International Journal of Operations & Production Management

The role of performance measurement in continuous improvement

T.C. Bond,
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IJOPM
19,12
1318
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International Journal of Operations &
Production Management,
Vol. 19 No. 12, 1999, pp. 1318-1334.
# MCB University Press, 0144-3577
The current issue and full text archive of this journal is available at
http://www.emerald-library.com
The role of performance
measurement in continuous
improvement
T.C. Bond
University of Hull, Hull, UK
Keywords Performance measurement, Continuous improvement, Kaizen, BPR
Abstract A research study of both kaizen and re-engineering programmes in a leading
international company indicated that the process life cycle has four characteristic stages. A newly
designed process commonly suffers from a variety of teething problems during the initial post-
commissioning phase. Once these have been eradicated achieving smooth product flow becomes
important in accordance with JIT philosophy. A stable process may be improved by applying a
kaizen continuous improvement programme. A dramatic step-change in performance may be
achieved by radical re-engineering. It is suggested that each of these phases has its own
characteristics which should be taken into account when determining performance metrics and
designing approaches to process monitoring and control. Explicitly recognising the stage a process
has reached in the life cycle provides guidance for practitioners effectively to direct and manage a
programme of performance improvement.
The purpose of performance measurement
Both Japanese-style kaizen continuous improvement and radical re-engineering
are popular approaches to enhancing process performance.
On the basis of studying both types of programme in a leading international
company, it was observed that the process life cycle has four distinct phases,
each with its own characteristic mode of behaviour. It will be argued that the
role of performance measurement should vary with the stage.
All organisations adopt a battery of metrics for measuring performance.
Only in an idealised world in which an organisation had unlimited resources
and inhabited a risk-free environment where the future can be predicted with
certainty would they be superfluous.
Management tasks are inherently complex. In general the number of states
necessary to describe all possible futures and the corresponding range of
decisions that could be taken is limitless. Getting involved with all the details of
a process would require a manager to access the total database of relevant
events, an enormous wealth of data, which would mask the overall picture.
Generally management are inundated with too many, not too few data
(KPMG, 1990). Selectivity is essential for guiding the management process. To
filter out extraneous data and report at an appropriate level of aggregation
means identifying the key performance variables called critical success factors
(Rockart, 1979). According to the classic feedback model managers regulate
performance by monitoring outputs and then adjusting the inputs to achieve a
target rather than controlling a task by considering all the individual data
elements necessary to describe the status of the system.
 Comparison forms the basis for learning. Thus learning takes place either The role of
when an organisation achieves what is intended or when there is a mismatch performance
between intentions and outcomes, according to the standard control loop. The measurement
basic single loop feedback control has refined into a learning or double loop
feedback model (Argyris and Schon, 1978).
Strategic evaluation is, therefore, the hallmark of the learning organisation.
Changed circumstances should induce a re-appraisal of the performance 1319
metrics used to monitor achievement.
Performance measures (PMs) provide a mechanism for relating product or
process improvement policies developed by senior management to action at a
local organisational level. The subject has been comprehensively surveyed
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(Neely et al., 1995; Nanni et al., 1992; Ghalayini and Noble, 1996; White, 1996).

