Six Sigma Bench Marking

8/6/2019 Six Sigma Bench Marking

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Client, Enterprise & Competitive Intelligence for Product, Process & Systems InnovationDr. Rick L. Edgeman, University of Idaho

IXCUSTOMER & COMPETITIVE INTELLIGENCE

FOR S YSTEMS INNOVATION & DESIGNS IGMA S

DEPARTMENT OF STATISTICS

DR. R ICK EDGEMAN, PROFESSOR & CHAIR SIX SIGMA BLACK [email protected] OFFICE: +1-208-885-4410


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IXS IGMA SDEPARTMENT OF STATISTICS

Benchmarking


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a highly structured strategy for acquiring, assessing, andapplying customer, competitor, and enterprise

intelligence for the purposes of product, system orenterprise innovation and design.


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Six Sigma Strategy and Methods

Managing Six Sigma Projects:Benchmarking from a Six Sigma Perspective


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The Analyze Phase of DM A IC:Define Performance Objectives

Defects

p(x) Benchmark

Z short-termBaseline

Benchmark:World-class

performance

Z short-term:The level of performance abusiness should be able toachieve giventhe investmentsalready made

Baseline:The current level of performance

Benchmarking sets the ultimate goal, while baselining takes current measurements to monitor a process

Benchmarking sets the ultimate goal, while baselining takes current measurements to monitor a process


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Define Improvement Objective For Y Z Short-term: Short-term performance of the process

Benchmarking: Get to best-in-class

Learning Curve-Based: Get to 6 Sigma across all processes in 5 years

Defect Reduction: e.g., eliminate 90% of defects

Sigma Scale of Measure

1

10

100

1000

10000

100000

1000000

Your Process

ImprovementObjective

1 2 3 4 5 6

The Basic Objective

The Basic Objective

Six Sigma Teams Set Aggressive, but Achievable Objectives .


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Actual (LT)Potential (ST)

0.7700.7690.7680.7670.766

Process Performance

USLLSL

Actual (LT)Potential (ST)

1,000,00 0

100,00 0

10,000

100 0

100

10

1

3002001000

Potential (ST) Actual (LT)

Sigma

PPM

(Z.Bench)

Process Benchmarks

0

3.42

309

6.00

Process Demographics

Opportunity:

Nominal:

Lower Spec:

Upper Spec:

Units:

Characteristic:

Process:

Department:

Project:

Reported by:

Date:

Report 1: Executive Summary

Process Capability


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BenchmarkingBenchmarking is the process of continually searching for the bestmethods, practices and processes, and either adopting or adapting theirgood features and implementing them to become the best of the best.

How is benchmarking used? Compare performance of an existing process against other companies best-in-class practices Determine how those companies achieve their performance levels Improve internal performance levels

Use benchmarking both for comparison of performance as well as to understand the potential for improvement

Use benchmarking both for comparison of performance as well as to understand the potential for improvement


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Types of BenchmarkingCompetitive Benchmarking

Functional BenchmarkingInternal BenchmarkingProduct BenchmarkingProcess Benchmarking

Best Practices BenchmarkingStrategic Benchmarking

Parameter Benchmarking


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Competitive Industry leaders Top performers with

similar operatingcharacteristics

Functional Top performersregardless of industry

Aggressive innovatorsutilizing new technology

Internal Top performers

within company Top facilities

within company

Best PracticeOverlap

B enchmarking M ethodology


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Benchmarking Is A continuous process

A process of investigation that provides valuableinformation A process of learning from others; a pragmatic searchfor ideas A time-consuming, labor-intensive process requiringdiscipline A viable tool that provides useful information forimproving virtually any business process


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B enchmarking Methodology Checklist

1. Identify Process to Benchmark

Select process and define defect and opportunitiesMeasure current process capability and establish goal

Understand detailed process that needs improvement


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B enchmarking Methodology 2 . Select Organization to Benchmark

Outline industries/functions which perform yourprocessFormulate list of world class performersContact the organization and network through to key contact


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B enchmarking Methodology 3 . Prepare for the Visit

Research the organization and ground yourself intheir processesDevelop a detailed questionnaire to obtain desiredinformation

