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Using Performance Excellence Models - Part 1:

Defining and Managing the Value ChainDefining and Managing the Value ChainJim Hill

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Minnesota ASQ Professional Development Summit

Feb 27, 2013

TopicsProblem: Wide interpretation of “Work System”

Why this matters and approach to resolutionWhy this matters and approach to resolutionCommon elements of PE ModelsThe difference between Value Chain and Work Processes

Decisions about the design of Work Systems

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g yand the Selection of Key Work Processes are strategic; these fundamentally define your organization’s Value Chain and how

well it operates

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Baldrige - Work SystemsWork 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 Baldrige-specific term. Confusion in interpretation and conflict for Applicants, Evaluators, and

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Judges in the concept and articulation in this subject area has been a long-standing difficulty.

Need To reduce Criteria User and Evaluator variation

Alignment

Baldrige represents “leading edge of validated management practice”

Alignment

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g p“Work Systems” are the core of the business enterprise, but the term is unfamiliar to mostWork Systems is fundamental to every organizationAccurate feedback is vital to PEN Mission

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Today’s ApproachDefine 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

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pp yof Work Systems, the equivalence to the Value Chain, and relationship to Work Processes

Why does this matter to you?The design of your Work Systems define

the fundamental organization ofthe fundamental organization of production work flow

Defines the Value Chain and support systemsDefines the Key Processes

Regardless of what you call it, defining

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these in the context of the Business Enterprise Model is fundamental to

Performance Excellence

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Approach to ConceptualizeExamine non-Baldrige Performance

Excellence and Improvement Models• If the term “Works Systems” is not used outside• 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

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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

P lW kf

Baldrige Criteria for Performance Excellence

People Focus

Process Focus

WorkforceFocus

Operations

Focus

Work Core

Leadership

StrategicPlanning

Customer Focus

Driver Triad

Organizational Results

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2

3

5

6

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8Measurement, Analysis, and Knowledge Management

which bring about results hereChanges here guide changes here

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Baldrige 2.1 - Work SystemsRefers 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 anddeliver 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

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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.

How does EFQM Excellence Model handle this?

People

EFQM Excellence ModelEnablers Results

People

Leadership

Partnership & Resources

Strategy

Processes, Products & Services

PeopleResults

Society Results

Customer Results

Business Results

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Learning, Creativity, and InnovationObservation: Performance Excellence

relationships conceptually the same as Baldrige

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Consistency in underlying Principles

Baldrige• Visionary Leadership• Customer-Driven Excellence

O i ti l d P l

EFQM• Achieving Balanced Results• Adding Value for Customers

• Organizational and Personal Learning

• Valuing Workforce Members and Partners

• Agility• Focus on the Future• Managing for Innovation• Management by Fact

• Leading with Vision, Inspiration, & Integrity

• Managing by Processes• Succeeding through People• Nurturing Creativity &

Innovation• Building Partnerships

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• Management by Fact• Societal Responsibility• Focus on Results and

Creating Value• Systems Perspective

• Building Partnerships• Taking Responsibility for a

Sustainable Future

Criteria Categories(based upon Principles)

Baldrige1 Leadership

EFQM1. Leadership1. Leadership

2. Strategic Planning3. Customer Focus4. Measurement, Analysis and

Knowledge Management5. Workforce Focus6. Operations Focus

1. Leadership2. Strategy3. People4. Partnerships & Resources5. Processes, Products, and

Services6. Customer Results

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7. Results 7. People Results8. Society Results9. Business Results

Summary: While criteria may be packaged differently, they are assessing the same aspects of performance

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“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 t k h ld i th l h istakeholders in the value chain.

Lean Enterprise Memory Jogger terms: Core Processes – activities, functions, and tasks that are inherent to the delivery of the serviceValue 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.

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p y

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 non-prescriptive nature of the Models

Now let’s look at some prescriptive models….

Business Process Oriented KMBusiness Process Oriented KMFocus upon ValueFocus upon Value--Adding ProcessesAdding Processes

14Fraunhofer Reference Model for Knowledge Management

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APQC Standard Process Framework©2012 APQC

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Enterprise Mapping

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Process-Based PerspectiveManagement

ReportingEmployeeSelection

Training &Development

Objectives & Goals

Planning

Budgeting

Core Production ProcessesCustomers

Recognition

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Recognition& RewardsPerformance

Management

Communication

Reference: ASQ Statistics Division – Statistical Thinking

What is your model?

