SETTING PERFORMANCE IMPROVEMENT TARGETS
Knowing the present performance status at any moment in time is the starting point.
Knowing the extent of the required or wanted improvement is the next step.
The new-world enterprise needs to identify gaps and to set performance improvement targets for each class of performance.
This is typical of a valid approach to improvement, including the so-called continuous improvement style: setting realistic and, at the same time, challenging targets creates the tension necessary to get there.
The new-world enterprise has two methods available to set the path to performance improvement:
Identifying gaps and setting corresponding targets through an absolute method means that:
enterprise's people, following their past experience, know-how and ideas, as well as cultural guidelines; and making projections and simple extrapolations; calculate somehow the theoretical, optimal level of performance in a given area (a class of performance - a key performance component - a process or a sub-process).
This corresponds to identifying criteria for setting a 5 score in the previous radar-chart example.
This method is more feasible and viable than what it seems.
After all, the optimal target for an enterprise Image (just to make an example) can easily be set according to enterprise's values, principles and believes (enterprise's culture).
Likewise, the optimal or ideal productivity level (theoretical target) of a productive process can easily be set on the basis that the overall processing time should not exceed (or be as close as possible to) the sum of the value-adding times of each process' activity....
In a similar manner, quality targets can absolutely be set, as well as customer's satisfaction targets, economical targets, financial targets, and company climate targets, and machine utilisation targets....
There are two risks inherent in absolute methods.
The one is identifying too narrow or too wide gaps, corresponding to setting too mild or too unrealistic targets (entity mistake).
Experience plays a determinant role. Year after year people "learn to learn" and learn how to perfect their methods. If the learning process is fast enough and corrective actions to the chosen methods are rapidly introduced, the approach is still very valid and the associated cultural enrichment is extremely valuable per se.
The other possible risk is to spend valuable time and resources in identifying performance gaps and setting associated improvement targets in non-relevant performance areas, non-relevant for that enterprise (direction mistake).
This phenomenon is very important. Performance gaps and improvement targets need to be relevant. Alternatively, an enterprise might be trapped in the black-and-white TV set mistake (or, improving to absurd levels a B&W set that nobody buys because the market wants colour TV sets....).
Ranking improvement actions in logical/rational priority order is an essential step in Performance Improvement (see below).
On the other hand, relative methods give higher guarantees of "realism", both in terms of entity and direction.
Gaps identification and targets setting via a relative method consist in comparing enterprise's performance in a given area with that of other enterprises - even belonging to a different sector - in the same area of performance; and establishing paths of improvement actions accordingly.
The most known relative method is definitely Benchmarking. But there are others.
Benchmarking consists in comparing own improvement practices, or ideas, or strategies with those of world-class enterprises (the best in the class-room) aiming at three major objectives:
- Identification of the most important areas to improve
- Identification and quantification of improvement targets
- Best approach to improvement
Through Benchmarking it is possible to measure an enterprise's methods, processes, procedures, product and service performance against those companies that consistently distinguish themselves in the same category of performance.
While very positive because offering realistic paths to improvement, priority directions and tested methods/approaches, also relative methods have a draw-back and an associated risk: that lies in possible "transplant" failures.
Every enterprise is a living organism, a delicate equilibrium of human factors, technology factors, methods, cultural principles, etc.
As such, there are no two identical enterprises on earth. Each one is "different".
Importing into an enterprise methods, approaches, strategies and cultural principles may give origin to reject phenomena. This is particularly true when the benchmarked enterprise/s' global approach is simply and a-critically imported or copied. Without the necessary adaptations, the reject risk is too high.
When, on the other hand, the necessary personalisation is done, the risk is much lower or nil.
This consists in grasping core principles from the benchmarked enterprise and refining associated methods to suit own style and culture.
Most definitely, every enterprise aiming at world-class status needs to adopt a personalised combination of absolute and relative performance improvement methods.
Today, it is rather universally agreed that the target in performance improvement is the lean status: this requires the adoption and deployment of healthy Lean Thinking principles (more »).
Once Performance Targets are set, the road is wide open to improvement. (more »)