In an economy with high levels of competitiveness like the current one, where the effects of globalization and technological advance are experienced day by day, we are going through an unparalleled moment where the whole world is interconnected and knowledge and information are increasing in geometric shape in the gigantic interrelated databases, companies, institutions and professionals are forced to operate within a new economic framework characterized by information and knowledge.
Thus, an entrepreneur or manager who is unaware of their own internal processes and problems, and also does not have information about the changes in their environment, is destined to fight feverishly only to lose market share day by day and limit themselves to a subsistence standard of living. Within this framework, it is not strange to meet managers who are completely unaware of the human capital they have in their company.
kaizen-continuous-improvement-and-the-balanced-scorecard-1Thus, the management of companies of excellence have implemented continuous improvement as a philosophy and way of operating, in order to be competitive and give meaning to their own existence and that of the company as a whole, continually redefining the objectives for this reason. organizational in order to bring them in line with the development of the economy, technology and the ever-growing needs of users and consumers.
As a way to monitor the evolution of your own company and its place in the global context, various alternatives were designed, the most famous of which were "the Kaplan and Norton balanced scorecard", "the balanced scorecard model of Maisel ”and“ the EP2M ”. In this monograph, the control panel is exposed from the vision of the deployment of policy developed by companies that practice the Kaizen method as a way to continuously improve their performance levels.
1. Introduction
Within the current economic environment marked not only by globalization, and rapid technological and cultural changes, but also by environmental pollution and the increasingly intense exploitation of scarce resources, companies are forced to improve their daily processes. day to day to strengthen its competitiveness, satisfying users in the best way with its products and services, and also make more efficient use of resources.
Today the world is experiencing the strong advance of telecommunications and transportation, which are becoming faster and cheaper every day, combining this fact with the accelerated process of industrialization and economic development of the countries of Southeast Asia and others such as India. Its immense number of inhabitants, of which a large proportion abandon agricultural tasks, whose yields are growing thanks to the development of biotechnologies, to join industrial activities, forces their governments to plan strong export policies. This not only implies an attack on the various markets, but also an increase in the demand for raw materials.
The changes are therefore very profound, until recently the main world trade area that was the North Atlantic basin has shifted to the Pacific basin, which is being led on the one hand by the economies of Japan and South Korea and on the other the United States. Companies have been forced to redefine their objectives to reintegrate within this new world board marked not only by new power relations, but also by the development of information technology, communications, biotechnology and materials engineering.
Thus, all companies, whether they want to or not, compete not only for their markets, but also for the raw materials or inputs that are necessary, and as in the case of athletes, they can only be in the final competition and aspire to the podium improving day a day. That is why in a country like Japan lacking natural resources, with a small area and many inhabitants, they were forced to continuously improve in order to rebuild their economic structure in the first place, which was decimated by the Second War. World, and on the other, to conquer world markets.
Japanese products, which in the 1950s were considered by Western producers as unable to compete with them due to their low levels of quality, were improving day by day in quality and design until cornering and defeating in many cases a large part of Western industry, from motorcycles and cars, to watches, music and video equipment, televisions, cameras, photocopiers and video cameras, and even financial services, among many more.
The adoption of Western quality control techniques exposed by Deming and Juran added to their own developments in the improvement of processes, as well as in the analysis of customer needs, gave rise to a method and system of continuous improvement called Kaizen. The following have contributed to its development: Masaaki Imai, Ishikawa, Taguchi, Kano, Shigeo Shingo and Ohno, among other important consultants and advisers in matters of quality and productivity.
This methodology called Kaizen requires a strong discipline, that concentration necessary to continuously improve, challenging new brands in terms of quality, productivity, customer satisfaction, cycle times and costs.
To monitor the proper functioning and capacity of the processes, as well as their continuous levels of improvement, it is necessary to have a Balanced Scorecard that allows not only to make known the strategic and operational plans at the various levels of the organization and stages of processes, but also allows information at various levels about what is happening in the gemba (workplace).
It should be clarified that for the Kaizen philosophy it is not enough for the executive to have an information system that notifies him of what happens in the production processes (be they of goods or services) but that it is essential to visit the gemba several times a day to personally evaluate what happens and why. Unlike most Western managers who focus on the written report of results, kaizen administrators give preponderance to everything related to processes, inspecting the places that are the basis of the results for this reason. "If you want to improve results, you have to focus on improving processes. "
2. Management guidance
Kaizen generates process-oriented thinking, since processes must be improved before improved results are obtained, being as stated before in sharp contrast to the results-oriented thinking of most Western managers.
