Having designed your company’s answers to who will lead its lean efforts and how you will educate on lean, one of the next critical questions is:

“How will you measure your success?”

Measurement is always a tricky subject in any organization. Most people fear it because of how it has often been misapplied and misused.

It doesn’t have to be that way. Lean measures should help management — not punish employees.

Some basic principles regarding measurement include:

What gets measured gets results. People respond to what they perceive is important to management. If you measure it, they will try to make it look good. This can happen several ways. Employees can improve the work being measured. What often happens is employees improve the measure by playing games with the numbers. Whatever is measured, it should be what is important to success and what is possible to improve.

Do not measure it if you are not doing analysis to take action. If you measure something, do the analysis to determine trends and the causes of variations. Then take action to reinforce good results and eliminate poor ones. It is important to understand the difference between common and special-cause variation and the appropriate actions to take for each. Often management takes action on what is common variation and sees little or no true impact.

Two ‘boards’ for measures. There are two basic types of measures — call them “boards.” Scoreboard measures show results after the fact. Profit, safety records, sales are all scoreboard measures. They tell if we are winning. Dashboard measures, just like the measures on the dashboard of a car, tell how things are going as the work progresses through the process.

Dashboard measures, maybe more appropriately, should be called “indicators.” Dashboard indicators are of most value while driving and of little use once we reach our destination. A company’s dashboard indicators tell a company’s “speed, fuel supply and temperature.” These include: dollar amount of invoices 90 days uncollected, inventory levels, attendance at safety training sessions; number of safety inspections conducted, complaints received and resolved this week, number of change orders outstanding, absentee rate this week and the number of improvement ideas submitted this week. Management needs to understand both types of measures and use each correctly.

Reward the behavior you want to grow. Incentives are usually tied to measures of performance. They motivate, but often drive the wrong action. One contractor had individual incentives that encouraged project managers to work against each other even though the company wanted teamwork. It became so competitive that managers hoarded tools and equipment and two submitted company bids on the same job. The contractor did not know this had happened until the customer asked which bid was the official one. When the contractor changed all incentives to team-based ones, it saw teamwork.

Measures rarely measure individual performance, even though managers typically assume they do. Almost all of the measures used tell how the system is working, not about individual performance within the system. Measuring the feet of pipe installed by an individual or even a crew is really gauging the way the pipe is purchased and delivered, how the install work is assigned and designed, and how the crews are trained and instructed.

Comparing crews’ installation rates should include questions about training, instructions, delivery of materials, etc. Managers are fooling themselves when they ignore these factors or assume all crews are equal.

Measure “value” as seen by the customer. Lean is about delivering value and eliminating waste. Measures should start with what is most important to the customer, such as quality, schedule and costs. By measuring the types of waste defined by lean, you will reduce costs and install time and improve quality.

Measures must connect to employees. Involve the users in developing the measures. They need to see what is measured and how it is to be used. Provide results to the people who can act on them. Imagine trying to drive a car when only the passengers in the back seat can see the dashboard. The people who do the work need to see the measures in a useful format, in a timely manner, and need to see the link between action and its impact on results.

Approaches

Given these principles, what are the right approaches to measurement?

A good start for lean measurement is to measure PPC for projects. (PPC stands for the percent of planned work completed by the crew within the week.)  Using the Last Planner System, a lean construction tool, one can achieve a high percentage. Logic says, and research validates, that higher PPC leads to faster installs and lower project costs.

PPC is not a productivity measure but measures the effectiveness of the project-planning system. Effective planning will yield higher productivity. PPC is reviewed each week of the project and barriers and constraints identified that prevented it from being higher. Action is taken weekly to improve planning performance.

However, a better approach is to measure PPC by project and to judge other key measures including:

• The cost of quality, the percent of work fabricated and installed right the first time.

• The percent of jobs finished on schedule (as promised originally).

• Customer satisfaction.

This approach will have an “owner” for each measure. The owner is not the one to blame for poor results but is the one who champions the measure and leads root-cause analysis when the measure is not performing as desired. The measures are reviewed periodically to determine trends and corrective actions.

The best approach for lean measurement is to actually use a scoreboard and dashboard set of measures and indicators. This takes effort for companies to clearly define these measures and each year’s desired target. At this level, the scoreboard measures are reviewed monthly with senior management and quarterly with everyone in the company. The dashboard measures are reviewed weekly.

In all reviews, the focus is to identify any deviations out of acceptable target ranges and countermeasures are taken to improve it.

What gets measured gets results. How do you know if you are improving unless you measure it?

Dennis Sowards is an industry consultant and author of the research book Thinking Lean — Tools for Decreasing Costs and Increasing Profits, funded and published by the Sheet Metal and Air-Conditioning Contractors’ National Association-affiliated New Horizons Foundation. His company is Quality Support Services Inc. and he can be reached at dennis@YourQSS.com or at (480) 835-1185.

For reprints of this article, contact Jill DeVries at (248) 244-1726 or e-mail devriesj@bnpmedia.com.