Big Hairy Audacious Goals Drive Innovation: How Modern Engineering Is Reshaping Manufacturing

TEC Canada | Leadership Development for the Thinking CEO

By TEC Canada, February 18, 2014

TEC Canada is comprised of the most influential leaders and entrepreneurs from high-performing organizations across the country. These Members have compelling stories to tell about building brands that stick and creating messages that resonate. TEC has partnered with Sticky Branding to bring you these stories about the successful brands of our Members, like TEC Member and General Manager of Modern Engineering, Udo Jahn. The article first appeared on Sticky Branding.

“The BHAGs looked more audacious to outsiders than to insiders. The visionary companies didn’t see their audacity as taunting the gods. It simply never occurred to them that they couldn’t do what they set out to do.” -Jim Collins & Jerry Porras, Built To Last.

Goals drive performance, especially BHAGs — big hairy audacious goals. They stretch you to try things beyond your reach, but they also focus your team on what’s important.

Modern Engineering is one of the oldest machine shops in British Columbia. It’s a second generation family business founded in 1939, and they have a BHAG. Udo Jahn, General Manager of Modern says, “Our primary goal is to render conditions favorable to manufacture in North America.”

It’s no small goal. They’re not simply interested in competing on a global stage. They’re trying to rejuvenate the value proposition of manufacturing industrial equipment in North America. 

BHAGs drive behaviors
BHAGs have two roles. First, they stimulate and motivate your team to change. And second, they shape the ideology of your brand.

Modern Engineer’s BHAG fulfills both roles. The goal gives the team latitude to innovate and try new ideas. They can look beyond their client projects, and consider how they can make incremental improvements in the business and their approach to manufacturing. It’s liberating to innovate when you have a clear purpose.

The goal also shapes Modern’s brand. They can approach their clients, and challenge them to improve their manufacturing processes too. The ideal becomes infectious, and allows engineers to come together, try new ideas and work to improve processes and techniques.

The BHAG elevates the brand from just another supplier to a company deeply committed to innovation and pushing the status quo. 

There’s no such thing as perfection
Perfectionism is a deterrent to a BHAG. Your team needs latitude to take risks, make mistakes, learn and get better.

Udo explains, “There’s no such thing as perfection. It’s the 80/20 Rule. If you can solve 80% of the problem you’re laughing.” But very few people or companies share this point of view. Udo continues, “Everyone wants to be number one, but they forget they have to get past 50% first. We’re conditioned to strive for perfection. People measure themselves from 100% down versus 50% up.”

It’s an interesting insight, and it makes Modern’s pursuit of a BHAG more achievable. Their goal is massive. It has a lot of moving parts, and many are outside of Modern Engineering’s control. But by focusing on incremental improvements they can work on what’s in their control, and they can make tangible improvements month-over-month and year-over-year.

Udo continues, “We’re heavily invested in becoming better every day. We don’t try to compare ourselves to the competition. We try to compare ourselves to where we’ve come from, and ask are we better today?” 

Make purposeful investments
A BHAG demands action.

You can’t make manufacturing in North America productive and competitive without very purposeful investments. Udo says, “We put our money where our mouth is.”

Modern Engineering makes major investments in capital equipment, processes and talent to achieve their BHAG. For example, they’re about to become the only machine shop in Western Canada with five 5-Axis CNC machines. And they invest in the tools and automation to operate at peak performance.

Modern also invests heavily in talent. Udo explains, “Our apprenticeship program is a clear differentiator for the company. We have more apprentices than all of our direct competitors combined.”

The apprenticeship program allows Modern to find talent early, teach them how to be tradespeople versus technicians, and give them the tools to succeed. Out of Modern’s entire workforce only two of their employees were not apprentices. 

Go big or go home
Does a BHAG make a brand? No. Collins and Porras write, “BHAGs alone do not make a visionary company. Indeed, progress alone — no matter what the mechanism used to stimulate progress — does not make a visionary company.” But when used effectively, a BHAG does shape a brand.

Udo Jahn’s vision for North American manufacturing is infectious. It gets people to say, “That’s interesting. Tell me more.”

And that interest comes out in many ways. It attracts talent that want to make a dent in the manufacturing sector, and want to work towards the vision. It attracts customers that share the same belief, and want to work with suppliers that get it.

The BHAG is a lightening rod. It takes the brand from just another machine shop to one challenging the status quo and working to achieve something greater than the collective sum of its parts. 