New style performance measures

Using profit as the only performance measure has been widely criticised, on the
grounds that it encourages short-termism (Maskell, 1991; Kaplan, 1983).
To counter the traditional emphasis on the implicit short-termism of profit
as the performance measure, the balanced score card using dimensions of
finance such as profit and shareholder value, customer service, innovation and
learning and internal process performance to present a more comprehensive
view of the business has been advocated (Kaplan and Norton, 1992).
It is important that PMs reinforce activity that is in the best interest of the
company. Dysfunctional behaviour may result from inappropriate metrics: ``if
you measure me in an illogical way . . . do not complain about illogical
behaviour'' (Goldratt, 1990).
To encourage the achievement of goals, PMs should be congruent with
company strategy (Nanni et al., 1992). Financial measures are focused on the
past (McNair et al., 1990). Often they are fragmented with cost, quality and
output being treated separately (Vokurka and Flieder, 1995). Local
optimisation, individual responsibility and individual incentives do not
encourage organisational (double-loop) learning. Survival in the longer term
depends on customer service measured by factors such as quality, cycle time,
employee skills, and productivity.
A performance pyramid in which ``corporate vision'' is translated into
specific marketing and financial measures at the highest level has been
suggested (Lynch and Cross, 1995). In turn these are broken down into
customer satisfaction, flexibility and productivity. Flexibility is measured in
terms of volume, delivery time and product mix. Flexibility is the ability to
respond to competitive pressures and be closer to customer needs (Slack, 1987).
At the lowest tier these aims are reduced to specific PMs at the operational
level. There is a clear underpinning philosophy behind these measures. Quality
is interpreted as satisfying the requirements of customers. Reliable delivery
means meeting output targets in terms of quantity and timing. Process time is
the throughput time taken to deliver the product or service. Lead-time
reduction is an important approach to improving competitive edge (Stalk,
 IJOPM 1988). Reducing cost is equated with the elimination of waste. Process time and
19,12 cost of waste are the determinants of productivity, which are non-financial
operational PMs.
Use of a balanced scorecard inevitably raises questions of whether or not to
aggregate non-financial measures and problems of determining the interaction
and trade-offs between different dimensions (see Dervitsiotis, 1997; Nocci,
1320 1995).
Implicit in the approach of Lynch and Cross (1995) is the layering of PMs,
which can be consolidated up through the organisation towards the centre.
Vertical reporting upwards requires conversion into consistent measures that
in practice are certain to be financial which was rejected at the outset in favour
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of a balanced scorecard! A notable omission in these models are direct

personnel measures.

Ongoing improvement
Improvement should be a way of corporate life. It is certainly central to many of
the fashionable schools of management thinking such as JIT, TQM and BPR.
Change may be continuous or discontinuous. Improvement can be categorised
as either small incremental change (kaizen) or innovative step change (process
re-engineering). The two are complementary, not mutually exclusive, routes to
progress.
Kaizen is characterised by operatives on the shopfloor identifying problems
and proposing solutions the epitome of spontaneous, bottom-up change.
Small scale tuning of a system, by its very nature, is likely to be low cost,
generated from an intimate knowledge of a small part of the system. Progress
is likely to be largely outside the control of management who are not the
sponsors of change but only play, at most, a supporting role. Even though the
aggregate effect may be significant, there is an obvious danger that progress
may be erratic and fragmented (Ghalayini et al., 1997).
It is surely a key management function to encourage improvement and not
leave things to chance.
The academic starting point of statistical process control provides powerful
intellectual insight into a mechanism for achieving continuous improvement;
``problems of improvement commence once you achieve statistical control''
(Deming, 1982).
These concepts form the basis of the Deming's PDCA virtuous cycle of
improvement:
. Plan study current situation and develop changes for improvement.
. Do pilot measures on a trial basis.
. Check examine effect of changes to see if the desired result is achieved.
. Action standardise on a permanent basis.
The aim is to correct the cause not the symptoms in order to eradicate a
problem permanently and so effect permanent improvement.
 In contrast innovation (BPR) is concerned with breakthroughs arising from The role of
wide-ranging, radical questioning of the big picture, whereas process performance
improvement is directed at better customer service resulting from reduced measurement
cycle time and superior quality. Significant gains often require large capital
expenditure. Major projects should be planned, sanctioned through the
budgetary process and controlled by senior management.
Nevertheless the two approaches to ongoing improvement are clearly 1321
complementary and they share the same philosophy of improving the way
work is conducted by focusing on the process (e.g. Walsh, 1996; Daniels and
Burns, 1997; Schneiderman, 1996; Zigon, 1997). Inevitably fewer large-scale
projects than continuous improvement programmes are supported.
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Toyoda, the chairman of Toyota, has commented that suggestions for

