4.22.2013

Understanding the Whole Enterprise

Last week, I spent some time on the phone with Jerry Harbour discussing his latest book titled The Performance Mapping and Measurement Handbook, and I asked him this question: In The Performance Mapping and Measurement Handbook, you talk about the need to develop performance maps and measures at multiple levels, starting at the higher enterprise level. Why is better understanding of the entire enterprise or the “whole thing,” as it were, so important? Here is Jerry's complete response:

Most organizations do an effective job in the “how to” of performance improvement. Where I often see them falter is in the “what to” improve part of the performance equation. This is why performance mapping and measurement is so important. Performance maps and measures, especially when developed at multiple levels, represent a systematic and objective way of identifying and prioritizing areas for improvement. Sometimes performance gains garnered at the local process level fail to translate into real improvements at the higher enterprise level. A common reason for this observed failure is the presence of unidentified throughput constraints and bottlenecks within the higher enterprise materials flow network. For example, one company implemented a very successful Lean Six Sigma effort at an upstream production site that significantly increased output. Yet at the enterprise level, those gains in productivity could not be realized because an immediate downstream transportation link that connected the production site to a needed export terminal was maxed out in terms of carrying capacity. Because the company couldn’t ship the increased output, it couldn’t sell those newly accrued gains to awaiting customers. Accordingly, the only real result from the company’s local improvement effort was increasing stockpiles of output that couldn’t be shipped or sold. This is why I always advise organizations to first take the time to better understand performance (and especially material flow) at the higher, enterprise-level right at the beginning of any local process improvement effort . As in the presented example, overall, there is very little benefit in making gains or improvements in one part of an enterprise if that gain cannot be realized or “flowed” throughout the entire enterprise.

Do any readers use performance maps? Have any of you run into the types of cross-functional or  hierarchical problems that Jerry describes?

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