LEAN Digital Metrics
“It is impossible to escape the impression that people commonly use false standards of measurement — that they seek power, success and wealth for themselves and admire them in others, and that they underestimate what is of true value in life.”
― Sigmund Freud, Civilization and Its Discontents
This essay and the accompanying video describes the problem associated with ineffective metrics and how to create a platform of smart metrics and benchmarked KPIs. For illustration purposes, we have used our own method on how we approach the challenge and provide solution.
Today’s organization challenges
– Almost all Key Performance Indicator (KPIs) start with a right intent to manage and improve the operations, however, over a period of time many of them become vestigial and an unnecessary overhead for operations.
– Many organizations have spent a significant amount of investment into creating metrics, dashboards and cockpits and yet a large number of them find themselves caught in a highly ineffective environment. People spend more time debating the nuances of metrics than true business impact.
– Service Provider’s (internal or external) dashboard seems to meet all the criteria required to provide a satisfactory level of service (metrics are green) however, in reality significant number of inefficiencies in the service exist that renders the metrics seem more red than green.
– Due to differences in interpretation and definition of metrics, the service providers and clients develop an “Us-and-Them” attitude towards each other.
– Last but not least, often there is such a deluge of data and information that people get into analysis paralysis. Moreover, even with such high amount of data, not enough “insight” can be derived from them.
Based on years of experience and using LEAN Six Sigma principles, we have devised an approach and a digital platform that can overcome the above challenges and create “Smart” metrics and “Benchmarked” KPIs.
The approach involves few basic principles:
– All metrics and KPIs should be part of a “Metrics tree”: interlinked and interconnected. This Metrics tree in turn is directly linked to organization objective. Each branch of the tree should be a KPI derived from the next level of organization objectives.
– Each role has certain set of responsibilities that need to be visible at real-time both for themselves as well as the leadership so that they can manage their objectives.
– Based on data calculation, platform is able to provide current performance details as well as a “target” specification. The platform allows to compare-and-contrast among internal business units as well as with external benchmark data (provided by APQC).
– All connected KPIs need to follow the “cause-and-effect” principle. In other words, the higher level metrics (effect) is directly a result of a lower level metrics (cause). Therefore, ability to drill-up and drill-down is extremely important to derive “insights”.
This approach provides a few advantages:
– This is more of a decision-making “enhancing” platform rather a pure reporting mechanism
– It provides a very robust and structured approach to evaluate current performance (smart metrics) and provide targets (for continuous improvement)
– This approach takes data from ERP, personnel-related information and data collected through interaction with the clients to create a baseline. Once baselines set is created, it provides a much richer platform for data-mining which a conventional setup may struggle with.
– The data obtained from the client is vetted by experts that increases the effectiveness and richness of the platform.
We have created this approach in which we assess existing metrics, existing operations and make recommendations on how to create an effective set of metrics. Our approach includes usage of our own system platform (can be licensed to clients) to preserve the integrity of data, facilitates data mining as well as offer the opportunity to benchmark. In the end, the clients get a platform that provides “Smart” metrics and “Benchmarked” KPIs
This approach can be universally used for differnt types of services including HR Management, IT, Finance, Logistics, Facilities management among other services.
We would like to hear your views as well as receive further input/feedback on this topic.