Set up logistics and send preliminary documents toorganization


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B enchmarking Methodology 4 . Visit the Organization

Feel comfortable with and confident about your homework Foster the right atmosphere to maximize resultsConclude in thanking organization and ensure follow-up if necessary


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B enchmarking Methodology 5 . Debrief and Develop an Action Plan

Review team observations and compile report of visitCompile list of best practices and match toimprovement needs

Structure action items, identify owners and move intoImprove phase


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B enchmarking Methodology 6 . Retain and Communicate

Report out to business management and 6 leadersPost findings and/or visit report on local server/6

bulletin boardEnter information on GE Intranet benchmarking projectdatabase


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Benchmarking CompliancePolicy regarding benchmarking protocol should be communicated to all

employees involved, prior to contacting external organizations. Guidelinesshould address the following areas:

Misrepresentation do not misrepresent your identity in order togather information

Information requests a request should be made only for information your organization would be willing to share with another company

Sensitive / proprietary information avoid direct benchmarking of sensitive or proprietary information

Confidentiality treat all information as confidential


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Benchmarking ComplianceAvoiding inappropriate communication and

contacts with competitors

Never propose, enter, or engage in a discussionrelated to any agreements with a competitor to fix prices, in terms or conditions of sale, costs, profit margins, or other aspects of the competition

Keep communications with competitors to aminimum make sure there is a legitimate businessreason for all such communications


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Benchmarking ComplianceConsult with business legal counsel before initiating any

contact with competitors regarding Six Sigma (or any other

topic):Benchmarking

Training of suppliers and customers they may also becompetitors

Comply with GECS guidelines for:Documenting competitor contacts check with legal counsel

first.

Participating in trade associations and standards - setting groups.


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Benchmarking

Best Practices, Processes & Products


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Client, Enterprise & Competitive Intelligence for Product, Process & Systems InnovationDr. Rick L. Edgeman, University of IdahoCustomers are I ncreasingly D emanding

Customer expectationsare simple. They want more goods

and services at a lower cost, in ashorter time frame, with

more information!


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Client, Enterprise & Competitive Intelligence for Product, Process & Systems InnovationDr. Rick L. Edgeman, University of IdahoCustomer E xpectation D ilemmaTime

Performance Gap


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Benchmarking(A) The process of identifying and learning from best practices anywhere in

the world is a powerful tool in the quest for continuous improvement.

(B) The systematic process of searching for best practices, innovative ideas,and highly effective operating procedures that lead to superior performance.

Learning by borrowing from the best and adapting their approaches to fit your own needs is the essence of benchmarking. It has broad applications inproblem solving, planning, goal setting, process improvement, innovation,reengineering, and strategy setting. It is a fundamental business skill thatsupports quality excellence.


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Benchmarks & Benchmarking:Ideas & Definitions

Benchmarking : is the on-going search for best practices that producesuperior performance when adapted and implemented in ones ownorganization.Emphasis : On-going outreach activity G oal : Identification of best operating practicesW hen Implemented : Produces superior performance.

Benchmarking : is the actual process of investigation and discovery thatemphasizes the operating procedures as the things of greatest interest and value.Benchmarks : are measurements to gauge the performance of a function,operation, or business relative to others.


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Client, Enterprise & Competitive Intelligence for Product, Process & Systems InnovationDr. Rick L. Edgeman, University of IdahoB est P ractices - the E nds

E nablers - the Means to the E nds

SOFT MEDIUM HARD

Training

Communication

E mpowerment

Attitude

ManagementInvolvement

Goals & Objectives

Sequence

Controls

Measures

Policies &Procedures

Plant

Suppliers

Money

Technology

E quipment


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Benchmarks & Benchmarking:Managing Change

Best Practices Benchmarking can be described asthe process of seeking out and studying the best internal andexternal practices that produce superior performance. Dont reinvent what others have learned to do better! Borrow shamelessly!

Adopt, adapt, advance! Imitate creatively! Adapt innovatively!


