High-Performing Contractor Newsletter June 2012 - Issue #105
This e-newsletter is dedicated to supporting High-Performing Contractors and all contractors who are working to become one. Written by Dennis Sowards
In honor of the 100th edition of this newsletter and to help remind everyone of what high-performance contractors are about, I am including some of the past issues best topics. In research the best of past issues I found I could include it all in one issue so I will do six issues - one for each of the seven categories of the HPC assessment process. The six performance categories for the high-performing contractor assessment are:
- Strategic Planning
- Customer Focus
- Employee Focused
- Process management
- Keeping Score
This issue includes articles on Keeping Score
Feb 2010 - Do your measures matter?
In construction, most contractors say we do have much we can measure. Then we measure everything; but little that matters! High-performing contractors measure to analyze to drive action. If you have measures but don’t analyze them to take action - why measure?
Note in using the term “measure” I am talking numbers that are written or recorded. These may be after the fact measures like profit, or the number of jobs over budget. They may be more like indicators such as the feet of pipe welded right the first time today or the percent of shop fabricated material delivered on time to the job site.
Analyzing measures doesn’t require a PhD in statistics. It simply means that we compare the measure to some target. That target often is last month’s or last year’s same month’s number. Another type of target may be the goal we expected to reach as a result of actions we took during the month. High-performing contractors will compare their performance to best-in-class (within the construction industry) or world-class performance.
Some more sophisticated contractors may even use statistical process management to compare past performance. This approach looks at the upper and lower performance system limits of the particular operation calculated using the average and standard deviation. This gives a more precise view of the function being measured - if its variation in control or not. While this may sound complex, managers, foremen and even front line employees can learn how to analyze the measures without knowing all the calculation details. This leads to a better identification of when to take action.
Regardless of what targets and analysis one uses, the measures must drive action. The first level analysis can only tell us three things – we are at, below or above the target. Depending on that conclusion, we can start the actions. If at target, what actions do we take to maintain this level? If below target, we need to first understand the root cause for being under and then what countermeasures to improve? If we are above target, assuming that is a good thing, we need to identify the root causes for achieving this level and take action to replicate it the next month and on other jobs or at other locations.
If we just look at the numbers as one manager did and conclude that “some days are better than others,” we are wasting time and resources. Take this measurement challenge:
List all measures that you currently have for field, shop, office, service, accounting, productivity, etc.
Group each measure by what it tells you related to:
Performance in meeting your customer’s needs
Employees (safety goes here) satisfaction
Determine who actually uses each measure?
Who analyzes the measure?
Does each measure have a target & how is it set?
Who takes action when the measure goes the wrong direction?
What actions have been taken during the last 3 months or year as a result of analyzing the measure?
Weed out all measures that don’t drive action. Set useful targets and post the key measures so everyone can see them.
TAKE ACTION - DO SOMETHING TO IMPROVE AND SEE IF IT DOES.
Sept 2011 - Tips in Developing Performance Measures
As the baseball season heats up in September for the possible playoff teams and winds down for the rest, lots of measures are being used to try to predict winners and decide which players to resign next season. We can measure how baseball players and team performs. We can also measure profitability for our companies. But beyond the usual financial metrics used in construction, we are weak at having and using useful performance measures. Here are some tips in developing construction related measures.
Measure what matters to the customer. Measure on-time delivery – did we deliver the project when promised? Satisfaction surveys can give useful feedback if designed correctly. Ask the customer if we delivered value and what is important to him/her. One company would do an annual satisfaction survey by asking its own managers what they thought their customers would say. Can you spell “bias?” Don’t just survey the customers you know will give good marks, include all customers. Negative feedback is useful, at least the customer is still talking to us and it gives us a chance to recover.
Don’t measure for Measurement’s Sake. Sometimes we count things because it is easy. Measuring pounds of metal fabricated or feet of wire installed tells us little. Customers could care less how many pounds we fabricated.
Develop leading indicators and not just rely on lagging indicators.The number of accidents (incidents) that happened last month is history by the time we see the measure. Participation in safety meetings or pre-task plans completed each day may be a better indicator of possible safety problems. One world-class company told me they measured the number of safety improvement ideas received each week as a percent of all improvement ideas submitted. If the percent of ideas that were safety related went under 15% of the total, they could almost predict a safety incident would happen.
Use targets with the measures. A number by itself is not very useful. We need to ask, “compared to what?” Set realistic targets, not pie-in-the-sky numbers that can never be reached.
Measure to drive action.If we measure something, analyze it then take action. This means learning how to interpret simple statistics: mean, standard deviation and system performance limits. If you don’t analyze a measure to drive action - why measure it?
Align Measures with the company’s purpose. If a measure cannot be connected with why we are in business (mission), where we want to go (vision) or how we behave (core values), then it will at best be useless, and at worst drive undesirable behaviors.
Remember that measures drive behavior.Mark Brown, a measurement expert, tells about “a fast food company that measured ‘chicken efficiency’ — the percentage of cooked chicken that had to be thrown out at the end of the day. Chicken efficiency was so important that it was the major determinant of franchise ratings, promotions and bonuses. The ‘top performing’ restaurant managers stopped cooking chicken at 6:30 p.m., so when they closed at 11 p.m. they would have no chicken to throw out (100 percent chicken efficiency). What happens if customers come in and there's no chicken? "We cook it," the manager replied. Don't the customers get frustrated for having to wait? "Sure, but there are plenty of other chicken eaters. And most people never come back anyway."
Many see measures as enemies to be feared and avoided, but measures are useful tools to help us manage the operations and projects more effectively and efficiently. What measures and how we use them can make a big difference and the bottom line measure will show it.
Source:The Ten Most Common Errors in Developing Performance Measures by Mark Graham Brown, July 5, 2011, BusinessFinance
You may be interested in attending one of these training seminars by Dennis Sowards:
Sept 27, 2012 – Excellence in Customer Relations- Sponsor – P.I.P.I. & 469 JAC – Phoenix, AZ - contact Cathy Mayeux at email@example.com for details.
Oct 4, 2012 - The Lean Construction Advantage: The Best-Kept Secret – Sponsor CCA/PHCC – Connect 2012, Philadelphia, PA. Details at http://www.phccweb.org
Oct. 5, 2012 - Dealing with variation in projects – Learn from the Parade of Trade Simulation- PHCC – Connect 2012, Philadelphia, PA. Details at http://www.phccweb.org
Oct 25, 2012 – Leadership Skills for the 21st Century- Sponsor – P.I.P.I. & 469 JAC – Phoenix, AZ - contact Cathy Mayeux at firstname.lastname@example.org for details.
Nov. 15, 2012 - Stop the Treasure Hunts– Sponsor: LCI-Chicago Community of Practice (LCI-CCOP) – details to follow or contact Cindy Menches at email@example.com
If you are interested in bring one of these workshops to your company or association, please contact Dennis Sowards.
Thought for the day
Where performance is measured, performance improves. Where performance is measured and reported, the rate of improvement accelerates.
- Thomas S. Monson
For more information about the High-Performing Contractor assessment process contact Dennis Sowards at 480-835-1185
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