improvement, which is the foundation of kaizen, come from the operatives not
senior staff (Imai, 1987).
The ongoing improvement process cannot easily be grafted on to a
traditional organisation. Rigid departmental boundaries with an emphasis on
financial control tend to restrict perspectives and encourage defensive sub-
optimal action the antithesis of empowered teams. ``Innovation, the lifeblood
of any organisation, is encouraged by an environment that does not unduly
penalize mistakes'' (Hayes and Abernathy, 1980).
The aim of monitoring performance at the lowest levels is to encourage
operational staff to take responsibility for their own activities in a manner that
supports the strategic aims.
An empowered team should be free of bureaucratic constraints requiring a
surrender of managerial authority and power, which raises issues of:
. management;
. alignment between teams;
. motivation;
. control.
In a perfect world a performance measurement system would:
. provide an early warning detection system indicating what has happened;
. diagnose reasons for the current situation (often requiring explosion of
aggregate PMs into greater detail);
. indicate what remedial action should be undertaken.
According to the traditional view performance measures are used in the first
two stages to monitor business performance and diagnose the cause of a
problem. In contrast, the process of ongoing continuous improvement
championed by an empowered workforce as exemplified by Deming is only
concerned with the first stage.
The objective of this paper is to examine critically the way in which PMs are
actually used by a world class manufacturing company to foster the
improvement process.
 IJOPM A specific case
19,12 The study was conducted in a leading edge international company making
surgical products. Research data were collected from a programme of semi-
structured interviews with appropriate staff at all levels ranging from senior
management to machine operators. This procedure allows interviewees to
express views on a range of predetermined issues as well as respond to
1322 supplementary questions that seek clarity and full explanation. Although it
was impractical to take a complete record during the interviews, notes
were made immediately afterwards. Wherever possible illustrations of
documentation were obtained.
The final stage was to check the accuracy of the observations made
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by submitting an account of the meetings to the interviewees for comment in

order to minimise factual errors and to reduce any subjective bias in
interpretation.
In-depth studies of this nature yield large amounts of data, usually without
any obvious underlying message (Marshall and Rossman, 1989). Structuring
the data to bring meaning is ``messy, ambiguous, time-consuming, creative, and
fascinating''.
Because of the divisional structure and variety of geographical locations, it
was impractical to conduct a detailed study of all aspects of performance
measurement throughout the company, so the research was confined to two
in-depth studies:
(1) the ``mini-company'' and the role of continuous improvement; and
(2) new ``quantum project'' of process innovation and step change.
Although manufacture is European-based, the biggest market is North
America with over 40 percent of sales.
As might be expected from a company associated with strong product
specialities aimed at a single market, the company clearly falls into the
strategic planning class of the (Goold and Campbell, 1987) three-part typology,
summarised by Richard Giordano, the long-time Chief Executive of BOC, as
centralised strategy and decentralised operations. The strategic control class of
organisation, characterised by non-overlapping areas of business, is
inappropriate for the company.
The remaining class of financial control where there are simple, clear-cut
financial targets, broken down into departmental budgets imposed by the
centre and reinforced by a hierarchical management structure, according to the
traditional accounting paradigm, is inimical to empowerment and kaizen.
Competitive pressures from world-wide operations provide strong
motivation for innovation. According to Schonberger (1986), who popularised
the term world-class, ``Today there is wide agreement . . . that continual
improvement in quality, cost, lead time, and customer service is possible,
realistic, and necessary''.
 In a similar vein Huge and Anderson (1988) suggest that the two principles The role of
of manufacturing excellence are continuous improvement and the elimination performance
of waste, whereas Hall (1987) suggests that total quality, just-in-time measurement
manufacture and people involvement are the key features.
JIT principles, including cellular manufacture regulated by kanban control
and the use of statistical process charts for quality control, had already been
established for several years. 1323

The mini-company
According to Schmenner and Vollman (1994), who conducted a study based on
the views of a group of senior executives, the areas where improvements were
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most commonly sought (ranked in order of importance) were:

