Metrics & Rewards
The last cylinder but one of the most important is the metrics and rewards system. So many companies no matter what size only look at a handful of metrics, frequently it is just one – revenue. While it is the “parent metric”, the apex of them all, it only tells a small part of the story, and if used alone by leadership poor decisions that affect people’s jobs can be made. To optimize an organization, we need solid metrics from the company through its value streams, product, or service lines, to work teams in all departments. Individuals need not only know what they are accountable for, but they also need to know how they are measured. These metrics start at a high level and get right down to the shop floor.
If a production supervisor is only measured on product velocity then they will manage to that metric. When they have a choice to produce more parts or produce better quality parts which one would they choose? Well, if they are managed by hitting their metrics, then they will do anything to get the maximum number of parts with their available time. In this real example, the factory had poor quality or line yield on a specific product. Every day engineering would ask to take over a tool to fix it and the request was declined as it impacted the ability to produce product. They would escalate all the way up the engineering silo to the manufacturing silo and then my manager would instruct them to hand over the tool. They would agree but request that the goal be de-committed and they would not hit their metric. This would happen daily. Once management realized they weren’t living up to their values and culture and realized that metrics drive behaviors they made a simple change. The new common goal for engineering and manufacturing was quality with velocity. This changed the game. Production started teaching engineers about workflow, when the time was right to work on the tools, then engineering taught production about quality six sigma management. Soon after, a new record was hit of the highest volume with quality the business ever saw. When you track metrics, you will see changes in behavior.