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Michael Balle

Michael Ballé: Evaluate efforts to improve performance indicators and develop self-competencies

By Michael Balle, co-author of The Gold Mine and The Lean Manager - Last updated: samedi, décembre 17, 2011 - Save & Share - Leave a comment

What an interesting question! And difficult to answer, as every organization has its own traditions and practices on the topic. If we’re talking evaluation and not incentive, the one thing I’ve learned the hard way in lean transformations is that you can’t simply focus on results because you’ll tend to give the hardest projects to some of your best guys. If a hospital evaluates its obstetricians on complications at childbirth, it will unwittingly punish the top specialist that gets all the hard cases. Results on key indicators are nonetheless important.

What we tend to do first is to separate financials from performance. One thing Orry Fiume tought me is to see financial performance as a quantity and a price. Which blends in well with my father’s practice of using a set of ten to twenty physical performance indicators (accidents, complaints, absenteeism, ppms, pph, OEE, suggestions, days of inventory, etc.). Freddy Ballé used to evaluate case by case the executive’s effort to improve these performance indicator. In a situation where the CEO does the gemba visits regularly, this is not as hard as one thinks to do –  I’ve accompanied CEOs on gemba walks where we keep meeting the same people over and over, and we do get a sense of how hard they try and how well they succeed.

Beyond that, in companies where lean transformation continues beyond the third and fourth year, we’ve started focusing on understanding what problems a person should be able to solve at each pay grade. This is very hard work, but we try to come up with a list of about ten to fifteen technical problems and tend to fifteen organizational problems specific to the job and the organizational level. This list is then used twice a year by the person’s manager to evaluate their progress and establish ONE point to improve by selecting a type of problem that fits the difficulty, and asking the person to come up with their own action plan for progress.

In some companies, (surprise, surprise,) we’ve taken inspiration from Toyota practice (or at least the way it’s practiced in France) and established a review based on:

1)     Expected Role

2)     Competency Improvement Focus: 3 competencies to improve and specific practices to focus development efforts on

3)     Individual objectives: up to five with challenging target and minimal target

The second part of the review is based on the competency list we’ve developed at the paygrade level.

Just as an illustration, here is a Toyota competency list:

1)     Accurate information gathering and analysis

2)     Creation of innovative visions

3)     Communications and sharing of mid-to-long-term action plans

4)     Awareness of situations and decisiveness

5)     Perseverance

6)     Strategic reallocation of management resources and review of work methods

7)     Establishing frameworks and systems for management

8)     Suitable assignments and Objective performance review

9)     Feedback of evaluation results and long-term development of others

10)  Realisation of own mission

11)  Technical knowledge and capability

To be honest, this list is very leadership biased – which is probably a good thing, but in most companies we work in, the list will be more technical-skill based (half) and more managerial. Leadership development remains a constant worry, and I suspect that it all depends of the maturity of the company.

The other very tricky issue is that of compensation, and here we’re all a bit in the dark because companies rarely communicate openly about these subjects. The two main principles that seem to emerge are:

1)     objectives should be shared at executive level. For instance, complaints reduction is unlikely to happen unless engineering, manufacturing and purchasing work together – so the trick is to give individual objectives that are the same across the management team.

2)     It’s very hard to determine the right compensation level, so HR has to follow and SPC approach to it and we typically start with a seniority/pay graph which plots each person as well as the industry average. HR is typically reluctant to do this, but when they do, compensation decisions become much easier – the difficulty with compensation is, of course, that people are sensitive to relative pay, not absolute: what matters to them is how well they’re treated compared with their peers within or without the company.

For what it’s worth Freddy Ballé used to split his bonus system three ways: 1) progress on shared objectives, 2) efforts to achieve performance improvement and 3) on specific personal progress point. But this remains a very tricky issue, and a critical one. Employees may react to what the boss says, but they sure know what the boss is ready to pay for.

In any case, thank you for asking this question, in trying to answer I’ve realized that I have no idea where other lean thinkers are on this topic and it is an absolutely critical one if we want to sustain lean transformations over the mid-term, so this is definitely an urgent research subject!

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