(1) customer satisfaction;
(2) quality;
(3) employee involvement;
(4) overhead cost reduction; and
(5) integration with customer.
All five issues struck a resonance within the company and were the driving
force for change.
The most recent innovation had been to create a business-within-the-
business called the mini-company, which was a radical departure from earlier
company practice. If successful this pilot scheme would become the prototype
for the creation of other similar mini-companies.
The mini-company consists of some 70 people with its own semi-
autonomous management team. A single product range is made on a dedicated
production process with shift working. The product was relatively new,
meaning that it had an important role in the company's future but also that
there was still plenty of scope to improve the process.
The mini-company was fortunate to inherit a JIT production system.
Machine modifications enabling quick set-up changes, self-inspection by
operatives and kanban material control meant that the manufacturing
processes had already stabilised, providing a sound foundation for a
programme of continuous improvement.
In essence the aim of creating the mini-company was to invigorate the
working climate and promote a process of ongoing continuous improvement.
Previously, under the old regime, operatives tended not to participate
actively; they merely reacted to management-imposed decision making.
Team work encourages participation of all employees, including the
operatives who are ideally placed to make a significant contribution to
improving performance.
Meetings were held at the end of every shift. The main purpose was to
analyse performance during the shift and brief the oncoming shift team.
 IJOPM Since the inception of the mini-company, 21 continuous improvement
19,12 projects had been undertaken in just over a year. Each project was run by a
small group, problems were discussed and progress minuted at the regular
weekly review meeting.
Typically a project was concerned with improving the production process.
For example, an oven was not illuminated, so an operator could not carry out a
1324 visual check on progress and as a result a proportion of orders were spoilt.
After modifying the oven there was no further loss from this source a
permanent gain in performance to a new higher level had been achieved.
Another project concerned testing the quality of a resin coating, which
involved stopping the line for two minutes while an off-line check was carried
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out. By changing from a wash-off test to a new dry test, not only was the
stoppage time reduced to 30 seconds but also the new approach reduced
variability.
In all cases staff on the shopfloor initiated the changes. The benefits were
considerable as a result of the combined effect from all 21 projects
performance improved by over 100 percent. Staff reacted positively to being
more closely involved and morale improved.
Under the new mini-company philosophy, creative activity was encouraged;
for example, if a machine was taken out of service for preventive maintenance,
opportunistic effort to improve the process could be undertaken without
consulting management this did not take place under the old hierarchical
management style.
Support staff such as accountants and maintenance engineers were just that
facilitators and advisers not front-line troops responsible for improvement
and as such they are regarded as listeners not doers.

Mini-company performance measurement

Both financial data and non-financial data were collected centrally through the
formal computerised information systems and routinely disseminated in the
standard management reports.
The centre did not impose a unified company-wide format for consolidation
into a performance pyramid (Lynch and Cross, 1995). Instead, the mini-
company management had freedom to design and install their own scheme for
monitoring their own performance.
Key performance factors identified by the staff of the mini-company were
divided into six categories:
(1) quality;
(2) delivery reliability;
(3) customer satisfaction;
(4) cost;
(5) safety; and
(6) morale.
 Each of the six critical performance measures will be considered in turn. By The role of
focusing on internal activity process metrics naturally measure efficiency. To performance
ensure that activity within the mini-company is strategically aligned to measurement
customer requirements performance metrics should also measure effectiveness
(Dervitsiotis, 1997). Quality was not a new issue lack of conformance was a
recognised problem.
Under the old structure the workforce could hide in the secure anonymity 1325
provided by a large organisation. Improved liaison between the mini-company
and their customers meant that the shopfloor workforce were confronted with
adverse comments and so they gained a better appreciation of what their
customers really wanted. Customer comments were logged so that underlying
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problems could be identified, providing an impetus for the launch of a new

