BSP Performance Management

Capability building| WEEK 5

Discussion

What do you think

‘Performance
Management’ is?

1
Performance management is based on reviewing and improving
performance at the end of each period

Standards
“How we
operate”

“Produce the
product”
Do

“Take action Implement Review “Discuss

on ideas to how well
improve we did”
production”

Improve

“Brainstorm
ideas
to improve”
Source: McKinsey

2
Performance dialogue must be linked and paced to allow
ownership at each level
Meeting Reporting format

Hourly Daily Weekly Monthly

Operation Interaction between each level

Manager ensures that everyone is working
towards a consistent set of objectives
Monthly
review

Site Manager

Weekly review Monthly

scorecard

Area
managers Site board and
Start of Day scorecards

Hourly Tracker Weekly review of longer term trends

and identification of priority areas
Operators Team board to focus on, combined with
Process control identification and sharing of team
charts best practices

Real time feedback allows issues to Daily identification of key actions

be addressed and resolved within a needed to address previous days
short timeframe issues and prevent reoccurrence

3
An effective performance management system is driven by
3 interlinked elements
Why it is important
Key performance indicators: Metrics, targets &
incentives
1. Measure ▪ Drives fact-based discussions
performance
(KPI) ▪ Allows focused dialogs on specific metrics
▪ Ensures clear understanding of key metrics and
progress to targets

Visual management/workplace
Effective ▪ Consistent and effective communication of goals
2. Visualize
performance and priorities
performance
management ▪ Enables real-time status updates and continuous
improvement

Performance reviews
▪ Drives corrective actions
3. Review ▪ Enables giving feedback as a "demanding partner"
performance ▪ Uses data as a lens to focus problem solving,
not as a weapon
▪ Ensures accountability for results

4
What makes
good KPIs?

5
1. MEASURE PERFORMANCE (KPI)
Key design criteria for good KPI

A▪ KPI should be SMART; a small number

of concrete KPI is often more helpful
than a lot of vague KPI
B▪ KPI should follow a tree logic along
the organizational level (cascade)
C▪ KPIs should be balanced between
leading and lagging

Source: McKinsey

6
 1. MEASURE PERFORMANCE (KPI)
A SMART way of setting targets

Tips Traps
▪ Linked to key value drivers ▪ Not using consistent language to
S pecific ▪ Cascaded across the describe a target
organization

▪ Unambiguous (usually numerical) ▪ Only using lagging but not leading

M easurable KPI metrics

▪ Clear RACI ▪ Not ambitious enough

(Responsible/Accountable/Consul
A chievable ted/Informed)
▪ Owner does not have the
power/capability to change
▪ Considers technical design limits
▪ Reflects aspirations and/or ▪ Not offering incentives for both short
R elevant benchmarking and long-term improvements
▪ Based on gap analysis

▪ Clearly defined time frame for ▪ Only setting long-term targets

T ime-bound progress measurement and without interim goals to ensure
achievement progress

7
 1. MEASURE PERFORMANCE (KPI)
B KPIs are derived from a linkage to stakeholder value and
prioritized to identify the most significant driver at each level
Planned
Product specifications
Maintenance
OEE
Lack of Shift organization
material/stock full
SOP/Training
Lack of energy
Automation

Lack of operator
Process measurement / adjustement / sampling

Production planning Breakdown (h/month)

Start/stop (#/month)
Administrative
process
Increase the Change over (set up)
efficiency
(>tons /h) Availability
Minor stops (h/month)

Performance Speed loss (h/month Process leveling

Process
Waste (ton/month)
capacity
Quality
(Capex)
Rework (ton/month)

8
 1. MEASURE PERFORMANCE (KPI)
C Ensure a balanced mix of leading and lagging KPIs

Leading KPIs1 (Causes) Lagging KPIs2 (Consequences)

Leading KPIs are typically measured more Lagging KPIs show the final outcome of an
frequently than lagging indicators and are action, usually well after it has been completed
the result of a measurement process. e.g. daily production output. Lagging indicators
Leading indicators give indication of future confirm that a pattern is occurring or about to
outcome e.g. slow cycle times may result in occur. Lagging indicators usually can not be Linking the two
missing delivery dates influenced until after the result. types of indicator
This link is vital when
designing a holistic set of
KPIs. For example, if the
lagging indicator for
quality is defective ppm,
the leading KPI needs to
be a potential root
cause process-wise. In
this case, it might be the
scrap level of incoming
material or the scrap level
upstream on the
production line, etc.

