoNoNo

3-6

PERORMANCE MANAGEMENT

PERFORMANCE MANAGEMENT

The “Balanced Scorecard” Sales/Service Engineering

1. Build Release Timing 1. ECN Accuracy

2. S.O. Accuracy 2. Engrg Quality

3. SER Response 3. SER Execution

4. Customer Samples 4. Warranty Expense

5. On-site Startup 5. Equip. Reliability

Operations Finance

1. Production Linearity 1. Accounts Receivable

2. On-time Delivery 2. Accounts Payable

3. Product Quality 3. CODs and Checks

4. Supplier Performance 4 Information Integrity

5. ECN Execution 5. Inventory Utilization

3-7 Cascading measurements with aggregate performance roll-up

THE BALANCED SCORECARD

The Ten Period Rolling Method

STOCKROOM - NEGATIVE BALANCES

7

72

4641

3531

3530

26

1822

16

0

10

20

30

40

50

60

70

80

90

100

GOAL FY96 FY97 QTR1 QTR2 QTR3 MAR 4/3 4/10 4/17 4.24

GOAL WEEKLY AVERAGE BEST-TO-DATE

SR02: Number of inventory, on-hand balances reported as negative.

ITEMS


Quarterly Team Achievement Rewards

Weekly Performance Incentives

Best-to-date Celebrations

3-8

THE BALANCED SCORECARD

Six Critical “Must Dos” 1. KISS! Simplicity is important - complete understanding

is necessary - start slow and let it grow

2. Negotiations are required and agreements are crucial

3. The number isn’t important, direction is the best focus

4. Tenacity is everything - good measurements should never die and never fade away

5. Timing is paramount - for example: financial data is too aggregate and way too late

6. Target selections - cascading structure is good, but performance analysis is best

3-9

YOU’RE EITHER WINNING OR

YOU’RE LOSING”

MAINTAINING SYSTEM CREDIBILITY Establishing a Measurement Mindset

“THERE IS NO STATUS QUO!

There is no effective control without measurements!3-10

MAINTAINING SYSTEM CREDIBILITY

Databases, Ownership and Maintenance1. Simple Department Processes- Sales Order Input

- User: process owner

- Database: chalk board, tick chart and hand plot graphs

- Maintenance: process customer

2. Complicated Department Processes - On-time Delivery

- Users: process owner or team

- Database: Excel spreadsheet and computer graphs

- Maintenance: assigned team member

3. Intradepartmental Processes - Cost of Quality

- User: functional manager or self-directed process team

- Databases: computerized business systems down

loaded to Access for additional input forms and graphs

- Maintenance: MIS and/or team data specialist

Remember, “Without data, you're just another opinion.”

3-11

MAINTAINING SYSTEM CREDIBILITY

Some Requisites for Success– Management acceptance and support– A few good champions– Trust and understanding– Valid, timely and consistent measurements– Need to review and adjust range of metrics– Demonstrated benefits from use of system– A “want to succeed” business culture– A true sense of accomplishment

3-12

BENCHMARKING

Internal - A Good Starting Place – Define critical company success factors– Identify relevant work processes and prioritize by

importance– Identify process owners and internal customers– Agree on current performance levels and establish data

measurements– Negotiate improvement goals - celebrate the goal

achievements and reset the marks

3-13

BENCHMARKING

External - Some of the Options– Customers– Non-Competitive Businesses– Competitors– American Electronics Association– American Production & Inventory Society– Society of Manufacturing Engineers– Purchasing Management Association– American Management Association– Institute of Quality and Productivity -SDSU

– Your Best Option: Industry Week - Benchmarking Tool Kit - www.industryweek.com

3-14

Engines on the Floor

100

BENCHMARKING Internal - The Line on the Wall Story

3-15

Engines on the Floor

100

BENCHMARKING Internal - The Line on the Wall Story

3-16

INFORMATION INTEGRITY

Objectives • Accuracy• Timely availability• Ready accessibility• Ease of understanding

