A company’s strategy is how it will realize its vision in the mid- to long-term.
The strategy needs to be translated into action via strategic objectives, and operational objectives.
The achievement of both strategic and operational objectives needs to be regularly monitored to see, if the corporate strategy is on track.
It's common to use KPIs (Key Performance Indicators) for this.
They measure the degree to which strategic objectives have been achieved and are often made visible through dashboards.
KPIs needs to be broken down to operational objectives for departments, teams and individuals to monitor, often referred to as Process Indicators. Process Indicators serve as an early warning for operational problems.
Process Indicators measure how a process is performing at the operational level. The Process Indicators must match the KPIs, which means that if the Process Indicators are performing good, so is the KPIs.
To motivate individuals, teams and departments, their operational goals and Process Indicators must be something they can influence, and something they believe is important for the strategic objectives (KPIs). Otherwise they lose motivation.
Here is one example: An operator's performance is evaluated based on OEE (Overall Equipment Effectiveness). The downtime of the machine is mostly affected by access to maintenance personnel and technicians. OEE is not a metric reflecting the operator's effort. If the operator is evaluated based on stop causes he/she affects, it's more motivating.
Goals are not motivating if they are not reflecting your effort.
Balanced goals and KPIs are important as well. By focusing entirely on productivity, quality costs and waste might increase. There may be situations where you have to choose between waste and efficiency. It's important that operators know what to prioritize and when.
Lean Six Sigma use the problem-solving method DMAIC: Define (understand problem and set goals) - Measure (map current situation) - Analyze (prove root causes) - Improve (solve root causes) - Control (create lasting results). The Define phase is about setting goals and measures: How do we measure success?
Here is a "rule-of-thumb" to help you define clear goals:
Use the verb "increase" or "decrease", include the unit the is being increased or decreased and the unit measure, estimate the baseline (current situation), state the target and when to achieve it.
Here's an example:
"The goal is to reduce pizza delivery time from 30 minutes to 20 minutes within 2020."
An "operational definition" is important to ensure that everyone measures the same way and has the same expectations of what to achieve.
How do you measure delivery time?
- The time from a customer order pizza until the customer has received the pizza.
- The time from the kitchen receive a pizza order until the pizza is packed in a box.
- The time from the pizza is packed in a box until it is delivered to the customer's door.
There are many possibilities which makes it easy to make assumptions resulting in misunderstandings. To be clear on how we measure, we need an "Operational Definition" that describes how the measurement is performed.