Japanese executive Mayumi Otsubo (Bridgestone Tire Co.) argues that it is process-oriented thinking that has enabled Japanese industry to achieve its competitive advantage in world markets and that the concept of Kaizen is the epitome of Japanese-oriented thinking. process.
Otsubo suggests that results-oriented criteria for evaluating performance is a legacy of the “mass production society” and that process-oriented criteria are gaining momentum in the postindustrial high-tech and stylish society.
Looking at the role of the manager, the stimulating and supportive role is aimed at improving processes, while the control role is aimed at the product or results. The concept of Kaizen underscores the stimulating and supportive role of management in people's efforts to improve processes. On the one hand, the administration needs to develop the criteria. On the other, control-type management only looks at performance or results-oriented criteria. In short, we can call the process-oriented criteria P-criteria and the result-oriented criteria R criteria.
The P criteria require a long-term view, as they are directed at people's efforts and often require behavior change. On the other hand, the R criteria are more direct and short-term.
R criteria are often easy to quantify. In fact, in most companies, administrations only have R criteria, as these typically refer to sales, cost and profit figures. However, in most cases it is also possible to quantify the P criteria. For example, in the case of Quality Control circles, the Japanese administration has developed complicated measures to quantify the level of effort. These and other figures are added together and used as the basis for recognition and awards.
The process-oriented way of thinking fills the gap between process and result, between ends and means, and between goals and measures, and helps people see the whole picture without deviation. In this way, both the P criteria and the R criteria can and have been established at each of the levels of management, between senior management and divisional management, between mid-level managers and supervisors, and between supervisors and Workers.
By definition, a manager must be interested in results. However, when we look at the behavior of successful managers in a successful company, we often find that such managers are also process-oriented. They ask questions and make decisions based on and guided by both P criteria and R criteria.
3. Kaizen Administration
Cross functional management and policy deployment are two fundamental administrative concepts that support the Total Quality Control strategy within Kaizen. In Kaizen thinking, the work of management is divided into two areas: (1) that of administrative maintenance of current business performance to achieve results and profits and (2) “Kaizen management” for the improvement of processes and systems. Kaizen management relates to both cross functional management and policy deployment.
The transversal functional administration is related to the coordination of the different units to realize the transversal functional goals of Kaizen, and the deployment of the policy with the implementation policies for Kaizen.
In CTC - Kaizen, the cross functional goals of Quality - Cost and Scheduling are clearly defined as superior to the line functions such as design, production and marketing. Consequently, the position of cross functional goals as higher-order goals necessitates a new systems approach to decision making. It is to meet this need that the concepts and practices of both cross functional management and policy deployment have been developed. Within this context, "quality" concerns the construction of a better system for quality assurance; the “cost” concerns the construction of a system to identify the cost factors and the reduction of the same;"scheduling" refers to building a better system for both order delivery and quantity.
Management's dedication to key concepts of cross functional management management and policy deployment is expressed in directions provided by senior management. It usually formulates its annual policies or goals at the beginning of the year based on long-term plans and strategies. Such formulation also encompasses two main categories of goals: (1) goals related to factors such as profits, and products, and (2) goals related to general improvements in the different systems and cross functional activities of the company.
An important aspect of politics is that it is made up of both objectives and measures, both ends and means. Goals are usually quantitative figures established by senior management, such as goals for sales, profits, and market share. On the other hand, the measures are specific action programs to achieve these goals. A goal that is not expressed in terms of such specific measures is just a motto. Therefore, it is imperative that senior management determine both goals and measures and then “roll out” them throughout the organization.
While achieving results goals generally takes priority as the top objective for managers, the goal of strengthening and improving the organization and its systems is no less important. The first is a company response to external requirements, such as shareholder pressure for profits; the latter is usually a self-generated movement for improvement in the company's culture, chemistry, and overall competitiveness.
A company is organized into vertical functions, such as R&D, production, engineering, finance, sales, and administrative services. Through such an organization by functions, responsibilities are delegated and profits are sought.
