4) The cornerstone is performance measurements.
The cornerstone for holding and maintaining the atmosphere for the
Learning Organization is performance measurements. Performance
measurements are not new to American manufacturers, nor is the
process of managing by the numbers. Formal financial systems have
been in use for many years. These systems take on many shapes and
sizes, but the basics are relatively common; accounts payable,
accounts receivable, general ledger, inventory evaluation, etc. The
problem is that our present accounting systems are not able to
summarize a company's manufacturing operations in terms of world
class. In fact, they may be even misleading and promote the internal
competitiveness that breaks down our organizational effectiveness.
Our people and our world class competitors are laughing at us.
Let us take a look at efficiency and utilization for an example, the
foreman who's stuck with a goal on numbers. He cannot do what is
right. If he would stop and do needed repairs on the machinery, he
would miss the goal set for him and add cost to the product. After
all, it might hold up through the shift. Sound familiar? The fact
that he's producing scrap has nothing to do with it. Budget based
measurements present problems all throughout the shop. They present
an inadequate picture on our overall performance in manufacturing.
The interesting thing that I find is that our people realized this a
long time ago. But guess what? Here we are in 1994 and we are still
measuring the same way.
World class performance and building an effective Learning
Organization require valid measurements that include:
• Quality. A total commitment to quality. This includes major
changes in the way we design products, our relationships to our
suppliers, train and educate our employees, and perform maintenance
and operate our equipment.
• Inventory. This includes not only our basic understanding of
optimizing inventory. It also requires us to extend this to include
the elimination of waste in setup times, reduction of
work-in-process, and the overall reduction of inventories elsewhere.
• Productivity. You may say that we measure productivity today
within our financial systems, such as value added per employee or
output per direct labor hour, but as direct labor cost decline
compared to total cost, we are missing opportunities to focus in on
total factory output. We can not in effect relate these
measurements by looking at aggregate data from profitability
statements. It requires a very detailed look at units produced,
labor used, materials processed, and capital utilized. In the 60's
and 70's many U.S. companies earned a significant profit but were
unable to identify that their productivity was declining.
• Innovation. Whether you produce mature products or specialty type
products, innovations are a key to staying competitive in a world
class market. This includes every aspect of a manufacturing business
from the manufacturing process itself to service and distribution.
If we realize that technology is doubling every 20 months, we need
to tap into every resource we have to make this work to our
advantage. The gateway resource to this advantage is our people. The
companies that are not able to do this may not be here in the next
10 years. Our performance measurements need to tell us how well, or
how well we are not doing in this area.
• Employee Empowerment This includes the ability to measure the
skills, training, and morale of the work force. Our current
financial system do a very good job of measuring our businesses in
terms of dollars and cents. But business is people whose team
objective should be success in achieving a goal. The goal could be
the order, the contract, or eliminating waste. The key is giving
each of us the sense of personal responsi-bility for what happens to
their department and to the company. People are our greatest asset,
let's manage them correctly.
I have highlighted a few measurements which I felt needed special
consideration for this paper. We still require all of the
measurements that we tend to think of in general terms within APICS,
such as top management planning, operations management planning,
and the operations management execution areas. The key is measure,
measure, and measure. A thorough understanding is necessary by all
people in the areas they are responsible for and the effects on
other functions within the company. Peter F. Drucker said, The
measurement used determines what one pays attention to. It makes
things visible and tangible. The things included in the measurement
become relevant; the things omitted are out of sight and out of
Summary and Conclusion
The Learning Organization has to be something that is freely
accepted by all. It actually is a process of voluntary and
responsible participation. This cannot be dictated. If it is, you
will get hostility to the new, and loyalty to the old. Alport, one
of our early leading social scientists said, "It's an axiom that
people cannot learn who feel that they are being attacked." It is
for this reason that group work methods are so vital in today's
manufacturing environment, where change is the norm.
As change occurs towards the Learning Organization, it is imperative
that our performance measurements change as well. Performance
measurements are in fact the controls that allow us to navigate our
company to greater and greater success in quality, productivity, and
service. This then becomes our ongoing continuous improvement
Learning to reason productively and bringing about change are
probably two of the most difficult things that we will ever do
within our manufacturing organizations—even painful. We must change
if we are to compete in global markets. But first, we must prepare
our organizations for change just like the farmer prepares the
ground before he sows the seed. If not properly done, the yield will
be disappointing. Chris Argyris of the Harvard Graduate School said,
"Every company faces a learning dilemma: the smartest people find it
the hardest to learn."
For balance of this article, click on the below link:
Lean Manufacturing Articles and go to Series 02
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