Disparate measures

If they hadn't measured Usain Bolt's 100m world record in Berlin in August last year, such are the 'invisible to the naked eye' differences that no one could have known that at 9.58 seconds with allowable wind assistance of 0.9 mph, it was faster than his previous marks of 9.69 and 9.72 set in Beijing and New York in August and May of the previous year. Nor that his performance was better than fellow Jamaican Asafa Powell's previous record set in Italy, in 2006. From the data available, we might also deduce that record runs are better attempted with some wind assistance rather than none, that more favourable conditions might pertain in August rather than May, and in Berlin rather than in Beijing or New York. And that it helps to be Jamaican. I only mention this to illustrate how multifarious and finely calibrated are the measures we might employ to determine and replicate excellence. They are but nothing, however, compared to the strategic and operational strands and layers the modern manufacturer must grapple with in the cause of continuous improvement. Lloyd Snowden, who works all over the world helping companies achieve their strategic goals for consultancy Oliver Wight, stretches the competitive athletics analogy by suggesting that improvement programmes begin with "finding the right start position". The Oliver Wight Class A checklist that he champions utilises what he describes as the Harvard four-step business model. It begins with the premise "this is where you are today". There are no right or wrong answers, he says: "You may be there for historic reasons, but finding the start position enables you to decide what your next stage is; [defining] where the gap is, then starting to do something about closing the gap down." Snowden has been working with companies from a strategic standpoint; how they translate a strategic business objective (SBO) into what people do day-to-day and what they should do differently to ensure they're aligned to that future strategic business requirement. There are usually between four and six SBOs that describe where a company wants to go into the future, he says. It's then all about creating a hierarchy from the SBO right the way down to individual actions. A typical SBO could be created through workshops where the thinking can be challenged, resulting in a statement with a metric like: To achieve 30% growth in the next five years. "You take that 30 and divide by five to get [an average of] 6%," says Snowden. "You then have to decide if that 6% is going to be linear [or not]." That decision would involve thinking through what might be achievable year by year. In the first two years, for example, new processes, plans to open up new markets, or the development of an approach to counter competition might require implementation - all meaning that growth in that early period could be zero. Then, in years three, four and five, it might be five, 10 or 15% growth to get to the 30%. It all comes back, Snowden believes, to "if you know where you're going, are you really thinking through how you are going to get there and are you creating the ability - with your measurements as part of the communication process - to help people understand what they need to be doing to get there". Behind the SBOs are the critical success factors that support them; the tactics and the actions. He observes: "One of the things I find consistently missing, even when I go into big multinationals that are considered to be really good at strategic planning, is that they produce the statement of the strategic plan which includes the SBOs but then they jump straight into actions inside a 12-month window." Given the complexities of doing things the right way, such impetuosity is understandable. Sorting out the driving strategies across the critical areas of the business, defining their individual critical success factors, deciding on the key performance indicators through departments and down through their layers and then, crucially, integrating them, is not a simple business. Snowden explains: "If we can understand the strategies in marketing, product, supply and finance - usually considered to be driving strategies - we can then create critical success factors that support the SBO in [each of the] areas. If we go to the next level down, we need to create the tactics - what are we going to do in the next two to three years for example - in marketing and in supply and in product and in finance. That's what people usually call the two- to three-year business plan." The problem is that "very often they don't have a means of linking it strategically". That, he says, is where integrated business planning comes in; and having a rolling 24-month management capability to take the deployed message and continue to work it consistently. Snowden illustrates the point by suggesting that in support of an SBO, a critical success factor for the marketing department might be opening up a new market, which can require the product team to develop new portfolio offerings. "The critical success factors at the top of those pyramids are different but supporting the same SBO," he explains. "If those two hierarchies of measures overlay each other, we can then determine whether there are measures which might compete or support each other. We can then start thinking how this hierarchy can be used to develop team-based measures." It is important, too, that departmental fairness is maintained by deploying a similar number of measures in different departments. Japanese companies, Snowden says, typically have a great many measures for manufacturing but few for sales and marketing. Behaviourally, that creates an undesirable 'them and us' situation. If doing all of that weren't enough, everything needs to be managed dynamically. "Very often in business you find out something new that you didn't know when you put the plan in place," Snowden says. "We might find new information that could challenge strategic assumptions. "If a critical success factor remains 'red' (meaning