1 Known as “performance drivers” in source 2 Known as “outcomes measures” in source 3 Adapted from source text
Source: “Translating Strategy into Action – The Balanced Scorecard”, Kaplan & Norton, HBS Press

9
 1. MEASURE PERFORMANCE (KPI)
C Leading and Lagging KPI can be defined to improve
specific economic drivers like ROIC

KPI list: Plant Manager Leading KPI Lagging KPI

Breakdown ▪ Production
Scheduled to plan
Availability rate
maintenance
Change over
▪ Plant OEE
Performance Reaction time
OEE
rate
Volume
Waiting ▪ No. of off spec
Start up loss analyses
Technical
Quality rate Scrap
capacity
Profit Rework
Feedstock
▪ Raw material
consumption
Variable costs Energy ▪ Energy usage
Unit price
Others ▪ Plant capacity
ROIC Margin Labor cost

Maintenance
▪ Maintenance
Unit cost Fixed costs priority split
QC
Property,
Others
plant, and
Invested Safety
▪ No. of SHE
equipment
capital incidents
Incidental
Working Environment
costs
Out of scope capital Others ▪ Absenteeism

Source: McKinsey

10
 1. MEASURE PERFORMANCE (KPI)
C Leading and Lagging KPI can be defined to improve Leading KPIs
specific efficiencies Lagging KPIs

Planned
Product specifications
Maintenance
OEE
Lack of Shift organization
material/stock full
SOP/Training
Lack of energy
Automation

Lack of operator
Process measurement / adjustement / sampling

Production planning Breakdown (h/month)

Start/stop (#/month)
Administrative
process
Increase the Change over (set up)
efficiency
(>tons /h) Availability
Minor stops (h/month)

Performance Speed loss (h/month Process leveling

Process
Waste (ton/month)
capacity
Quality
(Capex)
Rework (ton/month)

11
1. MEASURE PERFORMANCE (KPI)
There are generally 5 KPI categories that are used to
develop an effective and balanced scorecard

Example KPI
Quality
▪ Granulometry (%)
▪ Number of negative tests (#/month)
Quality Cost Delivery
▪ On-time-in-full (OTIF)
▪ Order-to-delivery lead time
Productivity
▪ Tons per man hour (ton/man h)
Productivity ▪ Overall equipment effectiveness (OEE)
Cost
▪ Overtime hours
▪ Unit cost
▪ Cost per ton
Safety
Delivery Safety ▪ Number of accidents
▪ Number of near misses

SOURCE: 782811

12
1. MEASURE PERFORMANCE (KPI)
Exercise 1: Design a KPI tree for the Kiln (15 mins)

Situation
▪ Imagine you are the site manager, you want to create a
set of KPIs for your kiln to use so that you, and your
teams can review the performance of the plant

Setup End product

▪ Breakout sessions: split into groups of 2-3 A KPI tree for a kiln

Participants' tasks
1 Review the key KPI areas on the next slide, and create a
KPI tree:
▪ Consider the right KPIs for manager and operator level
▪ Consider all the key areas of the business Fill in the boxes with question
▪ Ensure your KPIs are ‘balanced’ marks on the next page
2 Be prepared to report out your ideas to the other group
Time
▪ 10 mins to design KPIs tree
▪ 5 mins for sharing discussion/debriefing

13
1. MEASURE PERFORMANCE (KPI)
Using the starting point below, create a KPI tree for your kiln

Performance
“bucket” Safety Quality Production Delivery Cost

KPI Category
Injuries/ Machine Lead time to Labor
Quality
month productivity customer productivity

Production
manager ? ? ? ? ?

Front-line
team ? ? ? ? ?

14
1. MEASURE PERFORMANCE (KPI)
Using the starting point below, create a KPI tree for your kiln

Performance
“bucket” Safety Quality Production Delivery Cost

KPI Category
Injuries/ Machine Lead time to Labor
Quality
month productivity customer productivity

Production # Hazards
manager Scrap Ton Ton/man
reported/ OEE Kiln
tons/month loaded/month hour month
month

Front-line % Safety
team Scrap Speed loss Ton available
training Tons/shift
tons/shift (h/shift) in the silos
complete

15
An effective performance management system is driven
by 3 interlinked elements
Why it is important
Key performance indicators: Metrics, targets &
incentives
Measure ▪ Drives fact-based discussions
1 performance
(KPI)
▪ Allows focused dialogs on specific metrics
▪ Ensures clear understanding of key metrics and
progress to targets

Visual management/workplace
Effective ▪ Consistent and effective communication of goals and
Visualize
performance 2 priorities
performance
management ▪ Enables real-time status updates and continuous
improvement

Performance reviews
▪ Drives corrective actions
3
Review ▪ Enables giving feedback as a "demanding partner"
performance ▪ Uses data as a lens to focus problem solving, not as
a weapon
▪ Ensures accountability for results
Source: McKinsey

16
What is visualization
and why do we do it?

17
2. VISUALIZE PERFORMANCE
Visualization helps to communicate performance and set clear goals

▪ Visualization is key to maintain set standards

▪ Visualization has to be simple and intuitive
▪ It has to be implemented with and
maintained by the employees
▪ You cannot improve what you don't measure!
▪ Measuring is not enough – you need to
translate observations into action and value!