Author bio
Jeremy Miller is the President of Sticky Branding — a strategic brand consultancy that helps companies stand out, attract customers and grow sticky brands. Jeremy publishes a weekly column called Sticky Branding Stories that shares examples of how mid-market companies are growing sticky brands. You can reach Jeremy at 416.479.4403, and for more information visit http://www.StickyBranding.com. 

TEC Member Profile
Modern Engineering is a CNC machine shop dedicated to serving their customers with integrity. They provide the latest in machining and measuring technologies in order to provide high quality, cost effective solutions. Modern is one of the oldest machine shops in British Columbia, founded in 1939. They stand out as an innovator in their sector.
photo credit: ferdy001 via photopin cc

Using Performance Indicators to Drive Your Business Strategy - White Paper

 

We’ve all heard the old management adage “you can’t manage what you don’t measure”, but in the world of big data where managers have countless reports and data at their fingertips, the key challenge for companies is to identify what they need to measure and to ensure they are measuring it properly. In many companies, existing reporting doesn’t provide the key data that employees need to identify performance issues and take action. Many organizations have a lot of financial accounting data but only a few measures that relate to strategic and non-financial performance. In many cases there is too much data, but too little information, with no linkage to the strategy of the business. How do you go about fixing this problem?

This article describes an approach to developing and aligning performance indicators with strategic objectives. Other processes, such as developing objectives and measures through a formal contin- uous improvement or ISO program can also be used. There is no single “right” way to decide on the best approach for your business; you need to consider what fits both within your business culture as well as the other systems you have in place.

 

A Balanced Approach To Identifying Strategic Objectives

It all starts with a strategy that flows from the company’s mission, vision and values (see Figure 1). If you do not have a strategic plan for your business, you need to start by developing a plan along with specific measurable objectives. These objectives could cover a broad range of perspectives, including these areas:

• Internal Processes - streamlining key processes, applying new technology to improve efficiency
• Environment and Community - support local businesses, community leadership and connecting with future employees
• Learning and Growth - increase expertise and skills through training or mentoring
• Financial – revenue growth, asset utilization, cash flow
• Customer Focus - customer satisfaction, identifying and targeting the most profitable customers
• Employee Satisfaction - staff retention and positive company culture

Identifying the Right Performance Indicators

Once strategic objectives are in place, you need to ask: what are the critical success factors required to drive each objective? For those success factors, develop a list of potential measures we call “indicators”, which will allow you to track performance. From this list of indicators, prioritize the ones that will have the biggest impact on achieving the strategic objectives. A simple example of how a strategic objective is converted to performance indicators is shown in Figure 2.

In order to measure performance, you must be able to readily obtain the data needed. Therefore, it is important to consider the availability of data, the effort required to obtain it, and any changes to systems or processes needed when selecting your performance indicators. If you are implementing performance indicators for the first time, keep it simple. Use data that is readily available in the organization; if you need to collect new data, ensure the benefit outweighs the cost and effort of obtaining it.

Cascading Objectives AND Performance Indicators to Align the Organization
Cascading your strategic objectives and indicators to all levels of the organization is a powerful way to align behaviour across your organization and improve performance. In order to do this successfully, you must develop indicators appropriate for the level of the organization at which they will be used. The manager or team using the indicator must be able to influence the results within their scope of responsibility. It is not necessary to have indicators related to each strategic objective; only the ones that are relevant to the manager or team. The best way to develop these indicators is to directly involve the people who are responsible for achieving results or have an influence on the outcome.

Setting Targets 

Establishing targets enables you to check if you are on track in reaching your objectives. There are a number of ways to set targets, but the main point to keep in mind is that you want your teams to be motivated to achieve the results.

A target can be set using an external or internal benchmark. External bench- marks are applicable in cases where you have access to published data on industry best practices. Frequently they are most applicable in areas such as cost, quality, production cycle time, sales and marketing. Internal benchmarking involves analyzing internal data to understand where the company performance currently stands in order to set improvement targets. If you do not have the data, it may be necessary to collect it for a period of time (e.g. 3 months to 1 year depending on the measure) so as to establish a baseline.

Stretch targets are a great way to challenge and motivate staff to achieve great results. When setting stretch targets, be sure to break them down into more achievable targets or sub targets and quantify them in a shorter time frame. This will reduce the anxiety amongst staff and help them see what actions are needed to achieve results.

An example of how an objective can be cascaded through the organization, with targets set that are specific to the position in the company is shown in Figure 3. 

Developing Reports and Dashboards
Once you’ve identified your performance indicators and set targets, the next step is to establish an approach to ongoing monitoring and reporting that can be used by managers and teams to track progress. The reporting framework must consider requirements of different levels of the organization and the reporting frequency that is required to support effective decision making.