kaizen initiative.
Quality has an implicit bound of perfection. Any reduction in waste,
measured as scrap, will increase effectiveness by saving on materials, labour,
energy, etc.
Delivery reliability to the end customer was not directly measured. All
production went to a central warehouse customers placed orders for many of
the company's products not just those from the mini-company. Schedule
adherence was used as a surrogate measure for delivery. Lateness was usually
caused by machine down-time. Each instance was separately recorded,
detailing reasons, so that causes could be analysed and discussed at the shift
meeting.
The target for delivery performance is 100 percent schedule adherence.
Under normal conditions schedule adherence is a measure of effectiveness;
however, on the rare occasions when demand exceeded plant capacity the MRP
system explicitly took account of the resource shortage by scheduling work
later than desired by the customer. Clearly schedule adherence becomes a sub-
optimal performance measure (Wahlers and Cox, 1994).
Advance warning meant that alternative procedures to improve customer
satisfaction could be studied.
Enhancing product design was primarily an R&D function outside the scope
of the mini-company. The notion of customer satisfaction was subsumed by
quality and delivery reliability.
The term ``cost'' was used loosely in the sense that low cost would permit
competitive pricing, leading to buoyant sales and a thriving mini-company; it
was not interpreted according to a narrow accounting definition. Cost-based
accounting measures of performance were not of major concern.
Cost was not directly used as a measure of how the entire mini-company was
performing. Any action that reduces overall manufacturing lead time will
automatically increase responsiveness to customer requirements. Less work-in-
progress means that supporting stocks of raw material and finished product
can also be cut so that working capital is reduced. Thus lead time is a measure
of effectiveness.
 IJOPM Although safety statistics were not contained in the monthly management
19,12 report, they were an important performance indicator within the mini-
company.
Safety is a measure of effectiveness because accidents cause disruption.
Morale is not easy to measure directly; however, absenteeism was taken as a
surrogate. One operative commented that it was directly measurable by the
1326 state of the toilets!
In all but one of the cases studied, improvement projects were internally
focused on the production process.
The rationale for focusing attention on process improvement rather than
cost reduction was based on the presumption that, other things being equal,
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any permanent improvement will eventually yield gains in profitability.

Because non-financial indicators of performance adopted by the mini-
company were operational measures of process effectiveness (not efficiency)
action was naturally congruent with overall company strategy. Improving
customer service is self-evidently worthwhile; further justification is
unnecessary.
Gains were evaluated in terms of the main (non-financial) performance
measures of quality, schedule adherence and lead time. No attempt was made
to justify a proposal with a causal explanation, linking local action to global
financial measures such as profit.
The only case where accounting information was used for justification
involved the purchase of new equipment to improve packaging for a new
market.
Although aggregated accounting measures of efficiency such as cost or a
variance were regularly reported, they were not seen to be relevant for decision
making and so they were not routinely scrutinised.

The Quantum project

The Quantum project was initiated to capitalise on a potentially favourable
situation. The company had developed a new product that was technically
superior to all competitor products and as a consequence was selling extremely
well. In fact sales were so buoyant that whatever the company produced could
be sold even at a premium price. Unfortunately a single unreliable process
caused significant problems. Often several attempts had to be made before the
machine was set up to the required degree of tolerance and even after a
successful adjustment had been made the quality rapidly declined. In
consequence product regularly had to be scrapped, so output targets were not
fulfilled. Customers usually placed orders for several different products, so
disappointing customers had a knock-on impact elsewhere in the product
range.
A serious long-term issue was that the high price limited demand to a
relatively small market. Because of the superior characteristics of the product,
potential for expanding the market by substituting existing products of rival
companies was enormous.
 Over the last 18 months of continuous improvement campaign, a number of The role of
small-scale adjustments to the process had resulted in considerable gains of performance
nearly 100 percent in efficiency. Even so, the product cost would have to be measurement
drastically cut to around 10 percent of the existing value to compete with the
existing product range. Continuing with the current continuous improvement
programme was never likely to yield the desired gain.
In essence the aim was to introduce new production technology capable of 1327
reaching the target cost set by senior management. The project was evaluated
just like any other investment by the adequacy of the internal rate of return. A
budget was agreed and a small team created to re-design the process. The staff
were freed from their normal duties and encouraged to carry out a fundamental
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investigation, reviewing different technological approaches from other

industries rather than tinker with the existing system. After several months'
work the group achieved the objective of radically re-engineering the process to
achieve the desired step change in performance. Replacing the existing system
with a totally different, untried manufacturing process initially introduced a
very high level of instability characteristic of an immature process. Following
commissioning, the first step was bringing the process under control. The main
problems, such as incorrect documentation or inadequate packaging were
identified. Each of the defects was measured qualitatively. After a few months
of tracking these features the problems had been totally eradicated, so further
performance monitoring was not required.
Process stability is a necessary platform, which must be achieved before
kaizen-style innovations are likely to yield significant gains in productivity.

