Establishing Objectives & Strategy

In my previous process improvement introductory blog, I had laid out an overall road map. So now let’s start building on each step of the road map. Before embarking on the PI journey, we must ensure the existence of the ten primary characteristics mentioned in my previous blog “Process Improvement – Introduction”.

The first building block in this process (no pun intended!) as in any other process or initiative, starts with establishing objectives and strategy. Without a clearly defined set of objectives or understanding the underlying strategy, the PI effort will get diluted with little resultant improvement.

The PI journey is not limited to a specific area of the organization; it cuts across the entire organization affecting all parts of the organization. The best PI approach would be to mimic the way the organization is structured for management and performance reporting. So for example, at the lowest level you could have a cell, that would roll up to a department or a cost / revenue center, that would roll up to a function that would roll up to say a segment that would roll up to the organization as a whole. Such an approach makes it convenient to measure progress, establishes goals and objectives and allows for healthy competition across the organization.

For any activity to be successful, at its core, it must satisfy the following four principles: Cost, Quality, Delivery and Customer Satisfaction. To this I would like to add another principle and that is safety, in which I also include care and concern for the environment and people.

In any organizational endeavor, if you take care of these five guiding principles, you will be successful. These principles are all equally important and neither one necessarily comes before the other. However, given that I have a finance background, I will start with Cost!

Cost, which includes overall financial performance, is important because if we do not put an emphasis on it, our very organizational existence will eventually be at risk. Without a quality product or service, we will have no customers and no organization, making Quality a very vital principle. If we are unable to deliver our high quality products or services in a timely manner with a quick turn around time, our customers will go else where, placing our organizational existence in jeopardy. Customers are the most important stakeholders and the life blood of any organization. Only by satisfying our customers first do we have the opportunity to satisfy the needs of our other stakeholders. Finally, in operating our organization, if we are not to observe the basic principles of safety, environmental and people care, we could cease to exist as a human race.

I hope I have made my case for the five fundamental organizational principles. These will also help guide us through our process improvement journey and allow us to monitor our progress. Also note that I am not using the term “business principles” as I feel that for PI, these principles apply to non-business areas as well. In fact they can apply to all organizations, profit or not-for-profit; business or non-business.

In this phase of establishing objectives and strategy, I recommend the following broad approach presented pictorially below:

A typical road map for establishing objectives & strategy
Click on the process-map above to view larger image and then click your browser's "Back" button to return here

1. The first step in this phase is to identify and define the customer, who is the heart or the life blood of any organization. A customer is not necessarily the organization or person who buys your products and pays your bills but can certainly be so. Any organizational activity, even at the most basic level, has a customer and a supplier. It is that organization or person, who receives the products or services, paid or unpaid, is a customer and must be delighted in the PI journey. Explained another way, in a process value chain, the organization or person handing off is the supplier and the organization or person receiving is the customer.

2. The second step in this phase is to define the key organizational objectives, under the five major principles of Cost, Quality, Delivery, Customer Satisfaction and Safety/Environment. These objectives or key drivers are no different than the objectives identified say during the strategic planning process and perhaps should be the same to ensure total organizational alignment.

Under “Cost”, examples of key drivers are meeting or beating the organizational budget or providing products or services at the target cost or exceeding the target return on investment. Under “Quality”, the key drivers could be ensuring that the defect rate in delivering the products or services does not exceed a certain threshold. For “Delivery”, the key drivers could be providing the products or services on the target date or at the target turn around time. Key drivers for “Customer Satisfaction” could be attaining or exceeding the customer satisfaction target. Finally for “Safety/Environment” the key drivers could be meeting or beating the occupational injury standards or reducing carbon dioxide emissions by say 25% or providing frequent feedback to the organization's associates.

I think you get the drift. I would also like to emphasize that objectives are those strategic activities, when measured, allows the organization to determine whether they are on the path of improvement.

3. The third step in this phase is to validate the strategic objectives through the key stakeholders, including the Customer. We have to identify the customer’s “hot buttons” and by seeking their input, assess the key measures or “hot buttons” that will delight them and make them repeat customers. So for example, it could be high level of customer service measured through high level of customer satisfaction. Or it could be high speed to answer in a call center environment. The bottom-line is that the organization must identify that key metric, when continuously measured, will provide a good trend line on customer satisfaction. The goal of PI is to delight the “customer”, so when an objective is met, there is a high likelihood that the “customer” will be delighted.

4. In the fourth phase, it is very critical that periodically, the stakeholders and the organization as a whole be provided a status on the objectives by means of a Scorecard. The Scorecard is a key tool in the PI process.

Also, for an objective to be a strategic objective, it must meet the “SMART” or “SMARTER” principle, which stands for:

• Specific
• Measurable
• Attainable
• Relevant
• Time-bound
• Evaluate
• Re-evaluate

5. Finally, the strategic objective must be periodically updated or as noted above evaluated by comparing actual results against planned results and then continuously re-evaluated. An organization will only be successful when the bar or the objective is met and is continuously raised over time.

My next blog will be devoted to the second building block; process value stream. It will involve understanding what is a process value stream, looking at process improvement holistically across the entire organization, what is an organization in the PI context, definition of process and process management, and briefly touching on the foundations of conducting a process value assessment.

If you have any questions or comments or need help in implementing PI, please contact me via email.