Among the objectives of the CTC (Total Quality Control) is not only increasing profits but also general improvements in areas such as employee education, customer satisfaction, customer services, quality assurance, cost control, volume, control of deliveries and development of new products. These objectives require transversal functional efforts that cut across the entire organization. It goes without saying that the quality control department cannot by itself obtain the desired quality. All functional departments must be involved. Therefore, cross functional management is one of the main tools to improve the objectives of the CTC.
According to Shigeru Aoki (managing director of Toyota Motor) “the ultimate goal of the company is to make a profit. Assuming this is self-evident, then the company's next higher-order goal should be cross functional goals such as quality, cost, and schedule (quantity and delivery). Without meeting these goals, the company will fall behind the competition due to inferior quality, find its profits eroded by higher costs, and be unable to deliver its products on time to customers. If these cross functional goals are realized, profits will follow. Consequently, we must consider all other administrative functions as existing to serve the three higher-order objectives of CCP (quality, cost, and scheduling).These ancillary administrative functions include product planning, design, production, purchasing and marketing, and should be viewed as secondary means to actually CCP. "
4. Policy deployment
Policy rollout refers to the process of introducing Kaizen policies across the company, from the highest level to the lowest. For Kaizen, the term policy describes the annual goals or orientations of both medium and long range.
The annual profit and kaizen goals are established based on the company's long- and medium-term goals. Several months before senior management meets to formulate these annual goals, there is a preliminary vertical consultation between the different administrative levels in order to agree on the details of the plan. Once the new annual goals of senior management have been determined, they are "rolled out" to all lower levels of management. Goals that were declared abstract by top management increasingly become concrete and specific as they roll down. Unless the policies (goals) of senior management are put to practical use by lower-level managers, they will be useless.
As goals work their way down, top management policy statements are recast as increasingly specific and action-oriented goals, ultimately becoming precise quantitative values. Thus, the deployment of politics is a means for the task of high administration to be carried out by lower levels.
5. Checkpoints and checkpoints
The concept of the deployment of the policy has its other side in the Statistical Process Control (SPC). The SPC chart is useful for reviewing results, identifying the cause of abnormalities, and then developing ways to eliminate these causes. By using control charts in statistical quality control, we go from the results to the origin and correct or eliminate the factors that have caused the problems.
By analogy, checkpoints and checkpoints can also be used in administration. Each level of the organization has checkpoints (R criteria) and checkpoints (P criteria) in their work. At a higher administrative level, the checkpoints are the policy goals and the checkpoints are the policy measures. When these specific points of control and review are established between superiors and subordinates, a series of goals and measures are established, with links between managers at different levels. It is precisely these checkpoints and checkpoints that are used in the deployment of policies in the CTC. For such a system to operate effectively,It is essential that every manager knows exactly what his R-criteria (checkpoints) and what his P-criteria (checkpoints) are, and that his checkpoints are well understood as checkpoints by his subordinates. Each goal must be accompanied by measures to achieve it. Thus, "goal" refers to the control point and "measures" to the checkpoints. The goal is results-oriented and the measures are process-oriented.
6. Strategic Vector
Going back on our steps, and remembering the importance that the achievement of quality, costs and programming (CCP) have in the achievement of profits, we can graph on the basis of three axes corresponding to each of these transversal functions the Vector Strategic, which joins the points corresponding to the situation at the time of planning C0C0P0 with the strategic objectives set as C1C1P1 goals.
How important is this graph? Its main objective is to serve as a basis for the reasoning aimed at the recognition of objectives, the interrelation between the different transversal functions and the review between the proposed objectives and those actually achieved in order to meditate on the necessary corrections.
7. Interrelation between higher and lower objectives
As Shigeru Aoki well expressed, the ultimate goal of the company is to make a profit, but to achieve this it is necessary to fully satisfy consumers by providing them with the products and services they require, at the right price, in the place requested, and in the quantity and required time. Hence the importance of planning cross-functional functional goals and the need to have a Balanced Scorecard that allows the proper functioning of the system and processes to be verified at all times.
Thus, we have a higher objective, which in the case of a commercial company is the achievement of the highest return on investment and on the other hand, an objective that has to do with the mission of the company, those needs of the consumer that it has for goal satisfy. Only by satisfying these customer requirements can the company survive in the long term. Now, to satisfy these needs correctly, as previously stated, they must not only provide products of good design and quality, but also at an adequate price, which implies having efficient processes, also requiring products in adequate quantity and terms. The relationship between these three components maximizes the value for the customer / user, and therefore their preference for our products or services.