Targets• Engineering Documentation• Systems Data• Work Instructions• Work Standards

1-2

INFOTEGRITY

EXECUTIVES

SUPERVISORS & MANAGERS

BUYER/PLANNERS

SCHEDULERS, EXPEDITERS,PROD’N PLANNERS

CRITICAL RESOURCES COMSUMPTION CURVE

20%

35%

52%

67%

90% 80% 70% 60%100%

PercentConsumed

“INFOTEGRITY” - (ACCURACY AND TIMING)

1-3

SALES FORECAST

Up/Down Cycle, Product Management

0

10

20

30

40

50

60

70

A B C D E F G

Up Cycle Down Cycle

PURGING THE DEADBEATS

Target GPM

1-4

SALES FORECAST

Field Sales Data - Credibility Reviews

Field Sales Management Review

Inside Sales Review

Production Planning Team Review

The Annual Forecast - SWAG

The Quarterly Forecast SBs and WTs

Funnel Report

Build Plan

1-5

Forecast-Master Schedule Decision Process

SALES FORECAST

681012

25%

50%

75%

100%

DROP FENCE MANAGEMENT – MASTER SCHEDULE

COST EXPENDITURE CURVE

Weeks Remaining to Ship Date

FORECASTED CUST. ID 90% CONF

DOLLARS

EXE HOLD ORDER

1-6

ENGINEERING DOCUMENTATION

100 PRODUCT DEVELOPMENT COSTS AND SPEED CURVES

5000

60% 70% 80% 90%50%

Dollars($x000)

NFOTEGRITY” - “DOCUMENTATION” - (ACCURACY AND TIMING)

4500

500

1000

1500

2000

3500

4000

3000

2500

36

Time inMonths

30

24

18

12

Cost and Speed of Product Development

1-7


Timely Availability

0

25

50

75

100

% Availability

TIME

DETAILED PARTS DRAWINGS

0

25

50

75

100

"As Is" "Should Be"

0

25

50

75

100

"As Is" "Should Be"

0

25

50

75

100

DESIGN PROD’NPROTO

TIME

ASSY DRAWINGS% Availability

PROD’N

PROD’NPROD’N

PROTO

PROTO PROTO

DESIGN

DESIGN DESIGN

WORK INSTRUCTIONS TEST SPECIFICATIONS

1-8


Release and Change Control Process– Engineering has design ownership– Manufacturing has implementation ownership– Block change concept– The obsolete ECR-CCB-ECO process– The “World Class Design Team”

* Concurrent engineering concept* Conceptual design buy-off gate* Project management and design reviews* Design focus - do it right the first time* Prototype and Beta design buy-off gates* Up front design for manufacturing

1-9

Cancel Reorder

Reschedule

MASTER SCHEDULE

BILLS OF MATERIAL

LEADTIMES

LOT SIZES

INVENTORY

PURCHASEORDERS

WORK-IN-PROCESS

MRP – MATERIAL REQUIREMENTS PLANNING

SYSTEMS EFFECTIVENESS

Infotegrity Controls

1-10


THE MRPII CRUSADE – What went wrong, Olie?

COMPUTERGENERATED

MASTERSCHEDULE

COMPUTERGENERATEDMRP TAKE-ACTIONS

Master ScheduleSales Forecast

Production BOM

Order Entry

Sales Configurator

Prod’n Inventory

Shop Orders

Purchase Orders

FG Inventory

Product Design

82.1%MASTER SCHEDULE

“INFOTEGRITY” 68.2%ORDER-LAUNCH“INFOTEGRITY”

92%98%

100%

92%

99%

99%

82.1%

93%

96%

94%

1-11


Visual Management– Sequential production– Point of use logistics– Everything has a place and is in its place– The “constraints” board– Trouble lights– Kanbans– Time phased schedules– Cycle time and GPM displays– The daily walk around

