Evaluating the impact of improvement projects
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These days, every cost is challenged and every investment now needs more levels of sign off. The ongoing investment in an operational excellence effort is not exempt from these pressures. Even for those businesses where the opex function delivers value every year (Avis - $70m dollars every year), everything is questioned. The challenges faced are as follows: Which projects do we focus on and how do we decide that? How do we know if project activities are actually contributing to improved business performance? Finally, how do we best track and report on improvements? To be successful then, the VP of Operational Excellence needs a way of capturing the real objectives and how these will be measured at all levels of the organization. He/she needs a co-ordinated plan with all activities linked to business performance triggers and a way of managing performance against clear KPI's. In the absence of a clear system for goal cascading, the following issues are likely to be encountered. Goals are likely to be incomplete. In addition some of them may well be contradictory. Some goals will be well supported by projects, others will have little focus on execution. A big step forward is to have clear leading indicators in place. Most organizations are still using lagging measures almost exclusively. This provides no time to make early adjustments when problems arrive. It's like driving by looking in the rear view mirror. This is one of the real benefits of a solution like i-nexus. A good strategy execution system will do a minimum of 3 things: 1) Develop execution capability throughout the organization through the transparency engendered. 2) Provide real ongoing focus on execution through the visibility of progress in real time 3) Develop ownership throughout the business through accountability The ROI of improvement projects is easy to determine with the right tracking. What is less easy (but more important) to do is to determine the impact that the projects have had on the actual implementation of strategy.
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Evaluating the impact of improvement projects
- 1. Most managers are under pressure to define, measure, track and report actual performance gains for their improvement initiatives. Evaluating the Business Impact of Improvement Projects
- 2. Evaluating the Business Impact of Improvement Projects Paul Docherty - i-nexus Geoff Rinaldi – Tranzform Group 13 March, 2013
- 3. Issue #1 There is often not a clear understanding of the real objectives
- 5. Issue #2 Hard to know on a day-to-day basis if project activities are improving performance
- 7. Issue #3 Difficult to track and report on performance improvements
- 9. Three essential things for success. A way of describing your real objectives and how success will be measured at all levels of your organisation. A co-ordinated plan with all activities linked to business performance triggers A way to manage performance of activities and projects continuously against the agreed measures.
- 10. Translate your high-level goals into actionable priorities that are meaningful to individuals Success essential #1
- 11. “We must improve customer satisfaction.” DEPARTMENT HEAD “We must reduce rework.” OPERATIONAL MANAGER “Customer complaints must be reduced.” SERVICE EXECUTIVE “I must input the right details first time.” INDIVIDUAL CONTRIBUTOR
- 12. 1.1 Capture the Goal Cascade
- 13. 1.2 Set Targets For Improvement
- 14. Focus on the essential activities for achieving your desired business results. Success essential #2
- 15. “We must improve customer satisfaction.” DEPARTMENT HEAD “We must reduce rework.” OPERATIONAL MANAGER “We must reduce customer complaints.” SERVICE EXECUTIVE “We need new procedures.” ACTIVITY “We must develop a training program” SKILLS PROJECT “We need an input checking process.” SERVICE PROJECT
- 16. 2.1 Identify the Essential Activities
- 17. 2.2 Plan/Task Out the Essential Activities
- 18. Create a reporting structure that gives visibility that your activities and projects are actually providing the results you expect. Success essential #3
- 19. BUSINESS GOAL “I can see improvement in customer satisfaction.” DEPARTMENT HEAD “Customer complaints are reducing.” SERVICE EXECUTIVE “Rework is reducing.” OPERATIONAL MANAGER New procedures implemented. ACTIVITY Training program delivered. SKILLS PROJECT Input checking process completed. SERVICE PROJECT
- 20. 3.1 Track Progress Towards Goals
- 21. An email is received with an attached PDF report. The attached top-level report provides executives with detail of individual Business Unit Performance. From the top-level report, the executive can access each "Bowling Chart" (without needing to log- in) The executive can click drill into reports to see metric detail, action plan progress or any countermeasures 3.2 Generate Reporting That Focuses on Results Not Just Progress
- 22. Three essential things for success. A way of describing your real objectives and how success will be measured at all levels of your organisation. A co-ordinated plan with all activities linked to business performance triggers A way to manage performance of activities and projects continuously against the agreed measures.
Editor's Notes
- PAUL: Most managers are being asked to do more with less. They are being asked to deliver improved business performance, but often with reduced budgets or fewer resources. This puts them under pressure to define, measure, track and report actual performance gains for their improvement initiatives.
- Introduce speakers (Paul Docherty and Geoff Rinaldi).State the purpose of this presentation (to help you create a reporting structure to track the relationship between your strategic business vision and the improvement projects that will deliver the vision.