it is not being achieved) for so many cycles, it should have a little flashing light on it that says to the senior management team: 'Guys, are you sure this is performance related or strategic thinking related?' The SBO should then be reviewed via a diagnostic to see if today's thinking actually successfully challenges the strategy. If that's the case, be big enough to change the objective." If the prospects of putting in place the multi-layered necessities of performance metrics appear daunting, manufacturers can legitimately seek solace in the fact that 90% of organisations are less than halfway along the journey, with more than half of them still on the first stage. But that's no reason for not making a start. One company that is certainly well along the road is Britain's Best Factory, winner of the 2010 Factory of the Year, Siemens Traffic Solutions (STS), where Gary Winstanley is operations director. He sees the Poole plant's overriding strategic objective very clearly: to stay in business within a competitive environment. Unsurprisingly, then, its critical success factors are in the areas of cost bases and in quality and delivery, and it is around them that performance metrics are applied. Every manufacturing facility within the Siemens group is benchmarked against others with similar DNA. STS is in a group called 'high complexity, low volume' where measures include cost per placement, contribution per head count and first time pass rate. "The productivity measures are survival ones for us," Winstanley says. "Our KPIs come down to cost type measures and quality type measures - first time pass rate, so you don't have to invest in the rework, and those sort of things. They're the ones that guarantee our survival and pay the bills. If you do those things well and can put a good price on the table so that you can sell your product, it funds all the other things." Things like sustainability; a subject that is at the heart of the Siemens group's current two-year theme. "If we only concentrated on the environmental type things, but couldn't get a good product on the table that we could manufacture well and was at a competitive price to the market, then we wouldn't be here," Winstanley points out. But that is not to say that he sees sustainable manufacturing simply as a nice-to-have adjunct to a central survival strategy, especially as most STS customers are local authorities to whom it has to pitch convincingly good social responsibility attributes as well as 'doing it cheaper than somebody else'. "A sustainable business also has to be a business that makes money, so it's about the overall sustainability of the business as well as the environmental sustainability. So for us it's [things like] material costing and product costing; if we can't be competitive and we don't win business, then the business doesn't sustain itself." Interestingly in such economically harsh times, Marek Szwejczewski, senior research fellow at Cranfield University's School of Management and director of the annual Best Factory Awards programme, also puts sustainability - alongside health and safety matters - top of his list of the currently most popular benchmarks of manufacturing success. Evidenced by his annual programme of high intensity UK plant visits, he says he has noticed a lot more measures to do with energy and efficiency than was the case, say, six or seven years ago. Then, he says, it was only leading companies that would have been concerned about measuring things like lighting and the amount of material being sent to landfill, but now all above-average manufacturers were concerned about it. Such sentiments echo - in a return to an athletics analogy - the prime minister's assertion "that there is a compelling economic case to be made for fighting climate change that is barely out of the blocks yet". Szwejczewski is of a like mind to both David Cameron and Gary Winstanley when it comes to assessing the usefulness of measures in what the former claims to be a £3.2 trillion low carbon market. "If you were a practical manufacturing person, you might say 'yes, of course it's a soft issue' but there is a hard-nosed business issue around this," he says. Equally prevalent in the world of factory efficiency measurement according to Szwejczewski, is health and safety. "H&S has always been important in manufacturing," he says. "Manufacturing people recognise they have to go beyond saying: 'We must reduce the number of lost time accidents' and actually put the measures in place with managers doing more walking around looking for unsafe practices. Having tackled the top of the safety pyramid they're now realising that they need to put more focus on attacking the near misses and being more scientific about their measurement." In other arenas, Szwejczewski suggests that more people are monitoring the number of staff suggestions and being more conscious of measuring the cost savings available from continuous improvement (CI) activities, needing to understand exactly what savings are being made to drive initiatives forward and direct the CI team towards particular areas of focus. "The other area you'll encouragingly see [measured more] is the supply chain," he comments. "There is more interest in monitoring suppliers because, ultimately, delivery performance is a function of your plant's operation but it's also a function of your suppliers and their ability to deliver into you on time, in full and to the correct quality levels." As for who is doing most measuring, it is maybe the electronics sector, Szwejczewski says. And like Oliver Wight's Lloyd Snowden, he sees the virtues of focus and fairness when it comes to cascading measures down through the organisation. "A good factory will have several measures at the top level that conform to a balanced scorecard approach but as you go down the layers to the shopfloor and to the team leader, [the management] will be very focused on giving him four or five relevant measures to be concerned with, as opposed to having to worry about 10."