Process Improvement & Performance Management Made Simple: The Fasttrack Approach to Getting Results Quickly

By Andrew Muras and Glenn Goodnight

Can you get rapid results and still be effective? Where do you begin and what techniques should you use? What have others done and what were their lessons learned?

Andrew Muras and Glenn Goodnight answer these questions and many more based on years of experience in implementing and teaching at both commercial and government organizations. Filled with case studies, this book highlights techniques that are effective in the real world. Whether practitioner, manager or executive, youre sure to gain the insights needed for program success.

I find their approach to foundational aspects both structurally sound and engagingand critical for sustaining cost and quality performance improvements. Dr. Penny Weller, Hackett Group

FastTrack is easy to use, easy to understand, and easy to communicate. Billie Gayle Lewis, LSS Blackbelt

Ive been working with Andrew and Glenn for many years their workshops and trainings are typically our best attended and highest rated events. Guy Clayton, Director, IQPC

Table of Contents

Chapter 1: The FastTrack Approach for Rapid, Cost Effective Implementations

Chapter 2: Shared Services

Chapter 3: Chargebacks, Service Level Agreements and Service Catalogues

Chapter 4: Information Technology

Chapter 5: Product & Customer Profitability

Chapter 6: Capacity Analysis

Chapter 7: Performance Management, Metrics and Scorecards

Chapter 8: Enterprise Wide Implementations

Chapter 9: Benchmarking

Chapter 10: Outsourcing

Chapter 11: Government

Chapter 12: Business Transformation: Linking ABC/M with Lean and Six Sigma

• Language: English
• Publisher: Xlibris US
• Release date: Jun 18, 2009
• ISBN: 9781462800841

Andrew Muras

With over two dozen published articles, Andrew Muras is a highly sought-after speaker across North America and brings a wealth of implementation and teaching experiences from back office/shared services functions to front-line operations. Glenn Goodnight has over twenty years experience in performance management, cost estimating and activity based analysis for the private and public sector, ranging from strategy execution to improving service delivery and costs.

Book preview

PROCESS IMPROVEMENT &

PERFORMANCE MANAGEMENT

MADE SIMPLE

The FastTrack approach

to getting results quickly

Andrew Muras & Glenn Goodnight

With a Special Introduction by Mike Roberts,

former CAM-I Director and inventor of the FastTrack approach.

Copyright © 2009 by Andrew Muras & Glenn Goodnight.

All rights reserved. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without permission in writing from the copyright owner.

This book was printed in the United States of America.

To order additional copies of this book, contact:

Xlibris Corporation

1-888-795-4274

www.Xlibris.com

[e-mail]

48688

Contents

Introduction

Chapter 1 The Fasttrack Approach For Rapid, Cost Effective Implementations

Chapter 2 Shared Services

Chapter 3 Chargebacks, Service Level Agreements And Service Catalogues

Chapter 4 Information Technology

Chapter 5 Product & Customer Profitability

Chapter 6 Capacity Analysis

Chapter 7 Performance Management, Metrics And Scorecards

Chapter 8 Enterprise-Wide Implementations

Chapter 9 Benchmarking

Chapter 10 Outsourcing

Chapter 11 Government

Chapter 12 Business Transformation: Linking Abc/M With Lean And Six Sigma

INTRODUCTION

I was truly honored when Andrew Muras and Glenn Goodnight asked me to write an introduction for their book, Process Improvement & Performance Management Made Simple. I’ve known the authors for over a decade and we have worked together on countless successful process improvement and performance management efforts in nearly every industry. Successful, as I have chosen to define it, has two key attributes:

1.    Measurable Financial Return. Successful process improvement efforts must generate a minimum return of 10 to 1. That’s right, for every dollar spent on process improvement we expect to generate a minimum of $10 in quantifiable benefits.

2.    Knowledge Transfer. True success in process improvement also requires organizational learning. The approach we take ensures that organizations learn to analyze and improve any process. Our goal is for clients to gain a set of working tools that they can continue to use to improve processes for decades after we complete the initial efforts.

I started developing the FastTrack.ABMtm approach in the early 1990’s, at a time when seventy percent of ABC/ABM process improvement projects were documented failures. The reasons for these failures seemed fairly obvious to me. The ABC/ABM process improvement projects were too lengthy and expensive, most took six months and many went years without producing results. Many of these projects relied on cumbersome and complex software and, in an effort to ensure accuracy, often got mired in far too much detail. Only rarely were these efforts cross-functional in nature.

Perhaps worst of all, these projects ignored most of the ABM concepts that we had developed at the Consortium of Advanced Manufacturing—International (CAM-I) and instead became detailed accounting exercises. In creating the Fasttrack.ABMtm approach my intention was to simplify the process, overcome these common barriers to process improvement and deliver results quickly.

