4DX Applied – Operational Excellence

The whirlwind of activities that often derail projects can also become the greatest obstacle for achieving key operational goals.  Ironically, the source of these spontaneous crises tends to originate from the very business operation that we are trying to excel within!  Quality issues, customer complaints, absenteeism, and equipment breakdowns are just a few of the things that can and will pop up daily.  Fortunately, 4DX can provide means of achieving excellence amid the daily firefighting you may face within your business operations.

We introduced the principles of The 4 Disciplines of Execution a few weeks back in our blog article, Getting Things Done.  It is quite easy to see how this methodology is essential to successful project execution, since day-to-day issues tend to take precedent over projects.  Here’s a way that we’ve implemented them to facilitate ongoing operational excellence.


Discipline 1: Focus on the Wildly Important

We’ve laid out the principles in prior posts, so we’ll get straight to the point here.  The wildly important goals for your company must be defined in terms of the ubiquitous SMART goals.  Specific, Measurable, Achievable, Relevant, and Timely will all be important.  For now, we are going to focus on M – Measurable.  The old adage, “What gets measured gets done!” applies here.  Clearly defining your goal measures is the critical first step in establishing your Key Performance Indicators (KPIs).

Which KPIs should we include?  While it is tempting to measure everything, don’t try.  If you focus on everything, you will accomplish nothing.  Consider the dashboard in your car.  While dashboards are getting a bit more technically complex these days, there are still only a handful of KEY indicators within view.  Gas level, oil pressure, engine temperature, RPMs and your speed odometer are pretty much standard on any car and essential for safe and effective operation.  Same with your business (albeit, different indicators, of course!)

When selecting KPIs for your operation, we recommend considering at a minimum Quality, Delivery, and Cost.  We also recommend prioritizing in that order as well to emphasize the focus required to create a culture fixed on delivering world class service.  Quality first focuses on the customer, ensuring that the customer receives the product and/or service that meets their expectations.  Delivery also focuses on the customer, in this case ensuring that the customer receives your product and/or service in the amount and delivery time that they need.  Finally, Cost indicators focus more on the business, and ensures that your company makes an appropriate profit by operating within budgeted costs.

For wildly important goals, you should consider the top most important measures for your overall operation.  Depending upon your industry, quality indicators may include Number of Recalls or Customer Complaint Rate.  Delivery indicators may include Line Fill Rate, Lead Time, or Turn Around Time.  Cost indicators may be further broken down into 3 main categories: Material, Labor, and Over Head.  Cost indicators may be presented in total dollars or as a rate in terms of efficiency (e.g., Parts Per Man-Hour).  Note that these indicators are all LAGGING measures, and often cannot be acted upon directly.


Discipline 2: Act on the Lead Measures

What we learned in the 4DX framework is that we can work on LEADING measures.  In business operations, we want to link employee goals to company goals.  To do so, we can use a technique of cascading goals, which includes a drilling down of metrics from the top most wildly important goals of the company down to measurable results at the employee level.  Identifying a cause and effect linkage between top level goals and operational level goals will help you create a compelling scoreboard (remember Discipline 3 is coming!) that you employees can use to determine if they are winning or losing and to adjust accordingly.

Let’s take Quality, for example.  If your top level KPI is Customer Complaints, with a wildly important goal of 0 Customer Complaints, what do your employees have to do to ensure they meet this wildly important goal?  They work on many things all day long, but which are most important?  Which measures can we put in place that we can track and provide early indications of an issue BEFORE a complaint happens?  The value of knowing this will foster a culture of prevention as opposed to crisis management!

Many companies already know that they have quality issues and address them as they pop up.  Wouldn’t it be better to track these issues and eliminate the most prevalent ones so that they don’t keep reoccurring?  Of course!  Tracking and systemically addressing internal quality issues is certainly something that can be acted on BEFORE issues reach the customer.  The systematic review can also lead to other leading indicators to further protect the customer from a poor-quality experience.  Equipment cleaning and maintenance, stock rotations, and even employee training can all be acted upon to help support the wildly important goal.  The same process may be repeated for each of the other KPIs.


Discipline 3: Keep a Compelling Scoreboard

Once you have established the leading indicators, a compelling scoreboard is next.  The scoreboard must be visible and easy to interpret.  One should be able to view a chart from 20 feet away and be able to determine if we’re winning or losing in just a moment’s glance.  Recall the car dashboard.  A driver only has a split second to glance at the indicators before shifting focus back on the road.  In that time, a decision can be made to pull over to the next gas station or if it can wait until the next stop which may be 60 miles away.

With that, the scoreboard could be low tech and low cost.  White boards with color coded markers can just as easily indicate an adverse trend as can the most sophisticated software system.  Better to start off low tech then build up toward autonomy once the process has been established.

Time series plots are the most relevant chart type for this purpose.  A target line may be projected over time to show changing goals over time.  The agreement then would be that one side of the line is “good” and indicated with a green dot and the other side is “bad” and indicated with a red dot.  Alternatively, actual numbers may be written in a table, again with a stated goal over time.  A number meeting or exceeding the target may be written with a green marker and a number falling short of the target may be written with a red marker.  Either way, one could easily interpret the performance at a glance and from a distance.


Discipline 4: Create a Cadence of Accountability

For this all to work, there must be a cadence of accountability.  Lots of things come up during the day, and the most pressing thing tends to become the most important thing.  However, to ensure we are ultimately focusing on the most wildly important goals, the discipline of accountability must be instilled.  Simply put, this defines “how we do things here”.  As leaders, we always focus on establishing standards for our staff.  Yet for them to be successful, we must first set up standards for ourselves.

Thus, the concept of Leader Standard Work is paramount!  Let’s face it, the leader(s) established the wildly important goals, determined appropriate lead measures, and implemented compelling scoreboards.  If review and response to these are not adhered to with strict discipline, they will quickly become nothing more than wallpaper adorning the workplace.  But there is a right ay and a wrong way of doing this!

While we would much rather avoid sharing the wrong way, it is important to recognize it to avoid it or stop doing it should we find ourselves doing so.  All too often, we’ve seen managers sweep through an area and either praise the green or condemn the red.  Yelling at people and telling them to do better is not productive and tends to lead to fudging the numbers.  In the end, this leads to useless metrics and more than likely missed wildly important goals.

The right way of doing it is a bit structured, but worth the effort and is ultimately one of the leader’s primary responsibilities.  Time should be allocated each day (or hour, depending upon the operation) for a walking review of the compelling scoreboards.  Green and red do not necessarily equate to good and bad respectively.  Understanding the trends and any issues that your team encountered along the way is much more insightful. Thus, next to each scoreboard should also be means for workers to track issues and escalate to you for resolution.  Afterall, if you want them to do their job, you must equip them with what they need to do so.  In addition to action item trackers, Pareto charts are extremely helpful in highlighting the most pressing issues to focus precious resources on to resolve.


Wrapping it Up

Implementing 4DX for Operational Excellence is not very difficult, but does take time, effort, and, well, discipline.  While there are much more details to implement a company wide program than we can fit in a single blog article, we outlined the key points for you to consider.  Following our mantra of “Dream BIG, Start Small”, it is better to start off with a few key indicators and keep it as simple as possible.  Simple systems executed with discipline is a sure path to operational excellence and becoming a world class organization.

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