1-12

INFOTEGRITY CONTROLS

“TAKEACTION”

REVIEWS

SYSTEMS PARAMETER

MAINTENANCE

PRODUCTDOCUMENTATION

AUDITS

BUSINESS PROCESS REVIEWS

“INFOTEGRITY” EFFECTIVENESS CURVE

60%

70%

80%

90%

PercentEffectiveness

Reviews - Audits - MBWA - SPC

The Effectiveness Curve

1-13


Audits, Tracking and Corrective ActionsSTOCKROOM - NEGATIVE BALANCES

31

87

72

6256

43 45

3530

26

18

28

16

0

10

20

30

40

50

60

70

80

90

100

GOAL Year 3 Year 2 Year 1 QTR1 QTR2 QTR3 MAR 4/3 4/10 4/17 4.24

FY98 GOAL WEEKLY AVERAGE BEST-TO-DATE


ITEMS

INVENTORY RECORD ACCURACY

1. TOP 20

2. Negative Balances

3. 100%ers

4. Average Count

5. Average Net $

6. Average Absolute $

7. Location

INVENTORY PROBLEMS AND CORRECTIVE ACTIONS

PROBLEM CORRECTIVE ACTIONS WhoREOCCURRENCES

WK56WK55WK54WK53No.WK

“Four blanks and you’re Off”1-14


The “Where, What, and Why of Controls

TimelyProduct

Development

TimelyMaterials

Availability



Engineering Documentation

Controls

Forecast andMaster Schedule

Controls

Linearity and ResourceControls

Receiving and Stock/Issue

Controls

Total Customer

Satisfaction

ExcellentInternalQuality

ValidMaterialCosts

TimelyDirect LaborAvailability

Feedback andCorrective

Action Controls

Cost of QualityControls

Cost Accounting

Controls

Resource andCapacityControls

Yes Yes Yes Yes

YesYesYes

No No No No

NoNoNoNo

1-15

• Sales Forecasts– Up/down cycle, product management – Field sales data - input credibility reviews– Forecast-Master Schedule decision process

• Engineering Documentation– Cost and speed of product development– Timely availability– Release and change control process

• Systems Effectiveness– KISS– Management controls– Visual management

• Infotegrity Controls– The effectiveness curve– Audits, tracking and corrective actions– The where, what and why of controls

ACCURACY AND TIMING

1-16

The Methodology• The process review• Metrics philosophy• Metrics Selection and Design• Commitment and reward

Benefits• A focus on critical success targets• Establishes process ownership• Relevant innovation and learning • Bottom Line Results