FastTrack.ABMtm utilizes cross functional teams working in fast-paced group sessions. During these sessions, the teams identify key and significant activities, develop costs for each activity, create activity and process flow maps, define and quantify non-value added activities, identify operational performance metrics and develop a prioritized list of process improvement opportunities. All of this is completed in one week of half-day working sessions.

The FastTrack.ABMtm approach produces great results for a number of very good reasons:

•    Team-based—team based workshop approaches build consensus and momentum to implement change.

•    ABM Philosophy—is a key component of this approach which keeps the team focused on improving processes and activities.

•    Adult Learning Approach—the FastTrack.ABMtm uses adult learning principles so that the process improvement techniques and understanding is transferred to all participants.

•    Speed—people like to complete projects and get results. No one likes projects that have birthdays.

•    Results—the teams produce clear results every week. As I said earlier, we’re looking for 10-1 as a minimum improvement target.

The underlying, great secret of FastTrack.ABMtm is its simplicity. Obviously, no one could produce the results we’re talking about with a burdensome, complex approach. In conducting FastTrack working sessions we use simple and effective process analysis tools including:

•    group brainstorming

•    simplified activity costing

•    simple process maps (with only 4-5 symbols)

•    rapidly produced affinity diagrams

•    nominal group technique

We have repeatedly used this simple approach to analyze and solve all sorts of complex business problems and in just about any type business environment you could name. Many people today think of systems and process automation or integration as the solution to virtually any process problem. While technology may provide the best solution at times, in many other instances the solution is as simple as changing an outdated policy or streamlining a manual process. In fact, the automate and integrate solutions have been the bane of many good organizations. I continue to stress the importance of improving processes in this order:

1.    Understand the process

2.    Simplify the process to the extent possible

3.    If beneficial, automate the process

4.    Finally, if it makes business sense, integrate the process.

I have often joked with people saying that if Bill Gates had started out building the integrated Microsoft Officetm when he founded Microsoft, we would probably find Mr. Gates standing at some city intersection with a cardboard sign saying Will Program for Food. Instead Bill Gates built his office suite of products one step module at a time.

As the authors of Process Improvement & Performance Management Made Simple have continued to expand the FastTrack Approach, they have had great success incorporating Performance Measures including the Balanced Scorecard into the process. This enhancement has further helped organizations to monitor and measure their successes, and keep their improvement efforts on track.

As you go through the case studies that follow you’ll see how the authors have used this simple, straightforward approach to generate positive results in real life organizations.

Good luck in all of your improvement efforts!

Michael W. Roberts

Former Technical Director, Consortium for Advanced

Manufacturing-International and Author of the FastTrack Approach

The ABM Philosophy:

1.    The structure and control of activities to effectively meet customer needs is the key to competitive advantage.

2.    Activities and process must be continually analyzed, changed and improved to maintain competitive advantage.

3.    The only effective way to manage cost is to control the activities which consume resources.

4.    The only way to effectively improve the quality of products and services is by improving the activities which produce those products and services.

5.    Organizational objectives, strategies, activities, and measurements must be aligned to effectively manage the enterprise.

6.    The people who actually perform the work (activities) have the best understanding of how to improve the quality and cost of the activity.

7.    In order to improve the activities and processes, people must be empowered to change the way they work.

CHAPTER 1

The FastTrack Approach for

Rapid, Cost Effective Implementations

The 1990’s were an interesting time for those of us in performance management and process improvement. In the public sector, budgetary pressures and political ideologies were driving agencies towards an improved level of cost awareness and accountability for performance. The private sector was dealing with similar challenges as organizations sought ways to improve their competitive advantage. During this period, we were part of a medium-sized company, MEVATEC Corporation (later purchased by BAE Systems), serving both public and private sectors with a wide range of engineering services.

We initially heard about Activity Based Costing (ABC) and Activity Based Management (ABM) (hereinafter, ABC/M) from our customers who were interested in how they could improve visibility into their organization’s performance. What we discovered was a technique for not only activity-based analysis, but also an approach that provides simple and common-sense solutions for most performance management and process improvement initiatives in today’s environment. It has served us and dozens of clients well over the past decade plus of implementations.

As one client commented, FastTrack has the Midas touch. Not only does it make gold for the company implementing through cost savings and process improvements (e.g., several projects have generated multi-million dollar real savings after a one-week process), it also makes gold for those internal company personnel who learn and use the process. For now these individuals have an approach that can solve most operational management issues, ranging from profitability costing to capacity analysis to metrics to outsourcing to shared services to reengineering to staff training and development—and this makes those individuals valuable and easily promotable.

The Beginning

In the early phases of our journey, we read books and articles, attended training sessions, became active in interest groups and attended conferences to discover all we could about ABC/M. What we found was interesting:

•    Limited Success Stories. More than half those who had tried to implement and sustain ABC/M had failed, principally due to complexities built into a particular system and thus had failed to achieve desired results. This led to a large base of ABC/M opponents that still exists today.

