How to select improvement projects – so the whole enterprise financially benefits – should be important to a business. However, the common-place approach for project selection of listing potential improvement projects and then selecting projects from this list has fundamental issues with this big-picture objective.
This common-place improvement project identification approach can have high operational improvement expectations; however, often selected improvement projects fall off people’s plates and never get completed. In addition, when a Lean Six Sigma or other process improvement effort does get completed, often the benefits are reported as an anecdotal statement that includes no tangible performance-metric enhancement graphical demonstration.
An Integrated Enterprise Excellence (IEE) Enterprise Improvement Plan (EIP) addresses this improvement project selection issue. An EIP provides a methodology for drilling down from business goals to specific projects that have a quantifiable 30,000-foot-level reported metric that is to be enhanced from process improvement efforts. In IEE, evidence that a process has improved is that the process improvement project’s 30,000-foot-level metric has transitioned to an improved level of performance.
IEE is a 9-step business management system where an organization’s EIP addresses steps 4 – 7 of the system. An example EIP, discussed in Management 2.0: Discovery of Integrated Enterprise Excellence, illustrates the alignment of process metric enhancements (right side of the following graph) with the financial needs of the organization (left side of the following graph).
Details about the creation of an organization’s EIP is described in Management 2.0: Discovery of Integrated Enterprise Excellence. The following links provide information about this book:
The following is an excerpt from Chapter 7 of this book.
Book’s Excerpt: How to Select Improvement Projects using an EIP Methodology
“Moving on (Jorge said to Hank). With the IEE system, the establishment of overall organizational business goals is from a big picture perspective. The next figure (shown previously in this posting) in the ‘Positive Metrics Poor Business Performance’ article (which we have been walking through) explains how to address this big-picture objective (using an organization’s EIP).
“If you recall from the 9-step IEE system, the first step is vision and mission; the second step is the organization’s IEE value chain, which describes what the organization does and how it measures what’s done. The third step involves analyzing the enterprise. The fourth step uses a total-system-of-processes perspective in the creation of realistic financial goals. This figure’s four-column graphic summarizes actions for steps 4 through 7 for an organization’s big-picture improvement effort. In IEE, the reference to this collective description of 30,000-foot-level performance metric and process improvement work is the organization’s enterprise improvement plan (EIP).
“I’ll now provide more information about each EIP column from left to right. The furthest column on the left offers an agreed-to mean or median monthly-reported financial target objective, with an associated achievement time frame.
“Before beginning, I need to provide some background information for this illustrative example. Consider that this hospital had a decline in revenue since a competing facility opened its doors. Because of this occurrence and the associated financial impact, the set monetary goal was a profit level enhancement to a level consistent with what existed before the competitor moved into town. Because of this hospital’s underlying situation, the created EIP’s specific, measurable, actionable, relavant, and time-based (SMART) business goal in the left-most column was determined to be ‘Return reported monthly profit margin median to 11.9% in 14 months.’
“It’s important to note that this financial target is stated as a median or mean monthly monetary value, not a particular value next month, quarter, or year. A mean or median goal for the financials should lead to an overall process improvement mindset, where many processes may need to be targeted for improvement to achieve this enterprise objective. This goal-setting-approach is in contrast to the common goal-setting practice of meeting a specific financial number for next month or next quarter, which can result in behaviors that don’t have a long-lasting positive impact on the financials and organization as a whole. The associated time frame for the mean or median financial target achievement should be aggressive but not unrealistic. smartersolutions.com has an article that highlights the importance of setting a median or mean monthly financial goal, as opposed to the common-place goal-setting practice of meeting a particular financial number at the end of a quarter or month (Reference Appendix A, Web page 5).
“The second from the left column is strategies, while the third column from the left is high potential areas, where, again, each area for these strategically identified business improvement metrics is to have an owner. The final column, which is on the right, is a metric description of the expectations from the identified improvement projects to undertake.
“Note how each of these improvement project statements in the right-most column is specified relative to a futuristic process output response for a 30,000-foot-level metric. To elaborate more on this point, look at the comment to describe the last project listed in this right-most column. The statement for this project is ‘Reduce wastage by 10% in 10 months.’ Keep this project and its goal in mind, since this article will elaborate more on this particular process-output performance.
“It’s essential to highlight how there’s an alignment of process improvement projects on the right side of the figure with business metrics that are to be enhanced, as shown in the left column. Monitoring through 30,000-foot-level reporting in the organization’s IEE value chain provides an assessment of how improvement projects are progressing against their stated output measurement objectives.
“For process-improvement projects, it’s desired that an output response transitions to an enhanced performance level that’s consistent with the desired target, both from a magnitude of process-output-response enhancement and a time-line perspective.
“Another point worth highlighting is that focus often rests with enhancing operational processes when organizations undertake a process-improvement deployment. However, if an organization has excess available production capacity, focus on marketing and sales might be the areas that would provide the most bang for the buck relative to the execution of improvement efforts that provide the most financial benefits to the big picture.
“Still another point to highlight is that IEE EPRS software can provide the status of improvement projects to anyone who has authorization, at any point in time.”
Hank then anxiously responded, “Jorge, think I’m getting it! The IEE value chain can provide up-to-date metrics from a process-output point of view. You used EPRS software so that these metrics would be automatically updated and would take minimal resources for their maintenance.
“An organization can then basically examine the big picture through steps 4-7 to determine what metrics should be improved so that the enterprise as a whole may benefit through execution of improvement projects, as noted in step 7. The IEE system’s EIP methodology addresses the goal-setting and number of metrics that are to be enhanced issue that I had. The way I see this is that not every function and its metrics will need improvement from a strategic perspective. I assume that it would still be okay for a manager to improve a particular 30,000-foot-level metric in the area that he or she is responsible for, where this high-level’s measurement-reporting improvement need isn’t strategic. This effort would not fall under the spotlight like EIP projects, but this process improvement effort could still be an excellent thing to undertake for the business as a whole.”
Management 2.0: Discovery of Integrated Enterprise Excellence is available in paperback, e-book, and audiobook formats.
The book is listed as a Kindle e-book, but any computer, smartphone, or notepad can view the e-book with the installation of a simple app.