A simple dashboard, which is a one-page tool displaying the performance indicators, targets, and historical data in a graphical form, can be an effective tool for reporting. The purpose of a dashboard is to provide a big picture view, focusing on the key performance indicators, and draw attention to areas of concern so that mangers can drill down into additional information that is needed to take action. There are a wide variety of software tools available for dashboard reporting; however, existing reporting systems can easily be used to create simple custom dashboards. In designing reports or dashboards, here are few things to keep in mind:

• Keep the data for each area of the business limited to a single, easy-to-read page
• Provide context to the data, historical trends and targets help the user to see if they are on track
• Use graphs or tables that clearly communicate the data
• Don’t change your reports too frequently, people need time to get used to them

Implementation

If performance indicators are new to your organization, you need to approach the design and implementation process as a change initiative. You should consider building these steps into your process:

1. Make it a priority – The President / CEO and senior management must support this initiative and ensure there is a sense of urgency within the organization to follow through with this project.
2. Develop a team – This group should have enough authority within the organization to lead the change and include people from various functions. This team needs to be given the time and resources to develop and implement the program. You may want to include an external consultant or advisor who can facilitate and guide the process.
3. Communicate – A clear and consis- tent message needs to be delivered to the business on the strategic objectives and changes that are being implemented to introduce performance indicators. This is not a one-time thing; use as many vehicles as possible to communicate the message (e.g. newsletters, staff meetings, workshops and one-on-one discussions with staff).
4. Empower employees – Involve a broad group of people in the process in order to gain their support and input in developing the performance measures through workshops, facili- tated meetings, or surveys tools.
5. Plan for and celebrate success - Set targets that are achievable so that people can see visible results from their efforts. Acknowledge and celebrate success, reward people who have been fundametal to achieving the results. Be sure to start this early enough in the implementation process to motivate staff and build momentum.
6. Keep the ball rolling – Establish an annual process to review and update your performance indicators to align with changes in strategy and set new targets. Continuously improve your approach by introducing per- formance measures to other levels of your businesses, or link it to your performance management system — any time you do this, remember to start at step one in this process.

Annual Review And Continuous Improvement 

Once you’ve established a performance indicator system, you need to revisit and refine it to ensure relevance to the business. This should be linked to an annual strategic plan review and budget setting process. You should review which measures have worked well and which have not; it is especially important to look at which measures need to be changed based on adjustments to your strategic objectives. If you need to develop new measures, brainstorm on the success factors and identify new measures for each level within the organization. Regardless of whether the measures are new or not, you should be reviewing your annual performance and setting new targets for the upcoming year. Once these are established, they need to be communicated to the appropriate level of the company.

Identifying and linking performance indicators to the organization’s strategic objectives provides a foundation for aligning activities across the business. Developing simple reporting tools or dashboards will improve communication, decision making and performance monitoring. Overall, this process will help you to continuously improve your business and adjust your strategy as needed. 

Further Reading:
Kaplan, R., and Norton, D., “Using the Balanced Scorecard as a Strategic Management System”, Harvard Business Review, July-August 2007
Marr, B., “How to Design Key Performance Indicators” Advanced Performance Institute, (www.ap-institute.com), 2010
Pateman, A., “5 East Steps for Developing Your BSC Measures”, Harvard Business Publishing, March – April 2004

Tips for Development Performance Indicators

• Link indictors to your strategic objectives and align them across your organization for maximum performance improvement
• Develop indicators that are measurable, simple and easy to understand for those responsible
• for the performance
• Indicators must provide meaningful information on progress relative to the objectives
• Ensure there is a clear definition and precise methodology for calculation
• Have clearly defined targets that are challenging and motivating, but obtainable with a reasonable amount of effort
• Review objectives, performance indicators and targets on an annual basis to ensure alignment with the business strategy
• Stay focused, limit number for each level or area of the business to 10 measures maximum

ABOUT US

McNally Brown Group is a boutique management consulting and business advisory firm that works with companies to improve business performance. We work collaboratively with clients to conduct assessments, develop tools, and facilitate implementation of strategic initiatives in a broad range of areas including strategic planning and implementation of key performance indicators and dashboards.

Download a PDF of this white paper

Using Performance Indicators to Drive Your Business Strategy - White Paper

 

We’ve all heard the old management adage “you can’t manage what you don’t measure”, but in the world of big data where managers have countless reports and data at their fingertips, the key challenge for companies is to identify what they need to measure and to ensure they are measuring it properly. In many companies, existing reporting doesn’t provide the key data that employees need to identify performance issues and take action. Many organizations have a lot of financial accounting data but only a few measures that relate to strategic and non-financial performance. In many cases there is too much data, but too little information, with no linkage to the strategy of the business. How do you go about fixing this problem?