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Client, Enterprise & Competitive Intelligence for Product, Process & Systems InnovationDr. Rick L. Edgeman, University of IdahoB enchmarking for B est P ractices

Metrics

Benchmarks

OperatingStatistics

Processes

Best Practices

Benchmarking

Practices


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Process BenchmarkingProcess benchmarking focuses on discrete work processesand operating systems, such as the customer complaintprocess, the order-and-fulfillment process, or the strategicplanning process.Process benchmarking seeks to identify the most effectiveoperating practices from many companies that perform

similar work functions. Its power lies in its ability to produce bottom-line results. If an organization improves a core process, for instance, it canthen quickly deliver process improvement


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Performance BenchmarkingPerformance benchmarking enables managers to assesstheir competitive positions through product and servicecomparisons.Performance benchmarking usually focuses on elementsof price, technical quality, ancillary product or servicefeatures, speed, reliability, and other performance

characteristics. Reverse engineering, direct product or service comparisons,and analysis of operating statistics are the primary techniquesapplied during performance benchmarking.


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Strategic Benchmarking S trategic benchmarking examines how companies

compete and is seldom industry-focused. It roves acrossindustries seeking to identify the winning strategies that have enable high-performing companies to be successful in their marketplaces.

S trategic benchmarking influences the longer-termcompetitive patterns of a company. Consequently, thebenefits may accrue slowly.


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A pplications & BenefitsSetting & Refining Strategy;

Reengineering Work Processes & Business Systems;Continuous Improvement of Work Processes & BusinessSystems;Strategic Planning & Goal Setting;

Problem Solving;Education and Idea Enrichment;Market Performance Comparisons & Evaluations;Catalyst for Change.


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Widely AcknowledgedBenchmarking Benefits

Improves organizational quality; Leads to lower cost positions; Creates buy-in for change; Exposes people to new ideas; Broadens the organizations operating perspective; Creates a culture open to new ideas; Serves as a catalyst for learning; Tests the rigor of internal operating targets; Creates an external business view; Raises the organizations level of maximum potential performance.


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B enchmarking

Code of Conduct


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The B enchmarking Code of Conduct: Adopted by The Council on B enchmarking of

The Strategic Planning Institute

Successful Benchmarking Includes Personal Interaction, Openness,Sharing and the Transfer of Information.

Trust Between Benchmarking Parties is Fundamental.

To Respect the Rights and Prerogatives of Others and Reflect LegalConsiderations and Limitations, the Following Guidelines are

Suggested for any Benchmarking Interaction.


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Benchmarking:Legal & Ethical Guidelines

Ethics Principles, guidelines, or standards that determine a protocol of

interaction between individuals and organizations. Deal in a forthright & above board manner. Provide for a clear understanding of the intended use of information.

Consult your partner(s) should your intent change. Conduct benchmarking activities with integrity and in a professional

manner. Establish specific ground rules in advance, particularly when benchmarking with a competitor.


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Benchmarking:Legal & Ethical Guidelines

L egality Never misrepresent yourself or your organizations interest in a

benchmarking exchange. Treat information obtained from a benchmarking partner as

privileged. Identify all parties who will have access and the extent of that access.

Comply with antitrust laws; be aware of potentially sensitive issuesand consult with legal counsel if gathering procedure is in doubt,particularly if dealing with current or potential competitors.


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Legality: Proprietary Information Any information (in tangible or intangible form) created, acquired or

controlled by the company that has not been published or released withoutrestriction of a type the company wishes to maintain confidential.Proprietary information includes various kinds of technical, information perSecurities & Exchange Commission requirements. Request and accept only the types and levels of information that you and

your organization are willing to share. Understand your and your partner organizations definitions, restrictions,

and controls on proprietary information. Respect the sensitivity of partner organizations in areas that you might

not consider proprietary. Seek prior understanding about what can be shared and / or how it

might be used. Consult legal counsel on restrictions or rights regarding proprietary

information.

Benchmarking : Legal & Ethical Guidelines


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L egality: Intellectual Property Refers to the kind of property created from intellectual activities in the

industrial, scientific, literary, or artistic fields. It includes business andtechnical information (e.g. scientific works, inventions, industrial designs,computer programs) and the material that might lead to patents, copyrights,trademarks, service marks, and commercial names or designations. Know the internal organization source for any information that your

organization plans to provide in a benchmarking exchange. Understand the nature and value of your organizations intellectual

property. Respect the values of your benchmarking partner. Seek prior understanding about what can be shared and how it might be

used. Consult legal counsel on restrictions or rights regarding intellectual

property.