18
2. VISUALIZE PERFORMANCE
An optimal visual management to track performance follows 4 principles

Principles Example
Boards are visible to all team Suggested structure
Visible members and visitors to the A long enough Metrics are organized by
area history is shown to performance element and
spot any significant are limited in number to
Layout of the board is clear and trends keep things manageable
simple, so a newcomer can
Clear Cost Quality Delivery Safety
easily understand what is being
displayed

Leading Lagging
Actuals are always displayed Targets are shown
Target- against targets, so it is for each metric
driven immediately apparent when
targets have not been met

If rate is not updated live, time

slots are chosen so that
problems can be identified
Real time quickly enough for the team
leader to take action and catch
up within a shift
A balance of drivers (input Data are
or process measures) and graphically
results (output measure) is displayed
shown for each element

Source: McKinsey

19
2. VISUALIZE PERFORMANCE
Visual performance boards – Example 1

The "health" of the team is

assessed weekly using
the "team barometer"

Hourly performance is
tracked on the left
side of the board

Daily productivity,
quality, and lead
times are shown with
charts Workplace
organization
audits

Meeting agendas, rotas, and

other support material that
does not have to be T-cards are used to track
displayed all the time are progress of problem-solving
kept together initiatives

Source: McKinsey

20
2. VISUALIZE PERFORMANCE
Visual performance boards – Example 2

Performance on last
4 change-overs Development of key KPIs over time
available at visual performance
board in entrance area of plant

Operators join in problem solving

and commit to clear actions,
implemented immediately

Performance per hour for

last 24 hours displayed
along with root causes
when target not met

Team leader leads

problem solving
Daily 5-minute morning meeting in
front of visual performance board
Shop floor is engaged in daily tracking
of performance against targets and
rigorous dialog/problem solving

Source: McKinsey

21
2. VISUALIZE PERFORMANCE
Example board: A shift review board will act as a focal point for the end of
shift meetings

Handover notes Weekly schedule

for next shift adherence KPI

Status
indicator
Short-
for each
term
vessel
problem
solving
section

General
info

Status of Safety cross Longer term

Forklifts KPI issues escalated
to management

Source: McKinsey

22
2. VISUALIZE PERFORMANCE
Interpreting the board

1a 2
Have we produced If we have had
all the batches that downtime or not
we should? produced all the
batches, is there an ▪ Board is a tool for
action? a conversation; if
there are no
actions it’s just
3 ‘filling in sheets’
Will the action
resolve the issue?
▪ Actions should
solve the root
cause not
‘sweep it under
4 the carpet’, or do
Is there clear
a temporary fix
responsibility and
1b
Has there been are actions
excessive assigned a
downtime? due date?

Source: McKinsey

23
2. VISUALIZE PERFORMANCE
Example in Sibelco

▪ In Jaltipan, Mexico, this kind of

visualization has already been
successfully implemented
▪ The location of the meeting area has
been set right in the core of the plant

Source: SIBELCO

24
An effective performance management system is driven
by 3 interlinked elements
Why it is important
Key performance indicators: Metrics, targets &
incentives
Measure ▪ Drives fact-based discussions
1 performance
(KPI)
▪ Allows focused dialogs on specific metrics
▪ Ensures clear understanding of key metrics and
progress to targets

Visual management/workplace
Effective ▪ Consistent and effective communication of goals and
Visualize
performance 2 priorities
performance
management ▪ Enables real-time status updates and continuous
improvement

Performance reviews
▪ Drives corrective actions
3
Review ▪ Enables giving feedback as a "demanding partner"
performance ▪ Uses data as a lens to focus problem solving, not as
a weapon
▪ Ensures accountability for results
Source: McKinsey