Four levels of process management

The research indicated that performance measures were used in four
identifiably distinct phases:
(1) maintaining process status quo;
(2) process improvement;
(3) process re-engineering;
(4) achieving process stability.

Process maintenance
The objective is to ensure a smooth flow of output according to the schedule.
The kanban system of production control enforces synchronised material flows
through the manufacturing plant. Disruption cannot go undetected for long
periods because an interruption in work anywhere on the production route
means that new kanban demands for work will not be triggered upstream
whereas downstream work stations will run dry as existing work is finished.
The degree of tolerance to shocks is an inherent design feature determined by
the size of the kanban buffer stocks: the larger the buffer stocks the greater the
protection.
 IJOPM Quality is routinely monitored by operatives using statistical control charts.
19,12 In keeping with JIT philosophy, operatives have a duty to halt the process if a
breach of the control limits indicates a severe quality problem.
Control is an integral part of the manufacturing system design. Problems are
automatically detected by the kanban system if work flow is interrupted and by
the statistical control chart if quality ceases to be adequate, without the need
1328 for an operator to exercise judgement. The control mechanism is shown in
Figure 1.
During a prolonged disruption remedial action becomes the task of all
operators forced to cease work.
Although shift output measured in units (not monetary value) is updated
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hourly and displayed so that the entire team is aware of the current situation,
the chart is just a device for communication.

Processing continues

Yes
In control?

No

Processing stops

Diagnose problem

Figure 1.
Control cycle for process
maintenance Take corrective action
 Process improvement The role of
Maintaining standards is a minimum requirement; clearly improvement is performance
desirable. The team was charged with the duty of identifying weaknesses and measurement
suggesting solutions.
Provided that improvement schemes were within the technical competence
and budgetary resources of the team, they did not require management
expertise from outside the cell. 1329
Retrospective analysis of past performance indicates areas where problems
repeatedly occur and provides focus for an improvement campaign.
Deming's virtuous cycle of improvement (shown in Figure 2), in which a
process development is consolidated into a new standard operating procedure,
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ensures that a change results in a permanent gain.

Setting a new target and determining how to achieve the objective
corresponds to the ``plan'' phase, implementation to the ``do'' phase, and
ensuring arrival to the ``check'' and ``action'' phases.
Rationale for a change in the process was judged on the dimensions of
quality, velocity (measured as through-put time) and stability (measured as
schedule adherence). Performance of each of these three dimensions was
routinely measured at each work station.
Because the links to strategic objectives were intuitively obvious, such
performance measures do not need elaborate justification.
After a change in working practice the results were always scrutinised, as a
matter of policy, against previous measures of performance to determine
whether or not a worthwhile benefit had occurred.
Targets do not provide an indication of how to effect improvement. As
Deming has pointed out, exhortation to achieve a particular level of
performance inhibits learning and is likely to be counter-productive. If people

Starting position
(where are we now?)

Evaluation New position

(ensure arrival) (where do we want to be?)

Figure 2.
Implementation Means
Control cycle for process
(introduce new working procedure) (how do we get there?) improvement
 IJOPM cannot achieve a particular standard then either training should be provided or
19,12 the process should be re-designed or the standard revised. Once a target has
been reached there is no incentive to improve further. Continuous improvement
relies on intrinsic rewards of doing a good job as the driving force to improve
current standards.