- PAUL: To understand why a better approach to performance reporting is needed, we’re going to start by raising three issues that can cause big problems when you want to get a handle on whether your improvement projects are delivering the results you expect.The first issue relates to the way you have described what you want your improvement project to achieve.Perhaps your organisation requires you to prepare a business case according to set cost justification guidelines.Or perhaps you’re aware of solutions that have been implemented in other organisations and that have delivered the sort of outcomes you’re hoping to achieve.However your improvement project has come about, it is critical that you give a lot of thought to questions such as:Do we have a clear understanding why weneed to change anything?Whatactually needs to change? Who needs to be involved?How will we make the change happen?How muchimprovement can we expect to achieve?
- GEOFF: It is common for people confronted with a problem to try to come up with one or more possible solutions. For example, an organisation that has issues around producing a consolidated set of financial reports may be convinced that the solution to this problem is to implement an ERP system; a manager wanting to address a decline in sales may think the right thing to do expand the sales team; or in response to a poor customer service rating in a survey, an organisation might look into their processes to fix any inefficiencies. What typically happens when you head straight into implementing solutions is that you face a process of discovery that can cause considerable additional effort, cost increases and time delays while these other pieces are identified and addressed. …and then there is the question of whether your chosen “solution” can really be demonstrated to deliver the successful outcomes you are seeking.Tranzform worked with an organisation that has over 30,000 staff across 45 locations. Each site is able to procure goods and services from a panel of suppliers who have contracts in place for each spend category. However, there was extensive “off contract” expenditure to obtain other advantages. Our analysis identified an opportunity for significant savings in procurement. However, the client thought they needed a “solution” based on integrating their procurement information across all of their systems and locations. Ignoring our advice they committed to a $5 milion “solution” to fix this problem, but quickly found it would cost more than $20 million to implement properly. Significant benefits were eroded – all because they wouldn’t go through a technique we call Real Requirements before they investigated possible solutions.PAUL: I’d add that, you need to make sure you have an easy way to describe your objectives so they are meaningful to people at all levels of your organisation.
- GEOFF: The second issue we see that concerns most managers who are responsible for business improvement projects is that they rarely know if all of the stuff that people do on a day-to-day basis is really necessary to achieve the results they need. As if business life isn’t already complex enough, when your people have to get involved with an improvement project (in addition to their normal operational role), everyone is suddenly extremely busy and it becomes even harder to know what each person is working on, let alone whether each activity is being given the right amount of time and effort.PAUL: So it’s very important that you have a way of capturing all of the activities that are now needed and that you can see if al of this extra effort is actually doing anything to improve business performance.
- PAUL: One of the main reasons why people have a hard time trying to figure if their improvement project is actually delivering the expected gains is that, depending on who you ask, you can get differing opinions about the success of a project. For example, a project manager might tell you that their project is successful because it is “on time and on budget; whereas the business sponsor might only want to know if the project has caused any real and measurable business gains.GEOFF: I have another story about a major insurance company that Tranzform worked with. They wanted to improve service and gain efficiencies by implementing a replacement to their core business system. Their project team was working closely with the selected IT vendor; and the business assumed that the system would fit how they worked. Month after month – and prior to our engagement – the project was reported as having “green” status. Yet most of the allocated budget had been spent before the business realised the system would not do what they expected. Major effort and cost was required to reposition this as a business transformation program which could demonstrate real business improvements.PAUL: So you need an easy way for everyone in the organisation to stay focused on the main game…which is the business improvements you are seeking.
- PAUL: This brings us to the third issue.: how can you track and validate if improvements are being realised in your business?
- GEOFF: Let me tell you a short story we came across where an organisation had spent a significant amount of money on an IT system that was having trouble getting traction and had delivered nothing for the business. As a result of a company-wide cost reduction program, the main business area that was to gain from the new IT system had to cut headcount. Once this was done, the PM claimed the headcount reduction as a benefit and thereby claimed the system was cost-justified – even though it had not been properly deployed! This is a classic mistake of confusing budget cuts for savings. To achieve a lasting business saving, the system would have to have demonstrated that work was being performed differently, in a way that allowed measurement and comparison between the way things were previous done and how they were being done with the new system.PAUL: I guess what you’d really like to have in this situation is an easy way to forecast the impact that activities involved in implementing the new system and changes to associated processes are having on your business performance.
- PAUL: So in summary, these are the three essential things you need to be able to set up and manage the performance of your improvement projects.
- PAUL: Let’s start with the first of these essential elements for success…..demonstrate how goals/objectives are described in i-nexus, including break-down into sub-objectives, with owners assigned for each objective.
- ?? GEOFF to use this slide to explain how high-level goals need to be broken down so that they matter to individuals at different organisational levels. (Change the text in the boxes to suit Paul’s demo).
- PAUL: The second essential success element is that each individual can see how their actions contribute to achieving the goals of the organisation…..demonstrate how projects and activities are linked to objectives.
- ?? GEOFF to use this slide to explain how activities and projects connect and contribute to higher-level objectives.
- PAUL: The third essential success element is that you need a way of reporting project progress in a way that shows the impact on your business dials (or KPIs)…..demonstratei-nexus reporting capabilities,, eg. Ways a manager can drill down and investigate WHY project components are red.
- GEOFF: So in summary, these are the three essential things you need to set up and manage the performance of your business improvement projects.