STRUCTURE AND DEPLOYMENT

6 -2

The Business Survey

CredibleSales

Forecasting


As ReceivedQuality

Engineering DocumentationProcess Review

Forecast andMaster ScheduleProcess Review

Materials and Scheduling

Process Review

Mini-ISO-9000Quality

Process Review

StrategicPlanning

Total Customer

Satisfaction


ProfitMargins

StrategicPlan

Review

Feedback andProactive

Process Review

Days of Supply Process Review

Cost of Qualityand Kaizen

Process Review

Yes Yes Yes Yes

YesYesYes

No No No No

NoNoNo

TimelyProduct

Development

THE PROCESS REVIEW

6 -3

CredibleSales

Forecasting

No

In Search of Constraints/Opportunities

Sales Forecast &Master ScheduleProcess Review

THE PROCESS REVIEW

6 -4

Constraints/Opportunities

1. Untimely forecast updating

2. Sandbagging and SWAGing

3. Lack of credibility analysis

4. No formal forecasting process

TimelyProduct

Development

No



THE PROCESS REVIEW

6 -5


1. Bill of material errors

2. Late drawing releases

3. Excessive engineering changes

4. Ineffective product design process

On-Time Production and

Shipments

No


Process Review


THE PROCESS REVIEW

6 -6


1. Poor supply chain performance

2. Ineffective MRP system

3. Excessive inside-of-lead-time orders

4. Worker inflexibility

As ReceivedQuality

No


Process Review


THE PROCESS REVIEW

6 -7


1. Lack of worker training


3. Inadequate work instructions

4. Poor general quality attitude

ProductProfit

Margins

No

Financial and Cost of QualityProcess Review


THE PROCESS REVIEW

6 -8


1. Excessive scrap and rework


3. No continuous improvement program

4. Too much overtime


No

Days of Supply Process Review


THE PROCESS REVIEW

6 -9


1. Little line item accountability

2. Excessive work-in-process

3. No inventory parameter maintenance

4. Poor record accuracy

Total Customer

Satisfaction

No

Feedback andProactive

Process Review


THE PROCESS REVIEW

6 -10


1. Lack of sales/service feedback

2. Limited customer communication

3. Untimely inquiry response times

4. No corrective action logs/history

StrategicPlanning

No

CompanyPerformance

Review


THE PROCESS REVIEW

6 -11


1. Too little down the chain communication

2. Little low level commitment

3. Ineffective benchmarking

4. No relevant tactical plan or execution

Selection of a Few Relevant Metrics

Company

1. Gross profit margin

2. Customer satisfaction index

3. Sales revenue

4 New product introduction cycle

5. Productivity (Sales per employee)

THE PROCESS REVIEW

6 -12Top Level measurements


Sales

1. Missed sales opportunities

2. Inside of lead-time bookings

3. Sales order entry errors

4. Open customer complaints

5. Customer order cycle time

Cascading measurements with aggregate performance roll-up

THE PROCESS REVIEW

6 -13


Customer Service

1. Past due delivery dates

2. Open corrective action items

3. On-site equipment MTBF

4. Open “Request for Quotations”

5. Warrantee Expenses


THE PROCESS REVIEW

6 -14


Engineering

1. Bill of material errors

2. Late engineering releases

3. Routing and planning errors

4 Product design cycle times

5. Sales information cycle times


THE PROCESS REVIEW

6 -15


Operations

1. Non-Linear carry-overs

2. Build cycle times

3. As delivered quality problems

4. Supplier line rejects

5. Product cost-of-sales


THE PROCESS REVIEW

6 -16

METRIC PHILOSOPHY

A Focus on Improvement

Example #1:STOCKROOM - NEGATIVE BALANCES

25

80

6963

5862

6561

5852

61

52

0

10

20

30

40

50

60

70

80

90

100

G B JAN FEB MAR 4/7 4/14 4/21 4/28 5/5 5/12 5/19

TARGET WEEKLY AVERAGE BEST-TO-DATE

Process 5-03: Number of inventory, on-hand balances reported as negative.

ITEMS

6 -17

METRIC PHILOSOPHY

A Focus on Accomplishment

Example #2: PROFIT MARGINS

55

38

4142

48 4847

5152 52

49

52

35

37

39

41

43

45

47

49

51

53

55

G B JAN FEB MAR 4/7 4/14 4/21 4/28 5/5 5/12 5/19


Results02: Aggregate product profit margins

PERCENT (%)

6 -18

Keep It Simple Stupid (KISS) Easily understood Controllable by team actions Reliable and true Traceable to a source

Make Sure it Provides A number that you can quantify and graph Useful feedback An aggressive target A team’s ability to influence the outcome A relationship to critical success targets

