Especially in an economy like the one we are currently experiencing, organizations must come up with a way to create laser-like focus on the critical areas that are under-performing and dramatically improve them fast...or the consequences can be dire. Incremental improvement is not good enough.
In situations like this, identifying the few areas that must be improved and monitoring their improvement on what I call a "Breakthrough Improvement Scorecard" is a proven way to drive the focus, cross-functional accountability, and dramatic improvement that is absolutely necessary.
A Breakthrough Improvement Scorecard is similar to a Balanced Scorecard in that it contains objectives, measures, targets, improvement initiatives, and owners for each, but it is different in that it usually focuses on only one perspective (like financial) and one high-level outcome measure within that perspective that is under-performing and is cross-functional by design.
Some examples might be operating margin, customer satisfaction, or quality outcomes (like risk-adjusted mortality rates in a hospital). Each Breakthrough Improvement Scorecard focuses on only one outcome measure and an organization should have no more that five or six breakthrough improvement scorecards at one time, due to the number of resources required for each one. The scorecard is designed using some of the correlation tools that you might find in statistical problem solving processes like Six Sigma.
The design begins, of course, with the identification of the biggest organizational challenges or “burning platforms” that require special attention and dramatic improvement. For example, if the burning platform is that operating margin is in the red, first a target for improvement must be set, which would probably be to get it at least into the black.
Then, the operating margin must be segmented into its key drivers or components. Those drivers can be defined by formula (e.g., revenues and expenses), then by location (e.g., revenues by department or business unit; expenses by location or by category such as labor or supplies) and finally by correlation. Correlation is defined using tools like pareto charts or structure trees and would define leading measures like “productivity” as a driver of expenses or “volume” as a potential driver of “revenues.”
The next step is to align all of these measures in a correlation or cause-and-effect sequence and review the data for each driver. In other words, productivity drives expenses, which when combined with revenues, drives operating margin. Then, based on the measures that are under-performing most significantly, improvement initiatives would be developed and owners and contributors would be assigned.
The final step to dramatic improvement is for all of these initiative teams to find and eliminate the various root causes of the red measures. As that is completed, the individual gap reductions aggregate into not just incremental improvement, but breakthrough or quantum improvement.
I've been involved in deploying this approach at numerous organizations. One grew revenues from $2 Billion to $7 Billion (a financial organization and Baldrige recipient). Another reduced defects by 60% (a petrochemical company). Yet another reduced customer complaints by 78% (electric utility and Deming Award Winner).
If you're struggling with a way to drive similar types of changes at your organization, consider applying the Breakthrough Improvement Scorecard approach. If you need additional guidance on how to get it moving, please let me know. And if you try it, let me know how it works for you!
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