Leaders of improvement projects are always prepared for the inevitable question, “How do you know that you are successful?”
No continuous improvement initiative is complete without a clearly defined approach for measuring success. Since success can be defined in a variety of ways it’s necessary to adopt metrics that, when taken together, will provide a more complete picture and understanding of the implementation results.
The success of improvement projects can best be measured by
- changes in financial results
- utilizing an assessment process
- adopting tools and techniques designed to provide an understanding on how the company is viewed by its key stakeholders
These key measures together will provide a balanced view of the success of your continuous improvement implementation initiative.
There is one rule to follow: whatever measures or KPIs you choose must provide line of sight to the improvements.
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Measure success based upon the financial results.
Has the project improved profitability, or generated incremental cash flow, or both? Organizations often measure improved financial results in various ways. Some prefer a total-cost-of-goods-sold approach; others prefer a cost-per-unit measure.
Including the “keepers of the numbers” in the process establishes credibility in the reporting and ensures that the calculation method will be consistent with accepted accounting principles.
Once methodology and data requirements are defined, develop a standardized benefits tracking report, establish the interval for reporting, and create a distribution list to ensure all stakeholders remain informed.
Measure success by using an assessment tool.
In most cases, when organizations implement improvements suggested by assessment results, their processes, business practices, and results will improve. Subsequent assessment scores will also improve, providing a measure of success as the company moves along a path of continuous improvement and ever closer to benchmark or best-in-class performance.
Measure success based on the view of stakeholders
No organization operates in a vacuum. They interact with any number of parties or entities whose perceptions are critical to their long-term business success. These interested parties or stakeholders can include your shareholders, owners, customers, employees, partners, suppliers, and your community—all of whom have an interest in the financial performance of the business. As your company plans for its future, it should have a strategy component that is focused on the needs and expectations of its stakeholders.
Tools to measure the levels of satisfaction and acceptance among stakeholders typically would include surveys, focus groups, benchmarking, and assessments.
Other Metrics That Contribute to Success—
Activity reports will show you how hard the organization is working toward positive change, who is involved in the work, and where more coaching and mentoring is needed.
In the perfect world, improvements are completed at about the same rate as new opportunities coming into the system. Projects that get bogged down after being identified lower morale, decrease engagement, and reduce bottom-line impact. Leaders should be able to find the percentage of in-progress improvements at any time.
By tracking who is active on improvement projects over time, you can develop a baseline, compare current results to that baseline, and identify any trends. For example, you discover whether the ROI you’ve achieved is due to a small group of employees (a sign of a culture in need of attention), or a large group, indicating a vibrant culture.
Engagement reporting will tell you how many opportunities people submit per year on average and the number of team members active in your improvement management system. This gives you a view into how deep and wide your improvement culture goes.
Product Quality Metrics
There are several ways to determine if continuous improvement has had a positive impact on the quality of products and services. The number of defects identified before the product reaches the customer is one important metric. Others include the number of product returns, complaints, and requests for replacement parts.
Increasing product quality is hugely important to successful businesses; they recognize that superior products and services is how to increase sales, create customer loyalty, and increase the pride felt by their employees.
There are also aspects of quality that are harder to measure in the short term, such as how well your product or service meets the needs of customers or, better yet, delights them. There should be a positive long-term effect in terms of sales and customer loyalty, but it can be difficult, if not impossible, to know how much a particular improvement contributed to that success.
Time Savings Metrics
Often, the result of an improvement is a shorter time to market or a more efficient process that makes it possible for each person or resource to do more. Efficiency is the name of the game where time savings are concerned. It can be measured in increased output from any part of a process, given the same amount of time in the day or week. We refer to this as “soft savings,” because while it doesn’t directly result in an increase in revenue or a cost savings, it does free up employees’ time so that they can do other value-added activities, thus saving the organization money in the long run.
Beyond any “soft savings,” there are situations where time saved for employees leads to reduced amounts of overtime, which is a cost reduction that directly impacts the bottom line.
Organizations have a responsibility for the safety of every customer, patient, employee, or guest who enters their locations—as well as those who buy their products or services. Safety concerns are often a key reason that companies adopt a continuous improvement program, so don’t forget to measure the impact in this dimension. Of course, you can’t easily measure the financial impact of things like “lawsuits avoided” or “potential missed days of work,” but even counting the safety improvements and reporting that number is useful information in evaluating the impact of continuous improvement. One way organizations do measure the impact of safety is a concrete reduction in things such as liability insurance costs or workers’ compensation costs.
Customer Satisfaction Metrics
Most studies show that 80% of companies say they are delivering superior customer service. Sadly, only 8% of customers agree. This is why it is essential to measure how improvements impact customers, rather than just taking a guess. Come up with a way to measure that makes sense for your organization—it could be anything from surveys, customer service ratings, and focus groups to an increase in sales.
Employee Satisfaction Metrics
There are often disconnects between how satisfied employees are and how satisfied management thinks they are. Companies that implement a continuous improvement approach to business see employee satisfaction and employee engagement improve over time, as employees feel increasingly valued and respected for their work.
Are there other specific metrics your company should track? Probably. To find out, keep this pearl of wisdom in mind: “What gets measured gets managed.” Think about the things your organization needs to improve and create metrics around those. Doing so will help justify your investment in improvement and the technologies you need to support it.