Benchmarking :Le al & Ethical Guidelines


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Benchmarking :Legal & Ethical Guidelines

ConclusionK nowing the nature of the benchmarking topic, dealing ethicallyand legally, understanding information exchange latitudes, and

following the Benchmarking Code of Conduct

will contribute to a successful and mutually beneficial benchmarkinginterchange.


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PRINCIP L ES To contribute to efficient, effective and ethical benchmarking, individuals

agree for themselves and their organization to abide by the followingprinciples for benchmarking with other organizations:

LEGALITY: Avoid discussions or actions that might lead to or imply aninterest in restraint of trade: market or customer allocation schemes,price fixing, dealing arrangements, bid rigging, bribery, ormisappropriation. Do not discuss costs with competitors if costs are anelement of pricing.

EXCHANGE: Be willing to provide the same level of information that yourequest, in any benchmarking exchange.




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PRINCIP L ES CONFIDENTIALITY: Treat benchmarking interchange as something confidential

to the individuals and organizations involved. Information obtained must not becommunicated outside the partnering organizations without prior consent of participating benchmarking partners. An organizations participation in a study should not be communicated externally without their permission.

USE: Use information obtained via benchmarking partnering only for the purpose of improvement of operations within the partnering companies themselves. Externaluse or communication of a benchmarking partners name with their data or observedpractices requires permission of that partner. Do not, as a consultant or client,extend one companys benchmarking study findings to another without the firstcompanys permission.




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PRINCIP L ES FIRST PARTY CONTACT: Initiate contacts, whenever possible, through a

benchmarking contact designated by the partner company. Obtain mutualagreement with the contact on any hand off of communication orresponsibility to other parties.

THIRD PARTY CONTACT: Obtain an individuals permission beforeproviding their name in response to a contact request.

PREPARATION: Demonstrate commitment to the efficiency andeffectiveness of the benchmarking process with adequate preparation ateach process step; particularly at initial partnering contact.

The B enchmarking Code of Conduct: Adopted by The Council on B enchmarking of the Strategic Planning Institute


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Remember 1. Keep it legal; 2. Be willing to give what you get; 3. Respect confidentiality; 4. Keep information internal; 5. Use benchmarking contacts; 6. Dont refer without permission; 7. Be prepared at initial contact.


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Etiquette & Ethics In actions between benchmarking partners, the emphasis is on openness andtrust. The following guidelines apply to both partners in a benchmarkingencounter. In benchmarking with competitors, establish specific ground rules up

front, e.g. We dont want to talk about those things that will give eitherof us a competitive advantage, rather, we want to see where we both canmutually improve or gain benefit.

Do not ask competitors for sensitive data or cause the benchmarkingpartner to feel that sensitive data must be provided to keep the process

going. Use an ethical third party to assemble and blind competitive data, withinputs from legal counsel, for direct competitor comparisons.




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Etiquette & Ethics Consult with legal counsel if any information gathering procedure is

in doubt, e.g., before contacting any direct competitor. Any information obtained from a benchmarking partner should be

treated as internal, privileged information. DO NOT:

Disparage a competitors business or operations to a third party. Attempt to limit competition or gain business through the

benchmarking relationship. Misrepresent oneself as working for another employer.




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Benchmarking Exchange Protocol As the benchmarking process proceeds to the exchange of information,

benchmarkers are expected to: Know and abide by The Benchmarking Code of Conduct. Have basic knowledge of benchmarking and follow a benchmarking process. Have determined what to benchmark, identified key performance variables,

recognized superior performing companies, and completed a rigorous self-assessment .

Have developed a questionnaire and interview guide, and will share these inadvance if requested.

Have the authority to share information. Work through a specified host and mutually agree on scheduling and

meeting arrangements.




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Benchmarking Exchange Protocol:Guidelines for Face-to-Face Site Visits

Provide meeting agenda in advance. Be professional, honest, courteous, and prompt. Introduce all attendees and explain why they are present. Adhere to the agenda: maintain focus on benchmarking issues. Use language that is universal, not ones own jargon. Do not share proprietary information without prior approval, from the proper

authority, of both parties. Share information about your process, if asked, and consider sharing study results. Offer to set up a reciprocal visit. Conclude meetings and visits on schedule. Thank the benchmarking partner for the time and for the sharing.




