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H3 Partners is a leading provider of Business Change Programmes using Organisational Change Management frameworks to help transform businesses from within.
In this, the second in a series of discussions, UK Construction Excellence speaks with Rod Horrocks, Director of H3 Partners, about the challenges associated with Performance Measurement and the importance of understanding a business end-to-end.
We spoke previously about the importance of Performance Measurement. Proper implementation isn’t always an easy proposition however. How can poor implementation of a measurement system negatively impact a business?
Whenever you measure a process there will be a change in behaviour. Therefore if a business creates measures with the wrong targets, or measures employees on processes were they cannot affect how those measures are implemented – i.e. giving them a dashboard but not a cockpit – or the measures have been set without consultation the change in behaviour will be negative. Employees won’t work hard to improve and reach new targets if they believe that they can’t make it happen or if the people up or downstream are effecting how they perform, they end up becoming very siloed – trying to optimise their performance without worrying about anybody else’s. They might achieve a goal they can justify but they won’t achieve the overall process goal.
The same goes for unachievable or unagreed measurements, this will result in negative behaviour; a natural reaction, we’re human beings, not automatons.
What common issues might companies looking to implement Performance Measurement come up against?
First of all, businesses tend to measure the individual parts of an end-to-end process. They look at the targets for part of the process without looking at those required to impact end-to-end. If a business is only raising PO’s for 80% of their purchase orders and it should be be 100%, they might think that the improvement is in the purchase ordering department and that they need to be more efficient. But the reality is that the 20% are the ones that can’t be raised because the requisitions from the engineers are incomplete. They need to look upstream to set the measure in the context of the whole end-to-end procure to pay process.
The other issue comes when businesses fail to engage with people on the front line, asking questions such as “This is how it’s being measured, do you know why it’s like that?” Many companies do not even have these conversations with front line staff on the issue of designing and setting targets; therefore without their involvement you have no buy-in.
How do H3 Partners ensure a more accurate appraisal of a Company’s performance?
We start by documenting all the key end-to-end processes, reviewing the individual steps and making an honest assessment of the present performance.
An example is … one of the major suppliers to the construction industry wanted to get their performance of orders shipped down from 48 hours to four hours. The Company worked hard on process redesign and implemented changes, but they didn’t tell the construction companies, who were used to having two days’ notice. When the orders arrived in four hours those companies didn’t have space in the yard and so they were having to send half of them back! Without checking with one of the actors in the process, the customer, the effort in design could have been better directed.
Businesses have to think about the consequences, and not just inside the processes of their own company. Can their customers or suppliers handle what they are changing in terms of performance and is the change of value to both parties?
Could you explain the three phase AEC – Alignment, Engagement, Coaching – process?
Alignment is making sure that you know who the players are in an end-to-end process. Who are the people that impact each of these processes? For example, ordering and receiving goods or services starts with a requisition – the specification of the need. This is converted into a commercial agreement or a purchase order with the supplier. The PO is closed when the goods or service are received. Finally we match the PO with the invoice and the receipt and if all match, the supplier is paid. Four or five people and disciplines need to be aligned to make that process work effectively.
Engagement talks about making sure that you have not just managers but front line players in all of those areas. They need to understand what you’re trying to achieve on the end-to-end process and help to design the processes that meet the targets being suggested.
The targets must not be single targets. Classically there are three targets, the middle target being the ideal; the bottom target the one at which serious process investigation is conducted and the top target the stretch goal that is reached when all elements of the process work perfectly.
It then comes down to coaching staff how to manage these targets – both the managers and staff on the front line who are asking what they need to change to ensure it happens. Managers need to be coached so that they know that this is not about beating on individuals but working together to make sure that the measures drive improvements at the end-to-end level, and identifying what actions they can take. The key is to ensure that you start correctly, that everyone is engaged right from the beginning and is part of the process of setting the targets, and then coaching them in the skills that are needed to make those targets work.
Are most organisations too close to their own processes to look at them objectively?
Always the case! First of all, many businesses don’t understand the process end-to-end because they don’t work that way. The further the manager is away from the delivery of a service and the number of levels of intermediate management, the less likely they are to understand and realise how their business rules and organisation can work against effective delivery.
People still don’t understand process. They don’t understand that adding value is about delivering effective processes to the customer. We need to stop sub optimising departmental and individual performance outside the context of the end-to-end.
Looking at processes objectively by facilitating cross-functional workshops, exploring everyone’s understanding and defining business rules and roles. Once both managers and staff hold this in depth understanding we can look at inefficiencies and set targets for improvement. This task is difficult without an external facilitator to challenge and encourage ‘out of the box’ thinking.
What advice would you give to companies looking to introduce performance measurement into their business?
The first thing to understand is the present performance. What do you want to achieve and where will you add value? You must understand your key business processes, particularly the ones that are critical to the success of the Company. They won’t all be the same – some will be core to your added value and some will not. We take companies through a process to look at the critical success factors and map them against the business processes. This will indicate which are the key processes and if you apply an honest performance rating on the process companies can also define a suitable improvement programme. H3 Partners do this sort of work in facilitated workshops with managers and front line staff.
Having got that priority right, how do those processes fit into the end-to-end and how do they perform now? What’s best practice? What would you like to have and if you did that, what would be the performance benefit from the Company’s point of view? Once you understand those, you have a relationship between performance measurement and benefit. You can then strip that back to find out what’s stopping you from getting the best performance. Is that to do with training or more automation, or should you be moving this process down the supply chain for someone else to do?
A business has to understand where they are now – an honest ASIS view where nobody hides anything from a management perspective. Then it’s about setting targets – both stretch and achievable. How many people are involved in this process end-to-end and what’s their role in making that happen? An understanding of the end-to-end process is absolutely critical to the success of any business.
For more information on how H3 Partners can improve your business please visit the Company’s website or download H3 Partners’ Performance Measurement e-Book.
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