Achieving these objectives implies having to constantly measure and control our processes, having to verify its own internal evolution as its comparison with the environment. It is useless for an athlete to improve their own brand if they do not know how far they are from their competitors' brand.
There are four fundamental indicators, which will allow us to recognize the potential of the company to survive or succeed in the market, being them:
- Return on Assets (ROA) Value Added Per Employee (VAE) Market Share Customer Satisfaction
These four interrelated indicators, and analyzed in their evolution over time and in comparison with competitors, will give us a first visualization of the level of competitiveness of our company. These are key indicators for the top executives of the company, but it is necessary to make the conclusions known to the entire organization to give a greater impulse to the improvement of the processes.
8. Statistical Process Control and Balanced Scorecard
CEP charts can be applied to aspects related to financial indicators, such as those related to processes, consumer satisfaction, and learning and growth.
Its application is of great importance due to the advantages it implies. In the first place, it allows to know the capacity of the process or system to generate products of adequate quality and cost, to satisfy in a sustained way the requirements of customers and / or consumers, to maintain a regularity in productivity levels. Secondly, it allows differentiating between variations due to special causes, from those motivated by common or random causes, thus avoiding making mistakes in decision-making concerning making adjustments (see graph). Third: it allows to know at the moment if the processes are or not under control. Fourth: the methodology is used to verify both checkpoints (P) and control points (R),achieving in such a way to ensure the obtaining of the desired levels (call them quality, costs, productivity). Fifth: It allows to detect changes in the processes in time that can bring consequences (positive or negative) by adopting measures in this regard. And sixthly, it is an optimal and adequate means to apply the processes of "Plan - Perform - Evaluate - Act" (PREA) and "Standardize - Perform - Evaluate - Act" (EREA).
Among the indicators related to the process, we can graph, among others, the CEP corresponding to:
- Quality Inventory levels Preparation times Supplier response time Response time to customer orders Average Process Costs Poor Quality Costs Productivity Repairs Production cycle times Inventory turnover Days of stock of finished products Accidents Collections evolution Sales evolution
Regarding levels of satisfaction, we can subdivide it between clients (wholesaler distributor) and users or end consumers on the one hand. Also between type of clients by geographical areas, type of client and size of purchases. With regard to customers, we can measure and graph satisfaction rates for product or service or with brands or the company as a whole. Furthermore, both general (or global) satisfaction indices and by concept can and should be plotted. Example: in a sanatorium, the satisfaction of each client can be measured in relation to the quality of medical services, nursing care, bureaucratic procedures, quality of food, cleanliness, among others. From this we will obtain a global periodic index and another by concept,In this way, we will know not only how satisfied our patients are, but which are the aspects that are lowering the level of global qualification and must be improved.
Another aspect of fundamental importance is the measurement and graphing of the levels of satisfaction of the employees with the company, the levels of satisfaction of the internal clients with the suppliers (internal or external) and even the satisfaction of the suppliers with our company (fundamental aspect for a company that practices Just in Time).
Likewise, financial indices are capable of graphing them using CEP, thereby achieving all the advantages related to analysis and decision-making.
Thus, each managerial level corresponding to the different processes and functions of the organization will be able to track through the computer the current state of the processes and their evolution, recognizing whether they are under control or out of control, and their capacity.
9. Key follow-up issues in a Kaizen environment
Because the Kaizen system uses six fundamental systems such as Just in Time (JIT), TQM (Total Quality Management) and TPM (Total Productive Maintenance), suggestions, group activities and deployment of policies, it is essential It is important to set up the dashboards and comprehensive dashboards based on the objectives or operations of said systems.
Thus, in the case of Just in Time, it is of fundamental importance:
- the number of suppliers quality levels and supplier delivery compliance the number of qualified suppliers (just in time participants) quantity of parts used per product / service inventory and stock levels overproduction inventory turnover lead times - preparation times physical space used costs (Average Cost of the Process; and Maximum Acceptable Cost over Upper Control Limit - CMA / LCS) polyvalence rate quantity of kanban quantity and detention times autonomy levels cyclical length of internal transports Existing human resources “RHE” (in terms of skills, knowledge and experience as a amount) on Human Resources needed "RHN"
Its current state, its evolution, the level of compliance with the proposed objectives and its relationship with external data (benchmark) must be shown. Example: if the point is suppliers, the aspect to consider is the current number of total suppliers and quantity per input or product, its evolution over time, how far (in percentage) it is from reaching the objective (s), compared with number of suppliers that other competitors have (the best and the market average).