1330 Process re-engineering

Whereas kaizen aims continuously to improve existing products and processes,
business process re-engineering proceduralises double-loop learning (involving
fundamental changes in both products and processes) into a central feature of
management policy.
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A ``great leap forward'' to increase competitiveness results from a clear

strategic vision, involving the product, process and customer, which is the
prerogative of senior management.
Although the Quantum project was initiated and monitored by senior
management, the actual work was delegated to a specially created project team,
headed by a full-time seconded leader. Not surprisingly a clear specification,
timetable, financial justification and budget were agreed at the outset.
Often a major technological advance requiring substantial investment is
needed to achieve a step improvement in performance with benefits accruing
over several years. Significant progress comes from challenging fundamentals
which is the essence of double-loop learning.
Evaluation requires a forward looking analysis over the whole range of
activities. Even if the primary aim is to improve non-financial metrics such as
through-put time or quality, substantial investment implies the possibility of
compromise between different features of a project. To make a meaningful
comparison of trade-off possibilities all the relevant factors need to be
expressed in the familiar commensurate accounting measures such as revenue,
cost, and margin.
Goals, stated as profit, sales or market share for instance, can be readily
expressed as numerical targets by senior management. Execution of the plan is
fulfilled by junior staff. The double-loop model of control shown in Figure 3
applies.
An objective does not have to be an extrapolation of current practice; it may
be based on a level necessary to achieve a given result (for instance target cost
used by the Quantum project) or it could be best practice determined by
external benchmarking.

Process stabilisation
During commissioning and immediate post-commissioning phases the first aim
should be to achieve process stability. At this stage a set of qualitative
measures are most appropriate for monitoring performance (e.g. MacArthur,
1996). Good house-keeping measures of performance, such as accurate
documentation, correct packaging and moving product to the designated
location on time, should be determined by the immediate down-stream
 New control Task Monitor The role of
variables variables
performance
measurement

Reports
1331

Figure 3.
Control cycle for process
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Strategic Analysis
evaluation re-engineering

``customer'' who is most inconvenienced by poor service. Such performance

measures should be designed by the users. Usually teething problems can be
completely eliminated fairly rapidly.
The classical model of control shown in Figure 4 is appropriate.
Once a process has reached stability the initial performance measures may
be discarded and a new quantitative set of measures designed so that the kaizen
cycle of continuous improvement can start afresh.
Continuous improvement is based on painstaking, rational analysis and the
search for causal explanations, which is impossible in a chaotic environment.

Process life cycle

The phases represent the process life cycle. Initially the need is to create a
stable operating environment. Once this has been achieved, day-to-day routine
is concerned with maintaining reliable output in terms of quality and timing. A
combination of the kanban system to control material flows and the statistical
control of quality provides a setting that ensures a smooth flow of production

Planning

Action Objectives and goals

Analysis Performance measures

Figure 4.
Control cycle for process
Responses Targets stabilisation
 IJOPM without the need for an elaborate performance measurement system.
19,12 Continuity is a fundamental consequence of the way manufacturing processes
are designed.
During the mature phase of the process life cycle, kaizen studies should be
routinely undertaken to improve both efficiency and effectiveness. It is widely
recognised that efficiency, by itself, is not sufficient to achieve world class
1332 manufacturing status. Production teams, not senior management, are
responsible for initiating and implementing suggestions for improvement.
Although the performance measurement system is a key instrument for
guiding and testing the outcome of the improvement process, it does not
indicate how a process may be improved; this must be a consequence of
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thinking creatively about the process mechanism.

The desire for significant process improvement prompts radical re-design.
Questioning the wisdom of current operational conventions is fundamental to
double-loop learning. Re-design involves a strategic assessment of customer
requirements, competition as well as internal functions. New levels of
performance should be expressed in terms of the operational efficiency
dimensions of quality, velocity and stability, which will lead, inexorably, to
greater effectiveness measured in conventional financial terms.

Conclusion
It is argued that the process life cycle has four stages each with its own
distinctive characteristics. The research was based on studying both kaizen
and radical process re-engineering programmes in a leading international
company. Ideally, further empirical studies would be carried out to
demonstrate broader support for the findings.
The study has practical implications for practitioners. Explicit recognition of
the stage a process has reached in the life cycle provides guidance for the
design of suitable performance metrics and control systems needed to direct
and manage a programme of performance improvement effectively.
For instance, it might be established during the early stages of a study to re-
engineer a particularly troublesome process that manifests a range of
undesirable behaviour signifying, in effect, that the process is not in control.
Such a process is still in the first stage of process development. Before
attempting a radical re-design the existing process should be stabilised using
appropriate methods of control.

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