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Benchmarks & Performance Measurement

Revolutions begin long before they are officially declared.For several years, senior executives in a broad range of industries

have been rethinking how to measure the performance of their businesses.

At the heart of this revolution lies a radical decision: to shift fromtreating financial figures as the foundation for performance

measurement to treating them as one among a broader set of measures.

Professor Robert Eccles, Harvard Business School


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B enchmarking W hys & H ows Benchmarking represents a versatile process management tool thathelps organizations identify and understand what constitutes bestoperating practices.

Benchmarks are the operating statistics or measures that define theachievement level of any given practice or system.

These are not in and of themselves enough since they provide no insight into the root causes of performance differences.

A flexible set of benchmarks reflects full process or systemcapabilities. Performance indicators may include dimensions such ascost, productivity, cycle time, yields, error rates, waste and turnover.


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R ange of BenchmarksF OCUS Benchmark Levels Type Improvement

Benefit

STRATE G IC Best-in-World 7 Generic Processes 30%* Product / Services* Business Processes* Business Function

Best-in-Country 6 Functional Areas 30%-40%

PERFORMANCE Industry Leader 5 Direct Competitor 5%-20%* Customer Satisfaction N orm 4

* Output : Standard 3--Products & Services

PROCESS Best-in-Company 2 Internal 5%* Practices & Capability* Inputs:

-- Material/Supplier Baseline


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Lessons from Active Benchmarkers. Do not strive to benchmark everything at best-in-country or best-in- world levels :

No company can be best in every function -- focus on processes and practices of strategicimportance.

2. Seek best-in-class benchmarks for core processes and functions of the highest strategic importance : the Pareto Principle wins again. Other benchmarks can come fromlevels 2 through 5. World and country leadership benchmarks require greater time, resourcesand effort to develop.

3. Seek internal, regional, or industry benchmarks for secondary and support processes : for some processes and business activities that are not critical to theorganizations strategic advantage, internal, regional or competitive benchmarks may be mostappropriate. Such benchmarks produce incremental improvements that are substantial -- evenif not radical or breakthrough in terms of the size of the expected improvement benefits.


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Benchmarking Architecture

Performance Measures


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Client, Enterprise & Competitive Intelligence for Product, Process & Systems InnovationDr. Rick L. Edgeman, University of IdahoD ashboard of N ew P erformance M easures

C apital Expenditures

C osts

P rofitability

C ashflow

Sales Liabilities

Assets

Debt

Quality CustomerRetention

Training

CustomerSatisfaction

DefectRates

CycleTime

ReferralRates

EmployeeRetention


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Designing Successful Benchmarks:Effective Performance Benchmarks Reflect the Most Important

Operating Dimensions of a Business Process, System, or Function.

M EASUREMENT F OCUS

Determine where in a work area or process that value for the customer is created; Determine where value is detracted through high costs, errors, rework, or accidents; and Target benchmarks in areas where performance diverges from designated standards, or where

variation above and below standards is greatest.

M EASUREMENT P ERSPECTIVE Leading indicators foreshadow or anticipate future system outcomes. Leading indicators are

thus proactive or preventative. Lagging indicators such as traditional financial measures are reactive or descriptive of the

actual results of a system or process in a given time period. Traditional companies employ lagging indicators whilehigh-performance companies embrace

both types since leading indicators intervene upstream .


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M EASUREMENT CONTRO L People are always the principal factor affecting the degree of measurement control.

Managers fail at performance improvement when they evaluate individual or system performance using benchmark measures that are uncontrollable by the peopleoverseeing the process.

Therefore benchmarks that are designed for performance improvement must be crafted to reflect the individual level of authority, responsibility, and skills of those peopleexpected to work with the benchmarks.

D ATA COLL ECTION

After defining performance measures, managers must be able to readily collect the datafrom which performance benchmarks are constructed. Many organizations develop interesting performance measures only to discover that they

currently do not collect the required information and do not have the resources to do so. The best performance benchmarks can be collected without excessive investment of

time, systems, staff, or capital.