METRICS PHILOSOPHY

6 -19

Scorecard Template Design


40

8185

76 77

6972 73

6568 6665

0

10

20

30

40

50

60

70

80

90

100

G B 1/6 1/13 1/20 1/27 2/3 2/10 2/17 2/24 3/3 3/10



ITEMS

METRICS RECORDING

6 -20

Ten Periods Cascading


40

80

6972 73

6568

65

0

10

20

30

40

50

60

70

80

90

100

G B JAN 2/3 2/10 2/17 2/24 3/3 3/10 3/17 3/24 4/7



ITEMS

METRICS RECORDING

6 -21



40

80

6972 73

6568 66

6255

5855

0

10

20

30

40

50

60

70

80

90

100

G B JAN 2/3 2/10 2/17 2/24 3/3 3/10 3/17 3/24 4/7



ITEMS

METRICS RECORDING

6 -22



40

80

69 68 6662

5558

55

0

10

20

30

40

50

60

70

80

90

100

G B JAN FEB 3/3 3/10 3/17 3/24 4/7 4/14 4/21 4/28 5/5



ITEMS

METRICS RECORDING

6 -23



40

80

69 68 6662

5558

6265

6158

55

0

10

20

30

40

50

60

70

80

90

100

G B JAN FEB 3/3 3/10 3/17 3/24 4/7 4/14 4/21 4/28 5/5



ITEMS

METRICS RECORDING

6 -24



40

80

6963

5862

6561

5855

0

10

20

30

40

50

60

70

80

90

100

G B JAN FEB MAR 4/7 4/14 4/21 4/28 5/5 5/12 5/19



ITEMS

METRICS RECORDING

6 -25



40

80

6963

5862

6561

5852

61

52

0

10

20

30

40

50

60

70

80

90

100

G B JAN FEB MAR 4/7 4/14 4/21 4/28 5/5 5/12 5/19



ITEMS

METRICS RECORDING

6 -26



40

71

6258

52

61

52

0

10

20

30

40

50

60

70

80

90

100

G B QTR-1 APRIL 5/5 5/12 5/19 5/26 6/2 6/9 6/16 6/23



ITEMS

METRICS RECORDING

6 -27



18

71

6258

52

4236

0

10

20

30

40

50

60

70

80

90

100

G B QTR-1 QTR-2 QTR-3 OCT NOV 12/1 12/8 12/15 12/22 12/29



ITEMS

METRICS RECORDING

6 -28

Establishing Historical Performance


11

44

23

13

0

10

20

30

40

50

60

70

80

90

100

G B 2000 2001 1/5 1/12 1/19 1/26 12/8 12/15 12/22 12/29



ITEMS

METRICS RECORDING

6 -29

SCPM Cycle (Survey-Constraint-Plan-Metric)

INSIDE OF LEAD-TIME CHANGES

INSIDE OF LEAD TIME CHANGES

5

15

1213

910

11

87

98

7

0

5

10

15

20

G B JAN FEB MAR 4/7 4/14 4/21 4/28 5/5 5/12 5/19


SR02: Description of the metric measurement

ITEMS

6 -30

METRICS RECORDING

TACTICAL CORRECTIVE

PLAN

Sales Forecast &Master ScheduleProcess Review

Example #1


BILL OF MATERIALERRORS

6 -31

METRICS RECORDING

TACTICAL CORRECTIVE

PLAN


BILLS OF MATERIAL ERRORS

12

28

24

21

26

21

18

22

1618

1616

0

5

10

15

20

25

30

G B JAN FEB MAR 4/7 4/14 4/21 4/28 5/5 5/12 5/19



ITEMS

Example #2

SCPM Cycle (Survey- Constraint -Plan-Metric)