In the case of Total Productive Maintenance (TPM), indicators such as:
- Dead times and vacuum due to breakdowns or equipment preparation and adjustment times Loss of process speed due to operation at reduced speed or idle times and short stops Defective products or processes due to quality defects and repetition of work, and loss of performance during the start-up phase of the process.Overall efficiency of the equipment Coefficient of operation due to stoppages Coefficient of operation of the cycle Availability coefficient Coefficient of effectiveness Quality coefficient Charging times Operating time Real operating time Efficient operating time Average time between preparations Frequency of preparations Average time per preparation Rate of preparations Loss of efficiency due to preparations Average time between failures due to average time lost due to failure Failures Provisional failure rate Projected time rate Maintenance improvement rate Planned maintenance performance rate
Regarding TQM, it is possible and must be to monitor both the variables and the attributes corresponding to the various products and services for internal use as well as those intended for their commercialization. Of utmost importance is to keep track of the Sigmas level of the aforementioned products and services.
A control of the levels of quality costs (or poor quality) is also essential given the level that these costs have on average in companies in relation to the total invoiced.
The CEP corresponding to the levels of satisfaction and the number of repairs, returns and complaints or claims is a critical point and must be observed and analyzed very carefully.
Regarding small group activities, the following should be monitored:
- Number of quality circles Percentage of employees participating Average number of employees per team Number of suggestions or problems solved Average number of suggestions per team Total benefits produced by suggestions Average benefits per suggestions Number of suggestions applied / number of suggestions made
Regarding individual suggestions we have to observe:
- The number of suggestions per time period Average number of suggestions per suggestive employees Average number of suggestions per employee Approved suggestions on suggestions made Total benefits Averaged benefits per suggestions
10. Formation of the Balanced Scorecard
By conformation we must understand the values and objectives to be monitored, and the relationships that the main objectives will keep with the secondary ones, as well as the indicators that the various sectors or areas will follow, and the relationships that will be kept among themselves. This must be clearly distinguished from setting specific objectives, which will constantly evolve as a result of internal and environmental changes.
Thus, the fundamental steps to carry out would be:
1st Strategic Planning (Mission - Objectives - Values - Vision)
2º Determination of the key points or determining factors (FCE - Key Success Factors corresponding to each area, sector or process.)
3º Set what data have to be loaded, who, when, how and where.
4th Format of the information on the screen. Design and graphics.
The level of detail will increase as the indicators get closer to the processes or operational areas. The question is how much data to monitor and what? We should distinguish between fundamental data, for which a maximum of seven is considered appropriate, according to psychological studies, as a quantity that can be kept mentally by the user, but also all indicators that are out of control must be reported by exception (either positively or negatively). This does not imply that the interested party can access information on all the indicators if he wishes to make a detailed analysis, but the information format must be such as to report key data and those that constitute a need for decision-making.Regarding the data to be reported or monitored, they are those that are directly related to the decision-making of the interested party based on their responsibilities and in terms of the systemic vision of the company and the processes.
A distinction must also be made between indicators corresponding to different time periods. While the level of failures in production processes will be reported every 15 or 30 minutes, every hour, the level of customer satisfaction can be reported weekly, fortnightly or per month, inventory turnover levels will be reported monthly, the market share on a monthly basis, inventory level can be automatically reported when a certain level is exceeded (which will cause the stoppage of production), number of suppliers will be reported per month.
Thus, each Manager or Supervisor and even the employees or workers will have their monitors with information corresponding to different indicators and periods of time. It is essential that all the components of the company have information for self-control and as a way to improve their own processes.
The possibility of having data to carry out Paretian Analysis must be foreseen in the computer system. This refers to the fact that if, for example, an excess of expenses is reported, it is possible to immediately access the Pareto composition of said excess (the few vital and the many trivial), in order to make decisions to correct the deviations.
- Bibliography
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Author: Mauricio León Lefcovich - Operations Management Consultant
Specialist in: Kaizen, Six Sigma, Just in Time and Strategic Planning.
The monograph was completed on 10/30/03
E-mail address: [email protected]
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