How to measure a lean transformation

I got this question asked of me recently - "how do you measure the progress of a lean transformation".  When we do this type of work, there is an expectation of increased performance results, greater employee engagement, and that virtuous learning cycles have begun. But transformation work is hard and takes time. And there are a multitude of operational and other metrics, both at a tactical and aggregate level.

So how does a leader know the organization is on the right track? My experience indicates that the answer is not in any one measure but a combination of measures and associated behaviors that helps maintain strong performance and health. In the following, I am sharing a few measures that I have seen used successfully.

1. Establish long term measures

The importance of long term success measures is critical. These measures should be tied to the long term vision of the organization. Typically, these are espoused as True North measures or Organization level Objectives and Key Results (OKRs). These measures tie to the business strategy of the organization, and lean practitioners are well used to setting breakthrough targets in Quality, Cost, Safety, Delivery and Employee Health. Some other examples of measures I have seen work are:

Example Measure Business Strategy it primarily support

New customers per year; Net income per employee Profitable growth

Lead time for new products; No of innovations/employee Product or service differentiation

Net Promoter Score, Customer complaints/unit Customer experience

Productivity Low cost strategy

These are lagging metrics but perform the important task of providing direction and ties in the rest of the tactical and leading metrics.

In addition to the above, I would recommend a measure for the overall organizational maturity in lean. After all, it is the long term capability in lean that is going to achieve breakthrough results. Measuring maturity in lean practices is a powerful way to benchmark, learn, and drive improvement. In this process, regular assessments provide objective scores against lean maturity benchmarks. A rigorous reflection and problem solving process uses the assessment findings to provide learnings and actions. Common external benchmarks in the US include the criteria for Malcolm Baldridge Award and the Shingo Prize.

2. Establish leading metrics for performance and health

It is important to establish a set of leading indicators to understand the health of the lean system. These should include measures of both performance and health. The first dimension of leading metrics should measure pace and depth of progress against the business area's breakthrough objectives where the lean transformation is taking place. It is important to select these performance metrics carefully, to ensure the transformation can demonstrate impact within the respective time horizon. An example here is to measure reduction of lead time, and perhaps have secondary measures for productivity and quality.

I would like to share an additional measure that I find especially compelling and meaningful.

No of problems solved per employee. 

The intent of many lean programs is to drive innate capacity to continuously improve. Ensuring that the pace and quality of problems solved is ever increasing becomes a powerful leading indicator of the success of the lean program. This is relatively easy to measure, and can be adopted across all levels of the organization. This particular metric has some additional qualities. 

1. It serves as a proxy for employee engagement. This metric sets up the expectation for the people doing the work to constantly reflect and improve on how value is produced. This metric will only improve with the active involvement and support of the workforce.
2. It promotes cross-functional collaboration. As the easy problems get resolved, more complex ones get exposed. As teams try to solve these, there is more active work happening across silos and traditional roles and responsibilities.
3. This metric serves as a good measure for performance, capability, and behavior.

3. Help leaders learn what to look for

While measures and metrics have their place and help drive focus and improvement, there is tremendous power in helping the leader recognize strengths and opportunities in their everyday work. This serves as a leading indicator, and also connects to the leader in a personal way. This approach requires the leader to learn how to spot strengths, opportunities and take resulting coaching and problem solving action. Following are some examples of the leading behavioral indicators that leaders should look for in their daily work.

• People are prioritizing their work. As people internalize the long term objectives of the organization, they are more acutely aware of how their work and improvement activity tie to them. Employees constructively challenging priorities and reflecting on what value is driven from them is a healthy indicator for future success.
• Problems are being recognized. People should increasingly identify challenges and blockers towards the desired state. Teams should increasingly prioritize the problems based on their impact to long term success and targeted capabilities. 
• Stuff gets done. The leader should get the sense that more of the right work is being prioritized and getting completed. Activities the leader should watch for are clear standards, execution on standard work and action plans, follow up, and increasing trnsparency in to this work by the team.
• Leaders are doing their leader standard work. For a well-designed lean system, leaders and managers are expected to fulfill their roles to create conditions of maximum success for employees. Typically, these expectations and responsibilities are embodied in routines defined as leader standard work. Measuring leaders on fulfillment of these tasks can serve as a primary leading indicator for the lean program.

Lean is striving to create a learning organization, one that constantly challenges and changes.  Measures and metrics are tools that help us in the journey. The use of these metrics to drive the right behavior is a critical aspect of success. The measures that work for your organization will likely be completely different than the ones I have shown. But hopefully they serve as examples to develop ones that better meet your needs.