•    Hard to Use Software Tools. Most training was software driven, focusing principally on how to use a particular software tool. These software tools were powerful but also complicated. They worked well, but required everyday use or the skills would be lost.

•    Long Timelines. Implementations were taking what we considered an excessive amount of time. Our customers were interested in quick and hard-hitting methodologies that delivered a bang for the buck.

Given our initial findings, we still believed ABC/M was the right tool for our customers since it provided a common sense approach for understanding complex issues. We just needed to find a way to implement ABC/M efficiently and effectively.

In late 1997 we met Mike Roberts. Mike had been responsible for research at CAM-I (Consortium for Advanced Manufacturing—International) but was currently the owner of a small firm providing ABC/M services to private sector companies. We had searched for ABC/M service providers and were intrigued by Mike’s FastTrack software and implementation successes.

Like us, Mike had assessed the landscape of ABC/M practitioners and implementations and come to a similar set of findings. After our first meeting, it was clear that FastTrack, which included both an implementation approach and an easy to use and understand software package, would significantly help our clients. Shortly thereafter, Mike joined the company.

Since then, we have continued refining the process and software package based on hundreds of implementations. We have used FastTrack in virtually every environment, from manufacturing operations to back office functions—always providing management with actionable performance information that delivers quick results and provides a framework for sustaining on-going analysis and change.

Basics of ABC/M

ABC/M simply collects and organizes data in a logical manner that provides operational and actionable information to managers. The fundamentals of ABC/M are found in the five boxes of the CAM-I cross of ABC/M (see Figure 1-1). Once you understand these five boxes and how they relate, you understand ABC/M.

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Figure 1-1: The CAM-I Cross of ABC/M

Resources

One issue we typically encounter is the belief that ABC/M is a financial reporting tool. Nothing could be further from the truth. ABC/M is most successful when used as an operational reporting tool for management.

The only place where financial reporting and ABC/M touch is in the resources box. Resources are simply what it costs to operate the organization. This information usually comes from the organizations general ledger (G/L) or budget data. Typical resources include, but are not limited to, labor and fringe, facilities, travel, and other operating costs (e.g., office supplies, telephone, subscriptions), and allocations from other operating groups in the organization. To keep it simple, our rule of thumb is that resources include all costs associated with running a particular organization.

Activities

Activity analysis is the heart of ABC/M and the center piece of the CAM-I cross. Simply stated, activities refer to the work processes performed. As Peter Drucker said (Practice of Management, New York, New York: HarperCollins, 1954),

To find out what activities are needed to attain the objectives of the business is such an obvious thing to do that it would hardly seem to deserve special mention. But analyzing the activities is as good as unknown to traditional theory.

Most of us have been associated with numerous management tools and techniques over the years, many of which failed because they didn’t follow Drucker’s wisdom. Our continuing interest and use of ABC/M is based on Drucker’s insight—everything is ultimately intimately tied to the activities an organization performs. That just makes good sense to us.

Defining activities is often the most difficult part of implementing ABC/M. Our early findings indicated that many of the failures of ABC/M were attributable to complexity in defining and tracking activities. For the FastTrack process, identifying and defining activities at the right level is the key to successfully implementing and sustaining ABC/M.

To define activities, we use a hierarchy consisting of four elements: processes, activities, tasks, and steps. We suggest a limit of fifteen on the number of activities for any given functional model. Further, we tie each of the activities to a process that ultimately provides the services or products to the organization. Once the activities are appropriately defined, we use tasks and steps to ensure we have identified all work performed.

When the activities and their outputs have been defined and resources traced to the activities, we have the first significant output of an ABC/M model, the activity view. Figure 1-2a is an example activity view from an HR department. As you can see, just this initial view provides tremendous insight for a manager versus a typical G/L or budgetary view of the organization.

Products & Services

The bottom block of the vertical ABC/M cross includes products & services. While identifying products and services might seem obvious, many organizations and functions find it difficult, primarily because they have never been asked to list these before. In its simplest form, a product or service is fundamentally what the organization or function provides to its customers.

We usually do not place limitations on the number of services or products provided. Organizations can be creative here and construct a model based on a variety of business goals or project objectives. Figure 1-2b is a view of that same HR department’s activities traced to three business units they support based totally on consumption.

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Figure 1-2: Activity View of an HR Organization

Resource Drivers and Activity Drivers

A basic tenet of ABC/M is that resources are consumed by activities performed, and activities are what produce products and services. Resource and activity drivers are the means for tracing costs throughout the model and highlight two important aspects for management. First, resources can only be controlled through managing the performance of activities. Secondly, products and services should only be charged those activities which actually contribute to providing that product or service.

Resource drivers show how activities consume resources. For labor resources, we typically distribute a survey to the employees. This survey provides a listing of