Using Performance Excellence Models - Part 1:

Using Performance Excellence Models - Part 1: Defining and Managing the Value Chain Jim Hill Minnesota ASQ Professional Development Summit Feb 27, 2013 1 Topics Problem: Wide interpretation of Work System Why this matters and approach to resolution Common elements of PE Models The difference between Value Chain and Work Processes Decisions about the design of Work Systems and the Selection of Key Work Processes are strategic; these fundamentally define your organization s Value Chain and how well it operates 2 1

Baldrige - Work Systems Work systems comprise the internal work processes and external resources you need to develop and produce products, deliver them to your customers, and succeed in your marketplace. The Dilemma: Work Systems is Baldrigespecific term. Confusion in interpretation and conflict for Applicants, Evaluators, and Judges in the concept and articulation in this subject area has been a long-standing difficulty. 3 Need To reduce Criteria User and Evaluator variation Alignment Baldrige represents leading edge of validated management practice Work Systems are the core of the business enterprise, but the term is unfamiliar to most Work Systems is fundamental to every organization Accurate feedback is vital to PEN Mission 4 2

Today s Approach Define and illustrate example Work Systems for a PE Model For PE Criteria Users (to self-assess or preparing evaluation application) For PE Evaluators Demonstrate universal applicability of Work Systems, the equivalence to the Value Chain, and relationship to Work Processes 5 Why does this matter to you? The design of your Work Systems define the fundamental organization of production work flow Defines the Value Chain and support systems Defines the Key Processes Regardless of what you call it, defining these in the context of the Business Enterprise Model is fundamental to Performance Excellence 6 3

Approach to Conceptualize Examine non-baldrige Performance Excellence and Improvement Models If the term Works Systems is not used outside, then what equivalent term is used? Review has shown that the Value Chain is a well-accepted, common, and equivalent term, equivalent The Value Chain is the fundamental Work system, but there are other important Support Systems This is fundamental to Deming s Profound Knowledge; understanding the System such that one knows how to manage and improve 7 Baldrige Criteria for Performance Excellence 1 Leadership 3 Customer Focus Workforce People 5 Focus Work Core 7 Organizational Results 2 Strategic Planning Driver Triad Operations Process 6 Focus Changes here guide changes here which bring about results here 4 Measurement, Analysis, and Knowledge Management 8 4

Baldrige 2.1 - Work Systems Refers to how the work of your organization is accomplished. Work systems involve your workforce, your key suppliers and partners, your contractors, your collaborators, and other components of the supply chain needed to produce and deliver your products and carry out your business and support processes. Work systems comprise the internal work processes and external resources you need to develop and produce products, deliver them to your customers, and succeed in your marketplace. There are multiple possible Work Systems Note 2.1 (a4) In the most basic view of an organization, for example, the organization might define three generic work systems: one that addresses production of the product or service, one that engages the customer, and one that comprises systems that support production and customer engagement. 9 How does EFQM Excellence Model handle this? EFQM Excellence Model Enablers Results People People Results Leadership Strategy Processes, Products & Services Customer Results Business Results Partnership & Resources Society Results Learning, Creativity, and Innovation Observation: Performance Excellence relationships conceptually the same as Baldrige 10 5

Consistency in underlying Principles Baldrige Visionary Leadership Customer-Driven Excellence Organizational and Personal Learning Valuing Workforce Members and Partners Agility Focus on the Future Managing for Innovation Management by Fact Societal Responsibility Focus on Results and Creating Value Systems Perspective EFQM Achieving Balanced Results Adding Value for Customers Leading with Vision, Inspiration, & Integrity Managing by Processes Succeeding through People Nurturing Creativity & Innovation Building Partnerships Taking Responsibility for a Sustainable Future 11 Criteria Categories (based upon Principles) Baldrige EFQM 1. Leadership 1. Leadership 2. Strategic Planning 2. Strategy 3. Customer Focus 3. People 4. Measurement, Analysis and 4. Partnerships & Resources Knowledge Management 5. Processes, Products, and 5. Workforce Focus Services 6. Operations Focus 6. Customer Results 7. Results 7. People Results 8. Society Results 9. Business Results Summary: While criteria may be packaged differently, they are assessing the same aspects of performance 12 6