Designing Successful Benchmarks


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A Benchmark Design A rchitectureThe first step in designing a performance benchmark system is to create measures that will enable managementto achieve the organizations strategic objectives.

The second step in designing a benchmark architecturerequires managers to create an agreed upon vocabularydescribing performance measurement in your organization.

The third step is to develop plans to collect , process , andanalyze the performance measures.


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Customer-Service Performance Measures:The Best Customer-Related Measures Come from Objective and

Valid Data Collected Directly from CustomersCustomer-service performance measures typically probe organizationalperformance in the following areas:

Overall Customer Satisfaction with Products & Services;Customer Evaluations of Sales & Service Representatives;Customer Assessments of Your Organizations Understanding of Customer Needs;Customer Ratings of How Clearly Your Organization Communicates CostInformation & How Well the Organization Suggests Customer SolutionsCustomer Appraisals of Delivery Timeliness;Customer Impressions About the Usefulness of Your Organizations Product &Service Documentation;Customer Feelings Concerning How Easy it is to Conduct Business with YourOrganization;The Value Customers Place on Your Organizations Products & Services.


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Product / ServicePerformance Measures

Product & Service Performance BenchmarksInclude Measures of:

Accuracy, Reliability, Timeliness, Order Ease, Delivery, Packaging, Ease of Assembly & Use, Documentation, Billing, After-Sales Service, and Effective

Complaint Management.

These May Also Include: Warranty Exchanges and Returns,Unit Productivity & Cost, Cycle Time for Key Intervals,

and Market Share.


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Business ProcessPerformance Measures

A simple process analysis model can help identify your organizations mostimportant workflows. This model reveals that all work can be viewed in

four sequential stages:1. I nputs (including those from both employees & suppliers);

2. P rocesses (including internal operations & support services);3. Outputs (your organizations products, services, and documentation); and

4. Customer Satisfaction.

In the following graphic ( the input-output process model ) we begin with inputs that can be tangible (such as supplies, raw materials, and component products) or intangible(such as information) which are delivered to the work process, which transforms theminto some final output which might be a product or service. The goal of the output is to

create satisfied and loyal customers.


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Client, Enterprise & Competitive Intelligence for Product, Process & Systems InnovationDr. Rick L. Edgeman, University of IdahoInput-Output Process Model

Products

Services

Documentation

Results

Design of Products/Services

Production of Products

Performanceof Services

Delivery of Products/Services

People

Raw Materials

Components

CustomerRequirements

Capital

CustomerNeeds

Satisfied

CustomerProblems

Solved

CustomerRequirements

Met

Inputs Processing Outputs Customers


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Common Performance Measures of theInput-Out Process Analysis Model

* Enhanced customer value - often observed through added product features or reduced costs;

* Production costs, frequently described as cost per 100, 1000 or million;* Responsiveness and / or process cycle time;

* Defect, error, waste, problem, or failure rates, often formatted asdefects per 1000 or million output units;

* Productivity & resource utilization, often reflected in transactions per person, inventory turn rates, or projects operating within budget;

* Public safety and / or legal responsibilities, sometimes observed in accident rates,employee absentee rates, regulatory citations, or litigation rates.


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Client, Enterprise & Competitive Intelligence for Product, Process & Systems InnovationDr. Rick L. Edgeman, University of IdahoExamples of K ey Business Processes

IBM Xerox British TelecomMarketing Information Capture;

Marketing Selection;

Requirements;

Hardware/Software Development;

Service Development;Production;

Customer Fulfillment/ Relationship;

Service Customer Feedback;

Marketing;

Solution Integration;

Financial Analysis;

Plan Integration;

Accounting;

Human Resources

IT Infrastructure

Customer Engagement;

Inventory Mgt. & Logistics;

Product Design / Engineering;

Product Maintenance;

Technology Maintenance;Production & Operations Mgt.

Marketing Management;

Supplier Management;

Information Management;

Business Management;

Human Resources Management;

Leased & Capital Asset Mgt.

Legal;

Financial Management.

