KPI and Process Performance Metrics 2.0: No Specification or Goal Required

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This KPI and process performance metrics example describes an enhanced measurement reporting technique that requires no goal or specification. The described method can provide more insight into what is happening in a process (and what to do differently to improve its response) than ever seen before with a traditional measurement report-out.

The described methodology overcomes the many elephant in the room shortcomings of:

  • Process Performance Metrics or KPIs (Key Performance Indicators) reporting which often focuses on how a task is being executed relative to goal achievement (e.g., the balanced scorecard).
  • Process performance indices (i.e., Pp and Ppk) and process capability indices (i.e., Cp and Cpk) reporting relative to specification achievement as described in the article (and video) “Process Capability Analysis 2.0 Example.”

The following video provides insight into traditional elephant-in-the-room KPI and Process Performance Metrics reporting problems and what to do to resolve the issues:

 

 

This video addresses the following topics and more!

Business Measurements (e.g., KPIs) examples that can Benefit from Process Performance Metrics 2.0 Reporting

  • Revenue
  • Expenses
  • Profit Margins
  • Customer satisfaction
  • Customer retention
  • On-time delivery
  • Non-conformance rate
  • Market share
  • Inventory
  • Cycle time
  • Production yields
  • Employee satisfaction
  • Employee turnover

To illustrate the applicability and benefits of KPI and process performance metrics 2.0 reporting, this article uses data from a metric in a company’s red-yellow-green scorecard. With RYG scorecards, for each metric, there is a goal.  When a metric’s color is red, an organization aims to resolve the unsatisfactory-goal-set desire issue. However, often a green to red transition is noise to the process, where a red metric color change can return to green when nothing was enhanced in the process.

Red Yellow Green Scorecards

This example uses data from one metric in a company’s KPI red-yellow-green scorecard. With RYG scorecards, each metric has a goal.  When a metric’s color is red, an organization is to resolve the unsatisfactory-goal-set desire issue. However, often a green to red transition is noise to the process, where a red metric color change can return to green when nothing has changed in the process.

In a training session, I described how red-yellow-green (RYG) scorecards could lead to much organizational firefighting and playing games with the numbers. After my explanation, someone asked a question. He wondered what he should do since a metric he was responsible for changed from green to red one month and then back from red to green the next month without him doing anything.

With a joking smile, my response was that he should take credit for the metric-color-improvement change. He should, however, work to improve the metric-related process since the color will undoubtedly, at some point in time, change back to red if there were no process enhancements.

Red-yellow-green scorecards often lead to playing games with numbers and firefighting, resulting in much organizational waste and expense. Deming’s famous red bead experiment highlights the problems with RYG scorecard management. The article “The Improvement Of Scorecard Management: Comparing Deming’s red bead experiment to red-yellow-green scorecards” describes these issues and a 30,000-foot-level measurement report resolution. https://www.smartersolutions.com/orl/Deming-red-bead-experiment-and-red-yellow-green-scorecards.pdf

A Red Yellow Green Scorecard Measurement Response Analyzed from a Process Performance 2.0 Viewpoint

This article will consider an RYG organizational report-out from a process performance 2.0 point of view, with no arbitrary set of goals.  The enhanced process performance 30,000-foot-level metric reporting methodology described in this article provides a measurement report-out from an overall system point of view.  For a stable process, 30,000-foot-level measurements will give a prediction process performance statement whether a specification exists or not.  If a specification exists, there is an estimated non-conformance rate reporting.  If no specification exists, there is an estimated mean or media response reporting for the time-series data with an 80% occurrence rate frequency (an estimate for the range of four out five future read occurrences).

When a 30,000-foot-level response output is stable (whether a specification exists or not) and undesirable, this unsatisfactory response suggests the need for process enhancement.

The following 30,000-foot-level reporting illustration will use the Finance B data from the following organization’s RYG scorecard.

 

process performance metrics can improve RYG scorecards

 

An enlarged image of Finance B metric is:

 

 

This organization established a 2.2 maximum value goal for this metric, which resulted in a red-colored measurement response if exceeded.  In this reporting, one observes many process improvements occurring over time (red to green transitions). However, is that true?  The following free 30,000-foot-level reporting app suggests that this is NOT true.