Work System Observations EFQM uses term Value Chain extensively, but never defines it. For example, it is in the definition of Key Processes: The processes that are most important for delivering the strategy and driving the value chain of the organization. EFQM never uses the term Work System Baldrige: Use Value Chain term minimally, but context is similar to EFQM, as seen in this excerpt: Work process design. Overall, effective design must take into account all stakeholders in the value chain. Lean Enterprise Memory Jogger terms: Core Processes activities, functions, and tasks that are inherent to the delivery of the service Value Stream: All the activities your company must do to design, order, produce, and deliver it s products or services to customers Summary: It is observed that the elements an organization s value chain are consistent with the definition of the production Work System. Both Baldrige and EFQM state performance criteria; the things processes must accomplish, without ever suggesting a specific model or terminology as a requirement. This is due to the nonprescriptive nature of the Models Now let s look at some prescriptive models. 13 Business Process Oriented KM Focus upon Value-Adding Processes Fraunhofer Reference Model for Knowledge Management 14 7

APQC Standard Process Framework 2012 APQC 15 Enterprise Mapping 16 8

Process-Based Perspective Employee Selection Management Reporting Training & Development Planning Objectives & Goals Budgeting Core Production Processes Customers Recognition Communication & Rewards Performance Management What is your model? Reference: ASQ Statistics Division Statistical Thinking 17 Business Enterprise Process Scope Three types of business processes Management : Processes that govern the operation of a system. Typical management processes include Corporate Governance and Strategic Management Core Business: Processes that constitute and create the primary value stream. Typical operational processes are Purchasing, Manufacturing, Marketing and Sales. Support: Necessary processes that support the core business, such as Accounting, Recruitment, Technical support Source - Wikipedia: Business Process 18 9

19 Observation: There is no conceptual difference Every model has a a set of Core Processes, either titled or synonymous with Value Chain The core processes are supported by other sets of management and support processes Each of these sets of processes could be considered d a Work System All supporting Work Systems should have a direct connection to optimizing performance of the Value Chain 20 10

Strategic Alignment of Operating Processes within Work System Design: The Value Chain older Customer and Stakeho Requirements tencies Strategy and Core Compet 3.2 Product Offerings Product and Service Design 6.1 Work Processes Order Fulfillment 6.1 Work Processes Customer Relationship Management 3.2 Customer Engagement 3.1 VOC 1.1 & 1.2 Leadership 2.1 & 2.2 Strategy 2.1 Work System Design 4.1 & 4.2 Information, Analysis and Knowledge Management 5.1 & 5.2 Work Force 6.2 Operational Effectiveness Figure By Jean Bronk 21 What is the Difference between Work Systems and Work Processes? Work Systems (2.1) are not work processes (6.1); they are related process groups There is a defined group-to-group work flow Each group will have a set of sub-processes There should be measures of processes that the organization uses to manage therefore improve work systems How do you identify Key Processes? 22 11

Baldrige Work System/Process Relationship Category 2.1 6.1 2.1 6.1 23 Insights to Performance Excellence 2011-2012, by Mark Blazey, ASQ Quality Press, used with permission Key Work Processes EFQM: The processes that are most important for delivering the strategy and driving the value chain of the organization Baldrige: Your most important internal value-creation processes. They might include product design and delivery, customer support, and business processes. Your key work processes are those that involve the majority of your workforce and produce customer, stakeholder, and stockholder value. 24 12

2011 Baldrige Case Study: Triangle Bank 25 Processes and Sub-Processes 2011 APQC 26 13

Value Chain Creation Process How to do this? Quantifying Improvement Project s Benefit F.W. Breyfogle III 27 Value Chain with Metrics From Figure 7.1 Integrated Enterprise Excellence, Volume II, Business Deployment F.W. Breyfogle III 28 14

Baldrige 6.1b Process Management Improvement using Statistical Thinking All work occurs in a system of interconnected processes, Variation exists in all processes, and Understanding and reducing variation are keys to success Process Variation Data Improvement Statistical Thinking Statistical Methods Philosophy Analysis Action Statistical Thinking ASQ Statics Division 29 Performance Improvement/Problem Solving Steps Document the Problem or Significant Opportunity Plan Identify Potential Root Causes or Actions to take Checksheet Pareto Chart Control Chart Sample Tools 5 Whys Cause and effect Diagram Brainstorming Time Plot/Run Chart Is/Is Not Analysis Scatter Plot Stratification Choose best Solutions Interrelationship Diagraph Multivoting Affinity Diagram Do Check Act Implement/Test Solutions No Measure Results Solved? Yes Experimental Design Checklist Pareto Chart Control Chart Time Plot/Run Chart Flowchart Procedures Training Standardize: Share learning; update processes Redesigning the Introductory Statistics Course Hoerl, R. & Snee, R. (July, 1995). Center for Quality & Productivity Improvement, University of Wisconsin Note: See The Mind Jogger II for tool applications; all tool functions are generally available on computer (Excel, Visio, etc.) 30 15

