Created on 2018-01-04 16:30
Published on 2018-01-04 19:08
Without a clear map, it's easy to get off-track. In the case of air-traffic control, this is mission critical. The same can be said for managing multiple improvements on a complex process.
What about you? Are you rolling out a new set of improvement initiatives? When you present your initiatives, are people asking you about the benefits and interactions? Every new initiative should somehow help improve the business, but how are they connected?
Also, it’s difficult to estimate the impacts of a single initiative. Estimating multiple impacts from multiple initiatives on a complex process used by multiple groups might seem impossible.
This article will show you some proven best practices for working through this.
Yes, sometimes we all need our MOMI. Somewhere in your change management war room, you need a Map of Metrics and Initiatives to keep things straight.
Start with your KPIs. No, not the list of 100 metrics. We need your “True” Key Performance Indicators. This a shortlist of the critical few metrics that tell us if we are really getting better results.
Below, I’m using Program Performance as the highest result and just three KPIs related to timing, cost, and quality. They are Average days late for Gates; Engineering Cost per Equivalent Unit; and Production Validation First Time Pass %.
Drilling into Engineering Cost per EQU, we see Labor Cost per EQU is the biggest, so we go deeper into this to see Hours per EQU and Cost per Hour. By the way, if you multiple the two, you get Labor Costs per EQU.
Expanding Hours per EQU, we see categories, like Body of Knowledge and initiatives (with lightbulbs) like Subject Matter Technical Experts, Benchmarking of products, and Design for Assembly and Manufacturing. The free software used to create these maps is called freemind.
This connects the initiatives with the KPIs in a graphic format that anyone can follow. Now, we can see the connections. If we agree to move forward with an initiative, we already know where to expect to see the main effects. If we stop an initiative, it’s clear where the pain will be felt. A big MOMI can fill a wall, but it's all there in plain sight.
We can also connect ‘pain points’ from your organization. What is hurting us or slowing us down? A SWOT analysis can be used to find weaknesses and threats. Pain points can be connected to the initiatives and may help identify new initiatives, which are added to the map.
Estimating impacts for initiatives is challenging. One of the biggest challenges is understanding the current spending patterns. In product development, costs are often tracked by project in several categories over time, but not by Deliverable or even by Gate. However, we can start with what we know and fill in the rest with some educated guesses to construct a ‘typical’ WBS for planning. Here is how to do it.
Start with gathering data on Costs and Hours by Month for typical, completed programs and the Phase dates. From this, we can calculate the Weight in Phase. The example below shows 12% for Phase 2. The next step is to list the deliverables and ask experts for the Weight Within Phase for each Deliverable. Validate the results as much as possible. For example, you can compare the proportion of CAD operators to requirements engineers in the Standard WBS vs your real headcount. Cross-check from as many angles as possible.
You're probably wondering where Hours per Deliverable comes from, but first I need to introduce Equivalent Units. EQUs are explained fully in Engineering Productivity Measures. The EQU method was developed to measure and compare output of engineering projects on a common scale. 1 EQU of work represents a 'typical' project scope. If we know the average Hours per Equivalent Unit (EQU) is 21.077, we can calculate the Gate Spend Per Phase is 2,543 Hours/EQU. A project with 2 EQUs would require 5,086 hours.
Now, we have a foundation for both for estimating Hours for new projects and the impacts of initiatives. In the matrix below, a product group/technical center estimated the PLM (product lifecycle management) initiative impacts most Deliverables by 10%. No Change Zones has a 2% impact on roughly half the Phase 2 Deliverables. We can see where multiple initiatives impact the same Deliverables and avoid saving more than we spend on a Deliverable.
At the bottom, Cost per Hour is used to convert Hours into Costs. Here, I'm using Blended Rates, which equal all the labor costs divided by the hours for a diverse group of job titles. Blended Rates are useful for high level comparisons and historical trends. More on this in another article coming soon.
Other Cost Categories can be added (ex: Testing, Tooling, Prototypes). These can be treated at the Gate level or even total program. Going to the Deliverable level will be too complicated.
With our powerful Standard WBS in hand, each leader of a product group and/or location can build a Roadmap to the Benchmark. Each leader chooses initiatives that are right for them and estimates the initiatives savings. Next, project owners are assigned and due dates are established.
The Roadmap also identifies top committed initiatives and their impact on Labor Cost per EQU. The Waterfall Chart shows the march from the Baseline of $740,000/EQU to the Benchmark of $656,000/EQU (see below).
Now management can demonstrate their commitment to close their gaps.
Developing a Map of Metrics & Initiatives and a Roadmap helps to drive continuous improvement. This is best done with help from professionals with the right experience and background. This article shares as much as possible in a short article format, but there is much more to executing this properly in the real world.
Please connect with me if you'd like more information at: firstname.lastname@example.org
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This is part of a series of articles about applying continuous improvement processes to measure and improve the performance of product development projects. Here is the complete list in recommended reading order.
Copyright 2018 Richard Crayne