Vision, mission and the reliability balanced scorecard

Organizational alignment means having an organization that is structured and set up to succeed.

By Andy Ginder, vice president, ABB Reliability Consulting

In our first article, we talked about operational excellence, as depicted in the chart below, and how maintenance and reliability are core underpinnings. In this installment, I chose to address a few key areas under the Organizational Alignment pillar, in particular Vision, Mission and Scorecard (KPI’s). Although I touched briefly on these last time, I would like to expand upon them.

Five basic or foundational elements exist in this model: people, processes, systems, technology, and equipment

As mentioned last time, organizational alignment means having an organization that is structured and set up to succeed, with personnel moving in concert toward agreed upon and understood goals and objectives. Clearly defined vision and mission statements align people’s thought processes and activities. Rather than relying on textbook definitions, I’ll share my understanding of vision and mission statements, drawn from practical experiences during more than 30 years of consulting.

A vision identifies a far-reaching objective, one that possibly is unattainable, but worth striving for. It tends to be strategic in nature. A mission on the other is more tactical. The end objective or goal is more precise and well defined, and it should definitely be attainable. The intent of both, though, is to align and motivate personnel.

Some might consider vision and mission statements as “soft” or “fluff.”. If not applied correctly, that can be the case. Bountiful examples of “feel good” or politically correct” statements adorn the walls of manufacturing plants, yet have minimal effect on the decision-making and employee action.

Why is that? Unfortunately excessive focus often is placed on beautiful prose statements that touch on every possible core value you might want to see in a company: safety, role in the community, environmental compliance, world-class manufacturer, and on and on. They try to say so much that they say nothing. Vision/mission statements frequently are found in front offices (corporate headquarters or manufacturing plant) rather than on the manufacturing floor. Regardless of where they’re posted, I like to question employees, in particular operators, mechanics and first-line supervisors whether they know what their vision/mission is and whether it affects what they do. Almost always, the vision/mission isn’t understood for several reasons.

  • Excessive length. The statements are too verbose. There is too much to absorb or remember.
  • Lack of clarity. In trying to say too much, they say little. Nothing stands out and grabs one’s attention.
  • Inappropriate display. The statements either are posted in the wrong or inconspicuous locations
  • Lack of reinforcement. Supervisory discussions fail to reinforce the message or there are no links between the statements and what the organization measure.s.

A mission statement should be characterized by the “3 m’s”. In other words a good mission statement should be:

  • Minimal. Keep the message short and simple.
  • Measurable. You should be able to tell when the mission has been achieved.
  • Memorable. Craft something that grabs people’s attention as much as possible.

Employees don’t need to know the statements verbatim and regurgitate them upon demand; but they should be able to verbalize the basic content. And that’s more probable if the message is minimal, memorable and measurable.

A number of mission statements gained widespread prominence, statements that most of you probably are aware. For instance, President John F. Kennedy stated the following NASA Moon Mission in 1961.

“This nation should dedicate itself to achieving the goal, before the decade is out, of landing a man on the moon and returning him safely to the earth.”

Others include:

  • “Put a man on the moon by the end of the decade.” — John F. Kennedy
  • “Be number one or two in every industry in which we compete.” — Jack Welch
  • “Put a computer in every home” — Bill Gates

Although my wording doesn’t exactly match the originals, and even though each statement doesn’t include all of the “3 m’s”, they meet the criteria of great mission statements.

Of course, having a great mission statement isn’t enough. Your organization’s mission needs to be linked to your performance measures, strategies and plans of action, which brings us to a discussion of scorecards and key performance indicators (KPI’s).

My thinking in this area has been influenced by “The Balanced Scorecard” articles and books published by Robert S. Kaplan and David P. Norton. Once their initial articles were published in the Harvard Business Review, many major corporations adopted the approach, and numerous additional books by other authors have expanded the concept and documented successes and challenges in its implementation.

A principal objective behind the balanced scorecard is to integrate an organization’s mission, strategies, tactical plans of action and performance measures. Too often, there’' no linkage between these items. Once a company defines its vision and mission, it needs to ensure that its strategies and plans of action are designed to move the organization toward attainment of that mission, and the performance indicators should document that movement.

Another key element of this methodology is to ensure that there’s a balanced suite of indicators. Historically, companies placed great emphasis on financial indicators that measures whether you are successful today and in the past, but don’t adequately reflect future success. So, balanced scorecard adherents typically allocate their indicators between four quadrants: financial, business process, learning and growth, and customer.