LATE ORDERSAND

SHIPMENTS

6 -32

METRICS RECORDING

TACTICAL CORRECTIVE

PLAN


Process Review

Late Orders/Shipments

9

42

3537

32

2831

26

22 23

1818

0

5

10

15

20

25

30

35

40

45

50

G B JAN FEB MAR 4/7 4/14 4/21 4/28 5/5 5/12 5/19



ITEMS

Example #3


INSTALLER AND CUSTOMER

COMPLAINTS

6 -33

METRICS RECORDING

TACTICAL CORRECTIVE

PLAN


Process Review

INSTALLER/CUSTOMER COMPLAINTS

0.25

4

5

4

5

3

2

6

1

0.5

2

0.5

0

1

2

3

4

5

6

G B JAN FEB MAR 4/7 4/14 4/21 4/28 5/5 5/12 5/19



NUMBER

Example #4


HIGH COSTOF

SALES

6 -34

METRICS RECORDING

TACTICAL CORRECTIVE

PLAN

Cost of Qualityand Kaizen

Process Review

COST OF SALES

45

5355

5856 57 58

5254

51 5050

0

10

20

30

40

50

60

G B JAN FEB MAR 4/7 4/14 4/21 4/28 5/5 5/12 5/19



Percent

Example #5


EXCESSIVEDAYS OF SUPPLY

6 -35

METRICS RECORDING

TACTICAL CORRECTIVE

PLAN

InventoryDays of Supply Process Review

DAYS OF SUPPLY

30

94

66

52 50 48 48 49 49 4948

0

10

20

30

40

50

60

70

80

90

100

G B JAN FEB MAR 4/7 4/14 4/21 4/28 5/5 5/12 5/19



ITEMS

Example #6


TOO MANY OPENPROBLEM

ISSUES

6 -36

METRICS RECORDING

TACTICAL CORRECTIVE

PLAN

CustomerFeedback and

Proactive Process Review

OPEN PROBLEM ISSUES

2

8

7

6

5

6

7

6 6

5

6

5

0

2

4

6

8

10

G B JAN FEB MAR 4/7 4/14 4/21 4/28 5/5 5/12 5/19



Points

Example #7


NEGATIVE METRICTRENDS

6 -37

METRICS RECORDING

TACTICAL CORRECTIVE

PLAN

StrategicPlanning

METRICS WITH NEGATIVE TRENDS

12

32 3335

28

32

23

28 29

2325

23

0

5

10

15

20

25

30

35

40

G B JAN FEB MAR 4/7 4/14 4/21 4/28 5/5 5/12 5/19



Quantity

Example #8

THE METHODOLOGY

6 -38

Aggregate Performance Index

88

14

60 76

43 22 69 78 86

62 25 121

12 43 23 33 26

122 92

Top Level = Company

2nd Level = Divisions

3rd Level = Departments

4th Level = Teams

5th Level = Metrics

_

_

_

_ _

_

_

_

_

_

_

_

_

_

_

__

_

_

_

80

64

48

32

16

10

20

30

40

50

250 50

125

100

40200

30

75

150

20

50

100

1050

25

HUMAN RESOURCES

SERVICE

ENGINEERINGOPERATIONS

SALES

IN PURSUIT OF THE BOTTOM LINE

METRICS RECORDINGTHE

PERFORMANCE DIAMOND

6 -39

Performance Recognition


7

72

4641

3531

3530

26

1822

16

0

10

20

30

40

50

60

70

80

90

100

GOAL FY96 FY97 QTR1 QTR2 QTR3 MAR 4/3 4/10 4/17 4.24



ITEMS


Quarterly Team Achievement Rewards

Weekly Performance Incentives

Best-to-date Celebrations

COMMITMENT AND REWARD

6 -40

The “Make-it-Happen” Forum


The Machinists’ Story

6 -41

A Time For Change


CHANGE RESULT

Understanding the CEO’s vision Increased self-worth

Employee empowerment Increased morale

Tactical plans alignment No finger pointing

Focused efforts Improved performance

Improved communications Better decision-making

Optimized business processes - only value added activities - reduced operating costs

- reduced inventory

Performance recognition Employee job satisfaction and retention

6 -42

THE METHODOLOGY

• The Process Review– The business survey– Critical success metrics– Typical business metrics

• Metrics Philosophy– A focus on improvement– A focus on accomplishment– KISS

• Metrics Monitoring– Scorecard template design– Ten periods rolling forward– Establishing historical performance

• Commitment and Reward– Performance Recognition – The “Make-it-Happen” Forum– A time for change

6 -43

performance management performance measurement participative goal setting benchmarking balanced...

Documents

performance tracking

performance analysis

supplier performance

perormance management

data measurements

resource review

current performance

process customer