Direct Business;

Plan Business;

Develop Processes;

Manage Process Operations;

Provide Personnel Support;Market Products & Services;

Provide Customer Service;

Manage Products & Services;

Provide Consultancy Services;

Plan the Network;

Operate the Network;

Provide Support Services;

Manage Information Resource;

Manage Finance;

Provide Technical R&D


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Support Processes / ServicesPerformance Measures

Support services are activities and operations that enable your organizations core production and delivery processes.

They include functions such as finance, software services,

marketing, public relations, information services,purchasing, legal services, and facilities management.

Examples for various areas follow.


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Performance Measure ExamplesA ccountingPercentage of Late Payments

Time to Respond to

Customer Requests Number of Billing E rrors

Number of Payroll E rrors

PurchasingPurchase Order E rrors

Downtime Due to Shortages

E xcess Inventory

Cycle Time (from start of purchase to receipt in-house)

Information Services Number of E rrors / Code Line

Percent of Reports Received

on Schedule Number of Rewrites

Number of E rrors Found After System Accepted by Customer

Product EngineeringProject Completion Cycle Times

E ngineering Changes/ Document

Number of E rrors Found DuringDesign Review

Number of E rrors Found inDesign E valuation

Quality ControlPercentage of Lots Rejectedin E rror

Number of E ngineering ChangesDetected After Design Review

E rrors in Reports

Cycle Time for Corrective Action

MarketingAccuracy of ForecastAssumptions

Number of IncorrectOrder E ntries

Overstocked Field Supplies

Contact E rrors


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Technology & Innovation RelatedPerformance Measures

Technology-related measures reflect the productivity, deployment,and effective use of computers and other technology in anorganization.

Measure range broadly from processing speeds, deploymentpercentages, network down time and error rates.

In turn, innovation-related performance indicators reflect issues suchas product development times, employees suggestion rates, new product sales as a percent of total sales, and process improvementrates.


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Supplier Performance MeasuresSupplier performance measures help an organization qualify or

certify the vendors with which it will work .These benchmarks then help the organization monitor and manageon-going supplier performance .

Supplier performance metrics often include measures of cost,quality, reliability, speed or responsiveness, agreed-upon servicelevels, and product specifications .


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Cost Performance MeasuresCost performance measures are broad and flexible. They include

balance sheet liability requirements and information drawn from cost

centers throughout the organization.Companies can develop useful benchmarks by producing cost ratiosfor specific products, services, organizational units, processing steps,inputs, and labor.

A mortgage company, for instance, might use such measures as costper loan application, cost per loan processing,human resources costper loan, data processing costs per 100 bills, and service cost per loan.


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Financial Performance MeasuresFinancial measure include performance indicators required by stock exchanges, security analysts, public accounting firms, regulatory agencies, and other organizations that may oversee reportingstandards in your organizations industry.

Many of these measures make up the items on income statements, balance sheets, and cash flow statements, including measures suchas revenue, gross profit, operating income, net income, earning pershare, long-term debt, book value, cash flow, debt/equity ratio, days/ receivables ratio, current ratio, and so on.


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Six Sigma Strategy and Methods

The B alanced Scorecard


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TheB alancedScorecard

The Balanced Scorecard (Kaplan & Norton) manages performancemeasurements through an integrated system. This combines both financialand operational measures into an integrated system of performanceindicators. This assumes that no single measure is sufficient for managingall companies at all times. It combines at least four perspectives:

Financial Perspective : If we succeed, how will we look to ourshareholders?Customer View : To achieve our vision, how must we look to ourcustomers?Internal Operating Perspective : To delight our customers, what

management processes must we excel at?Innovation & L earning Perspective : To achieve our vision, how mustthe organization continuously learn, improve, and create value?


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The B alanced Scorecard:Financial Perspective

There are three fundamental dimensions, each of whichmay include many types of financial measures:

Profitability Growth Shareholder Value


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The B alanced Scorecard:Internal Operations Perspective

I nternal perspective examines those business processes andoperations that most directly influence customer satisfaction. Oftenincluded are the three dimensions of: Internal Cycle Time -- which may track specific process steps. Quality -- which may include simple defect measures or may pick

up sophisticated metrics such as first-pass yield rates. Productivity -- reflects employee skills, effectiveness, andmotivation, especially as they are evidenced in employees output perperson, per day, or per hour.