25
What makes a good
performance
reviews?

26
3. REVIEW PERFORMANCE
What do you need for a successful performance review meeting?
This …
▪ Regular appointment which fits in
with the shift work
▪ Boards will get updated before-
Process
hand with time set aside to do so
▪ Agreement on priority areas for
improvement actions
▪ Fact based discussion on
root causes
▪ Clear ownership of corrective
Content
actions
▪ Discuss process rather
than person
▪ Challenging accepted norms –
“can we do this better?”
Behaviours
▪ Delegating responsibility
▪ Coaching
Not this …
▪ Ad hoc reactive meetings with
little linkage across levels
▪ First sight of data is in the meeting
or meeting is taken up filling in data
▪ Lack of priorities set – scattergun
approach
▪ Solving superficial problems
▪ Shared or unclear ownership
of actions, nothing gets done
▪ Defensive session apportioning
blame
▪ Compliance – “that’s the way
we’ve always done it”
▪ Micro-management
▪ Instruction – do this
27
3. REVIEW PERFORMANCE
To have an effective performance review we should follow 5 steps

Stage Question Why do we ask it? Example

To highlight KPIs that Team sees that their number
Are any KPIs need to be discussed of processed orders is off
Review 1
off target? target

To get to the root Team discusses the problem,

What is cause and solve and finds that the order form is
2
causing this? problems for good complex with duplicated fields

Improve
To ensure our Team comes up with ideas to
How can we actions will actually make it easier by simplifying
3
fix this? solve problems the form; they have to check
with production first

So someone actually Task of checking with

Who will does it production to adjust the form
4
do it? is assigned to one team
member…
Imple-
ment
When will To make sure it gets … and a completion date is
5 they complete done quickly added. The team will discuss
it by? progress at the next meeting

28
3. REVIEW PERFORMANCE
Do’s and don'ts of performance dialogues
Actions need to be discussed, jointly defined and prioritized, and the responsibility
for their execution needs to be taken by somebody
Actions need … Say …
… a clear responsible “Stefan, that’s your job.”
… a deadline “Until next Thursday end of
shift”
… a clear definition of what “3 half-hour follow-up
the action is meetings on Mon, Wed and
Fri at 14:00”
… an explicit reporting “Send me an email, when
mechanism you’re done”
… help & support “Get support from Paula and
Serge, they know they should
help you”
… a clear understanding “Stefan, what was your job?”
Don’t say …
“OK, guys, you’re finishing
the report, OK?”
“Let’s see that we can do it on
time”
“A possibility to communicate
better”
“…”
“Just do everything that
needs to be done”
“Everything clear? Ok, then
it’s good …”
29
 What issues might
you face in a
performance review
meeting?

30
3. REVIEW PERFORMANCE
Intervening to get a meeting back on track
Problem Solution Method Example
▪ Remind people what they agreed to ▪ We agreed to brainstorm and we’re now
and hold them to it evaluating ideas”
Enforce the ▪ “We said we’d spend 10 minutes on this, it’s been 20;
agenda I suggest we move on”
▪ “We seem to have several conversations here, may
I bring us back to our original problem?”
Getting
off topic
Ask what’s
▪ Check that everyone is being included ▪ “I feel not everyone agrees with how we’re making this
in the process – decision – does anyone have another suggestion?”
going on

Deflect side
▪ Make sure participants feel heard and ▪ “John, your point is really important, I’m putting it on the
respected while putting the meeting board so we can come back it”.
issues
back on course

Not having ▪ Answer a question with a question; ▪ “Chris, you want to know the implications for the
Boomerang use the group to solve problems. operators, what does everyone think they will be?”
the answer

Use body
▪ Regain focus by standing or moving to
Disruptive the front of the room. Acknowledge
language
people’s comments with eye contact.

▪ Humor can diffuse a tense situation.

Use humour Be careful not to make anyone in the
wisely group the butt of the joke, particularly
Negative
junior members of the team.
atmos-
phere
If in doubt,
▪ Disturb an ineffective group dynamic
by splitting the group up. Use a short
break out
break to give people time to cool off.

Source: McKinsey

31
3. REVIEW PERFORMANCE
During implementation, typical mindsets that need to be tackled promptly
can be observed

Typical mindsets How to tackle them

▪ “Whiteboard is here to ▪ “Whiteboard is a team tool. Its purpose is not to control people, but help
control/judge me” team-solve problem and be more productive”
▪ “Performance of single team member is not recorded anywhere”

▪ “Whiteboard is ▪ “Tasks are created by team members and they are in charge of planning the
micromanaging” week, the only principle to be respected is the amount of hours per day”

▪ “Whiteboard will be ▪ “Thanks to the whiteboard, team members have a chance to discuss each
used against me” week with the team manager to address/solve problems (position in the
team, career, and training)”

▪ “Whiteboard is an ▪ “Team manager should delegate as much as possible whiteboard

overhead” preparation to team members”
▪ “Lean helps team manager to be real people manager and not only senior
expert”

Source: McKinsey

32
Homework

▪ Define the future state

meeting cascade in your site
▪ Pick which meeting we will
transform first
▪ Engage meeting attendees to
design board and pick KPIs

33