Sunday, December 8, 2013

Focus and Leverage Part 286....

In my last posting I indicated that I would lay out the first change I am making in how I will be developing and using the Goal Tree going forward.  I indicated that it is a subtle change, but one that is very important.  In one of my previous postings I discussed the difference between Lead and Lag Measures and this change is predicated on these two types of measures.
This change has to do with how the Goal and Critical Success Factors are worded (and some of the NC’s).  One of the key learnings in The 4 Disciplines of Execution: Achieving Your Wildly Important Goals, was the concept of Lead and Lag Measures.  The lag measure has to do with Goal achievement and should be written in such a way that there is a clear measurement of Goal units with a well-defined target.  So, for example, instead of the Goal being written as “A highly profitable company” like we have in our Goal Tree example, let’s word it as though it was a performance measure with a target.  Let’s say that this company’s current profit margins are around 3%.  What if we re-wrote the Goal as follows:  Profit Margins Above 15%?  Written this way, we can measure it and it has a clear target, just like a finish line in a race.  In this way everyone knows what the company wants to achieve and how to measure success.

Now let’s look at the Critical Success Factors (CSF’s).  The first CSF in our example is written as Highly Satisfied Customers.  Can you now see how vague this CSF was as it was originally written?  Written in this manner, it is neither measurable nor does it have a target for the improvement team to shoot for.  If we re-worded this CSF, an example might be something like, “Customer Satisfaction Index greater than 96%.”  By writing it this way, it becomes measurable and has a clear target or measure of success to attain.  What I’m suggesting is that the CSF’s should be written as Lead Measures that tie directly to the Lag Measure.  In other words, if we were able to move the lead measures in a positive direction, then the lag measure would eventually improve as well.  Let’s look at the original Goal Tree with the remaining CSF’s written using these simple guidelines.

As you can see, each of the CSF’s now are measurable and display a clear success target.  For example, one of the CSF’s is written as “Operating Expenses less than 6 % of Revenue.”  Clearly, Operating Expenses are measurable and the target to reach has been set as less than 6 %.  Now let’s look at the Necessary Conditions (NC’s).
As written in the Goal Tree above, some of the NC’s are written with the same clarity as the CSF’s.  I chose to do so because when they are measurable and have a target as some of them do, it becomes much easier for the improvement team to define activities that will move these lead measures.  And if these lower level lead measures move in a positive direction, they will move the upper level lead measures in like manner.  For example, one of the lower level NC’s is stated as “Schedule Compliance >96%.”  If this is achieved, then the assumption is that on-time delivery will also be met.  And if this CSF is met, then it should move the Goal, Profit Margin >15 %, closer to the targeted level.  As we know, each CSF contributes to achievement of the Goal.  The improvement team concluded that, if they implement Drum Buffer Rope, then there target of 96% schedule compliance would be achieved.  OK, so what’s next?
In my next posting, I will demonstrate how I intend to use this new version of the Goal Tree going forward.

1 comment:

Vellu said...

Good change. This way the Tree can be tied to Throughput accounting.