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The B alanced Scorecard:Innovation & Learning Perspective

Innovation & Learning include three primary dimensions: Market Innovation - this records new product & service introduction rates. Continuous Operational L earning & Improvement -records the rate at

which individuals & organizations learn. Intellectual Assets - These are among the most valuable and most intangible

resources available in any organization. Companies are developing measures thatevaluate skills deployment, training effectiveness, employee involvement levels,employee suggestion rates, cross-functional activity levels, and experiencesharing.


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B enchmarking Critical Success Factors

A dopt, A dapt, and A dvance : A well-designedperformance measurement and benchmark system isessential, but there are other critical success factors: Senior management support; Benchmarking training for the project team;

Useful information technology systems; Cultural practices that encourage learning; Resource dedication - especially in the form of time,

funding, and useful equipment.


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Selected

B enchmarking Processes


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The B ristol-Myers & B axter International Seven-Step B enchmarking Process

1. Determine which function(s) to benchmark;2. Identify key performance variables to measure;3. Identify the best-in-class companies;4. Measure performance of best-in-class companies;5. Measure your own performance;6. Specify programs and actions to meet and surpass;7. Implement and monitor results.


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T he M otorola F ive- S tep B enchmarking P rocess

1. Decide what to benchmark;2. Find companies to benchmark;3. Gather data;

4. Analyze data & integrate results into action plans;5. Recalibrate & recycle the process.


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T he X erox 12-S tep B enchmarking P rocess Phase 1: Planning 1. Identify what to benchmark; 2. Identify comparative companies; 3. Determine data collection method & collect data.

Phase 2 : Analysis 4. Determine current performance gap; 5. Project future performance levels.

Phase 3 : Integration 6. Communicate finding and gain acceptance; 7. Establish functional goals.


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T he X erox 12-S tep B enchmarking P rocess (continued)

Phase 4 : Action

8. Develop action plans; 9. Implement specific actions & monitor progress; 10. Recalibrate benchmarks.

Phase 5 : Maturity 11. Attain leadership position ; 12. Fully integrate practices into processes.


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The AT&T Nine-Step B enchmarking Process1. Identify what to benchmark;2 . Develop a benchmarking plan;3 . Choose a data collections method;4 . Collect data;5 . Choose best-in-class companies;6 . Collect data during a site visit;7. Compare processes, identify gaps, and

develop recommendations;8. Implement recommendations;9. Recalibrate benchmarks.

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A G eneric B enchmarking P rocess:The Simple, Consensus Model

From the Strategic Planning Institutes (SPI) Councilon Benchmarking has developed the following model:1. Launch2. Organize

3. Reach Out4. Assimilate5. Act


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B enchmarking R esources & T oolset

Resources : Time Investment:

Team Leader: 20%-25% over seven monthsTeam Members: 15% over seven months

Financial Investment:Travel: 4 on-site visits* 5 members * $1,500 visit = $30,000 People: $60/hour Research: $125 to $250 / hour * 8 hours = $1,000 - $2,000 Consulting: $1,500-$3,500 /day * ( 4-10)days = $6,000-$35,000

Toolset :Voice of the Customer Hoshin Planning S toryboardsS even S trategic Tools S even M&P Tools Team BuildingValue Delivery S ystem Process Mapping

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Attributes of B enchmarking Studies:Success vs. Failure Success Failure

Process Owner InvolvementCustomer Driven Objectives

Linked to Strategic Plan

Best Practices & Enablers

Consider Cultural Attributes

Disciplined Methodology Quantum Change

Clear Project Life Cycle

Integrated with ExistingQuality Efforts

Sponsorship Uncertain Amorphous Objectives

No Strategic Integration

Performance Metrics Only

Hard Data Only

Arbitrary / Casual ApproachIncremental / No Change

Keep Going and Going and ..

A la carte Program

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M anagements B enchmarking C hallenge Commit required resources to key projects; Provide focused training / facilitation to project

participants;

Proactively manage the direction and momentum of benchmarking within the organization;

Create visibility of the benchmarking process; Recognize benchmarking team efforts.

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End of Session

Documents

Six Sigma Bench Marking