Tuesday, December 10, 2013

Focus and Leverage Part 287.....


As I’ve written about before, here’s where I’ve departed from the traditional TP tools in that as Bill Dettmer recommends, the next step would be to use the Goal Tree to construct a Current Reality Tree.  And although I totally support Bill Dettmer’s approach when time is not a factor, and continue on with the Goal Tree in the way Bill recommends. But, when time is a factor, my immediate next step is to facilitate a critical discussion with the improvement team on the real-time status or current state of the Goal, CSFs and NCs.  I use a simple Green, Yellow and Red coding system to describe how each of the Goal Tree entities exists in our current reality.  With this new approach, the status of each entity becomes much easier.  I might add that the coding system I will now describe is a departure from the way I had been using the Goal Tree in the past.

Notice the key on the bottom right hand side of the Goal Tree and you’ll see that a box shaded in green indicates that the measure is at or above the target level.  Green can also be used to describe actions that we plan to take to drive the lead measures in a positive direction.  In this case, the required action is in place and functioning so no changes need to be made.  Likewise, a yellow box indicates that a lead measure is greater than 5 %, but less that 25% away from the defined target.  Or if it’s a required action, then it means that there is something in place, but that it needs improvement.  A box shaded in red means that the lead measure is greater than 25 % from its target or if it’s a required action, then the entity is either not in place or that something is in place, but it isn’t functioning.   (Note:  It should be obvious that any entity shaded in red has a higher priority than one shaded in yellow.)  Please understand that these guidelines that I’ve established are mine, so they are not hard and fast rules taken from some text book.  I encourage those using the Goal Tree in this manner to develop your own guidelines. Let’s look at our Goal Tree and see how this fictitious company made out.

 

The following were the values assigned to the current lag measure (i.e. the Goal) and all of the lead measures (i.e. all of the CSF’s and some of the NC’s):
Profit margin = 3 % (Lag Measure), Customer Satisfaction Index = 89%, Throughput Growth = 2 %, Workforce Attrition Rate = 10%, Operating Expenses = 13%, Raw Material Inventory = $1.1 M. On-Time Delivery = 75%, Customer Quality Rating = 97%, Schedule Compliance = 71%, Internal Quality System Audit = 99.2%

Starting with our lag measure for the Goal, we see that it is currently at 3% and because it is greater than 25 % away from our target, we shade it in red.  Since our Customer Satisfaction Index is at 89 %, which is between 5 and 25% away from our target, we shade it in yellow.  In fact, the only thing that seems to be working well is our Customer Quality Rating at 97% which is well inside the limit of 5 % from the target.  Because quality is not a problem, it is shaded in green, meaning that if this company continues with its current Quality System, they should continue doing well.  In like manner, we compare all of the remaining lead measures and color the boxes accordingly. 

As I previous stated, where we observe red boxes, it should be apparent that these are the areas we must focus on first because they offer the greatest potential source for improved results.  As we improve the lead measures in these areas, improvement in upper level lead measures will take place until ultimately, the lag measure (i.e. the Goal) of Profit Margins Above 15%) should also improve.  The key then, for creating a focused improvement plan, using the Goal Tree, is to first develop the required Lag and Lead Measures and then set realistic targets to achieve each one of them.  The key though is to make sure there is a correlatable relationship between the lead and lag measures.

So here it is, a different way to utilize a Goal Tree which is easy both to understand and construct and which permits the development of a very focused improvement plan.  In my experience using this approach, the team that develops it, will embrace it because it is their plan.  And the good news is, from start to finish it only takes less than a day, rather than days or weeks to develop.

When I started this series of postings, I introduced you to a book I have been reading called, The 4 Disciplines of Execution: Achieving Your Wildly Important Goals, by Chris McChesney, Sean Covey and Jim Huling.  I want to thank these authors for “enlightening” me with their book.  Once again, I encourage everyone to go get this book, read it and apply it….especially if you’re involved in improvement efforts.  The authors also describe why many improvement efforts fail and how to overcome barriers to success.


But before I move on, I want to add one additional change to the new Goal Tree.  In this new version, I have included Lead and Lag Measures, but one important fact is not in the equation……the “when” of these metrics.  That is, I will now add a “time piece” to the Lead and Lag measures.  In the figure below I have inserted completion dates into the Goal Tree and as you can see, each layer in the hierarchy displays an earlier date as you progress down the tree.  By adding dates to the Goal Tree, the improvement team now has a sense of timing so that priorities on what to work on is clearly visible to them.

This nested hierarchy of dates and actions provides the team with a roadmap, if you will, on what to work on first, then next and so on.  For example, if we look at “Schedule compliance greater than 96% by 12/15/2013,” it is clear to the team that DBR must be implemented well in advance of that date.  That is to say, in order to achieve the NC of “On Time Delivery Rate greater than 96% by 12/30/2013, then schedule compliance must be completed first.  In a sense, the upper level lead measures are both lead and lag measures.  Improvements to the upper level lead measures only occur when the lower level lead measures are achieved. In the case of action steps, these too should have completion dates associated with each one even though I haven’t depicted any dates in the Goal Tree below.  For example, in the case of “Throughput Growth greater greater than 20% by 1/15/2014, it is clear that the associated NC (Focus Improvement on the constraint) must be in place in advance of that date.

So now you have the complete list of changes I will be using on the Goal Tree going forward.  I want to make one point though as it applies to how I create the initial Goal Tree.  I will probably still create the initial Goal Tree as I always have prior to adding the lead and lag measures and completion dates.  I think it's important to do that prior to inserting the measures and dates.  I say this because I have found that the flow ideas should move forward in an unencumbered way and by waiting until later to introduce the lead and lag measures and the completion dates, this will happen.

Bob Sproull

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