Overall Conclusions Every organization has a value chain (aka, production Work System, Core Processes) All other supporting Work Systems should be designed to support Value Chain effectiveness. The context of the entire Business Enterprise must tbe clear to all llin order for the various Systems and Processes to work towards the common goal Optimize the Value Chain 31 Strategic Considerations If an organization has different sets of customers, should they have different Value Chains? Builder (Commercial vs Single Family Home construction) High School (Mainstream Curricula Delivery vs Special Needs) Finance (Commercial Loans, Home Loans, others) Should there be different sets of processes under the same Value Chains, dependent upon the customers? Hospital Patient (Long Term vs Day Patient) Government License Issue Community College (Incoming HS Students vs Business Professional market) 32 16

Baldrige is an all-inclusive Model Baldrige is not a competing management approach. It is a bounding model of an integrated management system Provides strategic context for value chain and improvement approach, e.g. PDCA, ISO, 6-sigma, Lean Models appear different, but conceptually there is little or none Defining and management Work Systems is fundamental to improvement initiatives; the use of Baldrige or another PE model provides context to better select, sustain, and accelerate such efforts 33 Profound Knowledge Problems do not go away or performance improve simply by exhorting persons to do better The use of Baldrige (or other model) brings cognizance (Profound Knowledge) to how all elements (including people) work together and contribute to success The biggest opportunity lies within the System in which employees work Fourth Generation Management: The New Business Consciousness Brian Joiner 34 17

The Importance of Culture The true system, the real system, is our present construction of systematic thought itself, rationality itself, and if a factory is torn down but the rationality which produced it is left standing, then that rationality will simply produce another factory. If a revolution destroys a systematic government, but the systematic patterns of thought that produced that government are left intact, then those patterns will repeat themselves in the succeeding government. Robert M. Pirsig, Zen And The Art Of Motorcycle Maintenance 35 Concluding Points Why use a Performance Excellence Model what is the Value? To accomplish cultural change to change the way Leaders and Managers think about how work gets done and how to plan for and manage Performance Excellence Performance Excellence Culture: Process ownership, process management, and continual process improvement Performance Excellence not achievable by benchmark imitation of others Organizational structure, processes, or through software silver bullets Valuing process ownership and improvement is cultural Processes have evolved to produce excellence in a specific culture; use by another culture will not be effective until fully understood and owned, with a culture of continuous improvement IT solution will not be effective if processes are new, or are simply an attempt to automate misunderstood processes Summary: The genuine and committed use of Performance Excellence model criteria can be the vehicle for such cultural change in particular in the Driver Triad 36 18

Thank You! The Performance Excellence Network (formerly Minnesota Council for Quality) is a non-profit corporation that advances improvement and performance excellence within organizations, individuals, and communities. The organization helps leaders identify strengths and improvement opportunities and builds networks that bring information, resources, knowledge, and best practices to organizations desiring to improve. Links for additional Performance Excellence information: Baldrige - www.nist.gov/baldrige/ EFQM Excellence Model - www.efqm.org Alliance for Performance Excellence www.baldrigepe.org/alliance/ Performance Excellence Network - www.performanceexcellencenetwork.org Process Excellence Network www.processexcellencenetwork.com ASQ QMD Organizational Excellence Technical Committee - http://www.asq-qm.org/organizational-excellence 37 Supplemental Slides Additional illustrative examples 38 19

Operational Excellence is a result of Leadership Performance Excellence Models provide criteria for Work Core Operational Excellence, however this is a result of Excellence in the Driver Triad, in particular performance in Leadership processes, e.g. how do leaders through personal actions: Guide and sustain your organization Communicate with your workforce and encourage high performance and so on (see Baldrige Criteria) 39 APQC Example Process Model APQC: Seven Tenets of Process Management 40 20

Value Chain with Metrics From Figure 7.1 Integrated Enterprise Excellence, Volume II, Business Deployment F.W. Breyfogle III 41 Process Drill-down 42 Fig 7.4 from The Integrated Enterprise Excellence System, Volume II, Business Deployment F.W. Breyfogle III 21

Adapted from NEI Standard Nuclear Performance Model 43 Value Chain Processes/Metrics Quantifying Improvement Project s Benefit F.W. Breyfogle III 44 22