Business Enterprise Process Business Enterprise Process ScopeScopeThree 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, M k ti d S l

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Marketing and Sales. Support: Necessary processes that support the core

business, such as Accounting, Recruitment, Technical support

Source - Wikipedia: Business Process

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Observation: There is no conceptual difference

• Every model has a a set of Core Processes, either titled or synonymous with “Valueeither 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 id d “W k S t ”

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considered a “Work System”All supporting Work Systems should have a

direct connection to optimizing performance of the Value Chain

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olde

r

tencies

3.2 Product Offerings

Strategic Alignment of Operating Processes within Work System Design: The Value Chain

Cus

tom

er a

nd S

take

hoR

equi

rem

ents

Product and Service Design

Strategy and

 Core Co

mpe

t

Order Fulfillment

Customer Relationship Management

1.1 & 1.2 L d hi

6.1 Work Processes

3.2 Customer

Engagement

Offerings

6.1 Work Processes

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3.1 VOCLeadership

2.1 & 2.2Strategy

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

What is the Difference between Work Systems and Work Processes?

• Work Systems (2.1) are not work processes (6.1); they are related processprocesses (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

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that the organization uses to manage therefore improve work systems

How do you identify Key Processes?

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Baldrige Work System/Process Relationship

Category 2.1 – 6.1

2.1

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6.1

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 organizationof 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

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processes. Your key work processes are those that involve the majority of your workforce and produce customer, stakeholder, and stockholder value.

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2011 Baldrige Case Study: Triangle Bank

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Processes and Sub-Processes

26©2011 APQC

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Value Chain Creation ProcessHow to do this?

27“Quantifying Improvement Project’s Benefit” F.W. Breyfogle III

Value Chain with Metrics

28From Figure 7.1 “Integrated Enterprise Excellence, Volume II, Business

Deployment” F.W. Breyfogle III

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Baldrige 6.1b – Process ManagementImprovement using “Statistical Thinking”

•All work occurs in a system of interconnected processes, •Variation exists in all processes and

Process Variation Data Improvement

•Variation exists in all processes, and•Understanding and reducing variation are keys to success

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Statistical Thinking Statistical Methods

Philosophy Analysis Action

“Statistical Thinking” ASQ Statics Division

Performance Improvement/Problem SolvingSteps Sample Tools

Document the Problem orSignificant Opportunity

Identify Potential Root Causes or Actions to take

•Checksheet•Pareto Chart•Control Chart

•“5 Whys”•Cause and effect Diagram

•Time Plot/Run Chart•“Is/Is Not” Analysis

•Scatter PlotPlan

Actions to take

Choose best Solutions

Implement/Test Solutions

Measure Results

Cause and effect Diagram•Brainstorming

•Interrelationship Diagraph•Multivoting•Affinity Diagram

•Experimental Design

•Checklist•Pareto Chart

•Stratification

Do

Ch k

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Measure Results C•Control Chart•Time Plot/Run Chart

•Flowchart•Procedures•Training

“Redesigning the Introductory Statistics Course” Hoerl, R. & Snee, R. (July, 1995). Center for Quality & Productivity Improvement, University of WisconsinNote: See “The Mind Jogger II” for tool applications; all tool functions are generally available on computer (Excel, Visio, etc.)

Solved?

Standardize: Share learning; update processes

Yes

No

Check

Act

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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 t b l t ll i d f th i

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must be clear to all in order for the various Systems and Processes to work towards the common goal – Optimize the Value Chain

Strategic Considerations• If an organization has different sets of customers,

should they have different Value Chains?– Builder (Commercial vs Single Family Home

construction)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?

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customers?– Hospital Patient (Long Term vs Day Patient)– Government License Issue– Community College (Incoming HS Students vs Business

Professional market)

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Baldrige is an all-inclusive Model• Baldrige is not a “competing” management

approach. It is a “bounding” model of an integrated management systemmanagement 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

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g g yfundamental to improvement initiatives; the use of Baldrige or another PE model provides context to better select, sustain, and accelerate such efforts

Profound Knowledge• Problems do not go away or performance

improve simply by exhorting persons to do betterbetter

• The use of Baldrige (or other model) brings cognizance (Profound Knowledge) to how all elements (including people) work together and contribute to success

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gThe biggest opportunity lies within the

System in which employees work“Fourth Generation Management: The New Business Consciousness”

Brian Joiner

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The Importance of CultureThe true system, the real system, is our present construction of systematic thought itself, rationality itself, and if a factory is torn down but y , ythe 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

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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

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 ExcellencePerformance Excellence Culture: Process ownership process management– 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

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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

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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 iimprove.

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/

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• 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

Supplemental SlidesppAdditional illustrative examples

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Operational Excellence is a result of Leadership

Performance Excellence Models provide criteria for Work Core Operationalcriteria 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:

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– Guide and sustain your organization– Communicate with your workforce and

encourage high performance …and so on (see Baldrige Criteria)

APQC Example Process Model

40APQC: Seven Tenets of Process Management

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Value Chain with Metrics

41From Figure 7.1 “Integrated Enterprise Excellence, Volume II, Business

Deployment” F.W. Breyfogle III

Process Drill-down

42Fig 7.4 from “The Integrated Enterprise Excellence System, Volume II, Business

Deployment” F.W. Breyfogle III

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43Adapted from NEI Standard Nuclear Performance Model

Value Chain Processes/Metrics

44“Quantifying Improvement Project’s Benefit” F.W. Breyfogle III