Free App Illustration: KPI and Process Performance Metrics Calculator – No Specification Required

The following figure illustrates for process performance metrics the result of applying a free app (that anyone can use for tracking the output of their processes) to create a 30,000-foot-level report-out.

One can right-click on the graphic to save the image as a PNG file.

 

process performance metrics with specification

 

For this process performance metric 2.0 illustration, the individuals chart (left-reported chart of the two-chart pair) indicates process stability since there are no datum points beyond the data-calculated upper and lower control limits (UCL and LCL).  This conclusion is in contrast to the decision that one would have from examining the RYG scorecard.

With high-level process output 30,000-foot-level level reporting, a stable process is considered predictable. The probability plot (right-reported chart of the two-chart pair) provides a non-conformance rate estimate for the 2.2 upper specification limit by determining the estimated percentage of occurrences above the specification limit to determine the prediction statement. The bottom of the two-chart-reporting-pair reports this determined estimate to be a 32.7% non-conformance rate.

If 2.2 were indeed a specification (not an arbitrary set goal) and the report-out 32.7% estimated non-conformance rate is unacceptable, this 30,000-foot-level reporting suggests the need for process enhancement.  This reporting format contrasts to possible “why occurrence” of the common-cause individual points up and down variation in the time-series chart. This action is also in stark contrast to the firefighting actions of unique datum points beyond the 2.2 goal that the RYG scorecard report-out encourages.

For this situation, setting a 2.2 arbitrary “individual point specification” goal is probably not appropriate. A better approach for this finance metric is to create a 30,000-foot-level metric without a specification, which this app provides as:

 

process performance metrics, no specification

 

This 30,000-foot-level report-out provides an estimated mean of 2.26 with an 80% frequency of occurrence between 2.09 and 2.42. If this response is undesirable, an organization should focus on improving the MEAN of the process response via a process improvement project and/or the overall between-month measurement variation.

 

KPI and Process Performance Metrics 2.0 Examples – with and without Specifications

 

Integrated Enterprise Excellence (IEE) is an enhanced business management system that provides a means where organizations can orchestrate their 30,000-foot-level reporting.

Management 2.0: Discovery of Integrated Enterprise Excellence & Leadership System 2.0: Implementing Integrated Excellence describe many applications of 30,000-foot-level reporting for both when there is a specification and no specification.

 

process performance metrics bookprocess performance metrics book

 

Management 2.0: Discovery of Integrated Enterprise Excellence discusses the application of 30,000-foot-level metrics to seven situations in a novel-book format. At the same time, Leadership System 2.0: Implementing Integrated Enterprise Excellence discusses thirteen 30,000-foot-level reporting situations in a novel-book form.

The concepts described in Chapter 6 of Leadership System 2.0: Implementing Integrated Excellence depicts a methodology of integrating 30,000-foot-level metrics reporting throughout a business for the incorporation of an enhanced Business Process Management (BPM) and Management Information System (MIS), which addresses the objectives of Deming’s philosophy, Malcolm Baldrige criteria, Shingo Prize, and ISO 9001 – at the same time.

One significant advantage of 30,000-foot-level reports over red-yellow-green scorecards is that this performance metric 2.0 reporting methodology can supply a means to statistically identify when a process improvement occurs through a staging of its individuals chart (left output chart). The associated probability plot of the two-chart pair would then provide a process performance statement using the after-staging data (in words that everyone can easily understand).

KPI and Process Performance Indicators Example Application: Integrated Enterprise Excellence Volume II and III

There are descriptions of applying 30,000-foot-level continuous response reporting for Lean Six Sigma project metrics AND business KPI reporting in a 4-book IEE Series. The IEE Volume II in the set provides details for applying KPI reporting techniques at the business level. The IEE Volume III describes using the above process-output-response-metric-reporting techniques at the Lean Six Sigma improvement project execution level. A project’s metric baseline would occur in the measure phase of the Define-Measure-Analyze-Improve-Control (DMAIC) roadmap.

 

process capability calculator books

Summary

What additional process insight could you gain from the application of the above described 30,000-foot-level reporting app?  This amount of understanding could be huge.

 

business management system meeting

 

Contact Us through an e-mail or telephone call to set up a time for a discussion on how your organization might gain much from an Integrated Enterprise Excellence Business Process Management system. Or, a Zoom meeting can be schedule directly:

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