Our consulting work adapted many concepts of the balanced scorecard and applied them in what we refer to as the “Reliability Balanced Scorecard,” a sample of which is depicted below.

A vision identifies a far-reaching objective, one that possibly is unattainable, but worth striving for. I

– Andy Ginder, vice president, ABB Reliability Consulting

The essence of the corporate vision statement is “100% on demand performance”. From a reliability perspective, this company wants to meet any production demand without downtime, slowdowns or quality problems. Although this vision likely isn’t achievable, it’s worth striving for. Both the corporate and individual plant mission statements supportthe vision. By achieving higher levels of overall equipment effectiveness (OEE), as measured by availability, run rate and quality, they move closer toward attainingthe corporate vision.

The four scorecard quadrants display primary objectives, as well as KPIs to track progress against those objectives. Strategies and tactical plans are developed to achieve the objectives in a manner that dovetails with the corporation’s overall vision and mission. Although not overtly stated in the vision and mission statements, it’s understood that those objectives will be attained while adhering to company core values (safety, environmental compliance, etc.). Those values are emphasized by their inclusion as key indicators of performance in the four quadrants.

The financial quadrant has five key indicators. Those identified here are fairly common, but dozens of financial indicators exist. That’s the case in each quadrants. Financial indicators reflect how you’re performing today and in the past. Although past trends might provide an inkling of what to expect in the future, they don’t reflect whether you’re performing activities or making investments that ensure continued or expanded success.

The internal business process indicators in this case reflect whether the company is moving successfully from a reactive to a proactive environment. A business process indicator reflects whether you’re performing activities (business processes) that will improve performance. For instance, if we’re performing a more PM (as a percent of total labor hours or as a percent of planned PM hours), one would anticipate that OEE eventually would improve. Of course, the assumption is that the PM is well defined and appropriate to the equipment for which it has been developed.

Learning and growth indicators reflect investment in upgrading employee capabilities through education, better tools and methodologies. If employees get more and better training, the expectation is that they’ll be able to manage their roles and responsibilities more effectively.

We placed a special twist on the customer indicators. Everyone is aware that companies have internal and external customers. From the reliability perspective, we believe that maintenance and production have a common internal customer, the equipment itself. If you consistently provide any external customer with on-time delivery of quality products on a cost-effective basis, you get the result you are seeking. Customers order more products. Equipment responds similarly. If you feed your production line the proper raw materials, start up and shutdown equipment properly, run the equipment according to defined operating procedures, apply proper PM and monitoring techniques, and perform timely repairs or upgrades, you get a given result: high OEE levels at an optimal cost. Rather than being in a customer/supplier relationship, production and maintenance actually are partners in servicing their internal customer (equipment). Operating in partnership avoids the arguing and finger-pointing that plagues many organizations.

It’s worth emphasizing two final points about the scorecard methodology. First, as is fairly obvious, no single indicator evaluates an organization’s success. The key is selecting a proper suite of indicators to evaluate in conjunction with one another. Secondly, indicators need to be appropriate to the organizational levels and functions in the company. For instance, high-level corporate indicators need to be cascaded down in a manner that is intelligible to the workers on the floor. A mechanic’s eyes will blur if asked to help improve “maintenance costs as a percent of replacement asset value.” Although this is a good indicator for high-level managers, an operator or mechanic is unlikely to see what he can offer. On the other hand, if asked to help drive down monthly pump repair costs, the mechanic will be engaged much more effectively. The figure below depicts a simple financial example of how you can cascade a high-level indicator down through different levels of the organization, so that you eventually include small work groups of operators and mechanics in activities that ultimately are important to the corporation. In this situation the high-level indicator (maintenance dollars as a percent of replacement asset value) is cascaded down the organization to the manufacturing plants and work teams. At each level the indicator is converted into a more meaningful measure , but still feeds up to and affects the corporate indicator.

The methods and examples here aren’t intended to be “best in class examples,” but instead to provide background and a framework for future discussion. Although one could go into much greater detail of the areas discussed and provide other possibly better samples, enough has been provided here to stimulate your thought processes and assist in evaluating what you’re doing in your organization.

Andy Ginder, vice president, ABB Reliability Consulting, may be reached at andy.p.ginder@us.abb.com.