This article describes an approach to developing and aligning performance indicators with strategic objectives. Other processes, such as developing objectives and measures through a formal contin- uous improvement or ISO program can also be used. There is no single “right” way to decide on the best approach for your business; you need to consider what fits both within your business culture as well as the other systems you have in place.

 

A Balanced Approach To Identifying Strategic Objectives

It all starts with a strategy that flows from the company’s mission, vision and values (see Figure 1). If you do not have a strategic plan for your business, you need to start by developing a plan along with specific measurable objectives. These objectives could cover a broad range of perspectives, including these areas:

• Internal Processes - streamlining key processes, applying new technology to improve efficiency
• Environment and Community - support local businesses, community leadership and connecting with future employees
• Learning and Growth - increase expertise and skills through training or mentoring
• Financial – revenue growth, asset utilization, cash flow
• Customer Focus - customer satisfaction, identifying and targeting the most profitable customers
• Employee Satisfaction - staff retention and positive company culture

Identifying the Right Performance Indicators

Once strategic objectives are in place, you need to ask: what are the critical success factors required to drive each objective? For those success factors, develop a list of potential measures we call “indicators”, which will allow you to track performance. From this list of indicators, prioritize the ones that will have the biggest impact on achieving the strategic objectives. A simple example of how a strategic objective is converted to performance indicators is shown in Figure 2.

In order to measure performance, you must be able to readily obtain the data needed. Therefore, it is important to consider the availability of data, the effort required to obtain it, and any changes to systems or processes needed when selecting your performance indicators. If you are implementing performance indicators for the first time, keep it simple. Use data that is readily available in the organization; if you need to collect new data, ensure the benefit outweighs the cost and effort of obtaining it.

Cascading Objectives AND Performance Indicators to Align the Organization
Cascading your strategic objectives and indicators to all levels of the organization is a powerful way to align behaviour across your organization and improve performance. In order to do this successfully, you must develop indicators appropriate for the level of the organization at which they will be used. The manager or team using the indicator must be able to influence the results within their scope of responsibility. It is not necessary to have indicators related to each strategic objective; only the ones that are relevant to the manager or team. The best way to develop these indicators is to directly involve the people who are responsible for achieving results or have an influence on the outcome.

Setting Targets 

Establishing targets enables you to check if you are on track in reaching your objectives. There are a number of ways to set targets, but the main point to keep in mind is that you want your teams to be motivated to achieve the results.

A target can be set using an external or internal benchmark. External bench- marks are applicable in cases where you have access to published data on industry best practices. Frequently they are most applicable in areas such as cost, quality, production cycle time, sales and marketing. Internal benchmarking involves analyzing internal data to understand where the company performance currently stands in order to set improvement targets. If you do not have the data, it may be necessary to collect it for a period of time (e.g. 3 months to 1 year depending on the measure) so as to establish a baseline.

Stretch targets are a great way to challenge and motivate staff to achieve great results. When setting stretch targets, be sure to break them down into more achievable targets or sub targets and quantify them in a shorter time frame. This will reduce the anxiety amongst staff and help them see what actions are needed to achieve results.

An example of how an objective can be cascaded through the organization, with targets set that are specific to the position in the company is shown in Figure 3. 

Developing Reports and Dashboards
Once you’ve identified your performance indicators and set targets, the next step is to establish an approach to ongoing monitoring and reporting that can be used by managers and teams to track progress. The reporting framework must consider requirements of different levels of the organization and the reporting frequency that is required to support effective decision making.

A simple dashboard, which is a one-page tool displaying the performance indicators, targets, and historical data in a graphical form, can be an effective tool for reporting. The purpose of a dashboard is to provide a big picture view, focusing on the key performance indicators, and draw attention to areas of concern so that mangers can drill down into additional information that is needed to take action. There are a wide variety of software tools available for dashboard reporting; however, existing reporting systems can easily be used to create simple custom dashboards. In designing reports or dashboards, here are few things to keep in mind:

• Keep the data for each area of the business limited to a single, easy-to-read page
• Provide context to the data, historical trends and targets help the user to see if they are on track
• Use graphs or tables that clearly communicate the data
• Don’t change your reports too frequently, people need time to get used to them

Implementation

If performance indicators are new to your organization, you need to approach the design and implementation process as a change initiative. You should consider building these steps into your process:

1. Make it a priority – The President / CEO and senior management must support this initiative and ensure there is a sense of urgency within the organization to follow through with this project.
2. Develop a team – This group should have enough authority within the organization to lead the change and include people from various functions. This team needs to be given the time and resources to develop and implement the program. You may want to include an external consultant or advisor who can facilitate and guide the process.
3. Communicate – A clear and consis- tent message needs to be delivered to the business on the strategic objectives and changes that are being implemented to introduce performance indicators. This is not a one-time thing; use as many vehicles as possible to communicate the message (e.g. newsletters, staff meetings, workshops and one-on-one discussions with staff).
4. Empower employees – Involve a broad group of people in the process in order to gain their support and input in developing the performance measures through workshops, facili- tated meetings, or surveys tools.
5. Plan for and celebrate success - Set targets that are achievable so that people can see visible results from their efforts. Acknowledge and celebrate success, reward people who have been fundametal to achieving the results. Be sure to start this early enough in the implementation process to motivate staff and build momentum.
6. Keep the ball rolling – Establish an annual process to review and update your performance indicators to align with changes in strategy and set new targets. Continuously improve your approach by introducing per- formance measures to other levels of your businesses, or link it to your performance management system — any time you do this, remember to start at step one in this process.

Annual Review And Continuous Improvement 

Once you’ve established a performance indicator system, you need to revisit and refine it to ensure relevance to the business. This should be linked to an annual strategic plan review and budget setting process. You should review which measures have worked well and which have not; it is especially important to look at which measures need to be changed based on adjustments to your strategic objectives. If you need to develop new measures, brainstorm on the success factors and identify new measures for each level within the organization. Regardless of whether the measures are new or not, you should be reviewing your annual performance and setting new targets for the upcoming year. Once these are established, they need to be communicated to the appropriate level of the company.

Identifying and linking performance indicators to the organization’s strategic objectives provides a foundation for aligning activities across the business. Developing simple reporting tools or dashboards will improve communication, decision making and performance monitoring. Overall, this process will help you to continuously improve your business and adjust your strategy as needed. 

Further Reading:
Kaplan, R., and Norton, D., “Using the Balanced Scorecard as a Strategic Management System”, Harvard Business Review, July-August 2007
Marr, B., “How to Design Key Performance Indicators” Advanced Performance Institute, (www.ap-institute.com), 2010
Pateman, A., “5 East Steps for Developing Your BSC Measures”, Harvard Business Publishing, March – April 2004

Tips for Development Performance Indicators

• Link indictors to your strategic objectives and align them across your organization for maximum performance improvement
• Develop indicators that are measurable, simple and easy to understand for those responsible
• for the performance
• Indicators must provide meaningful information on progress relative to the objectives
• Ensure there is a clear definition and precise methodology for calculation
• Have clearly defined targets that are challenging and motivating, but obtainable with a reasonable amount of effort
• Review objectives, performance indicators and targets on an annual basis to ensure alignment with the business strategy
• Stay focused, limit number for each level or area of the business to 10 measures maximum

ABOUT US

McNally Brown Group is a boutique management consulting and business advisory firm that works with companies to improve business performance. We work collaboratively with clients to conduct assessments, develop tools, and facilitate implementation of strategic initiatives in a broad range of areas including strategic planning and implementation of key performance indicators and dashboards.

Download a PDF of this white paper

Employee Engagement: Making it happen for the Customer

I've mentioned unions before in previous posts, and how some folks find unions to be an obstacle to getting things done.  This week, I'd like to give you another example of a success story from a unionized plant.

At the first B2B manufacturing business I worked for, whenever our general manager was going to be away on vacation, he rotated the job of assuming his role among the members of the management group.

Eventually it became my turn to run the morning production meetings and coordinate production schedules and customer orders for a week. Things started out being very much a routine.

We had an order in house for a new product we were doing for the first time for a new customer my team had been developing.  It wasn't a complex product - just a foil lid for a major yogurt producer - but our production team encountered a serious problem.  The foil we had received to run this order had some significant quality issues that adversely impacted how easily we could run the product on our presses and downstream operations.  It wasn't something we could easily replace.  The lead time for this particular grade of foil was 16 weeks, and the customer's purchase order required it to be delivered the week I was in charge.

Our production manager suggested running the order on an older press that wasn't used much, but we had only a couple of operators who'd ever been trained on this press.  He suggested we ask for volunteers to put together a crew to run this order.

The union assisted us in assembling a crew for this old press and managed to finder an operator from among their membership who had once run this particular piece of equipment.

We met with the crew and explained the challenges to running the job and offered whatever help we could.  They agreed to give it a try.

Not only did they manage to run the order, we also managed to deliver it on time to the customer.  The order took longer to run than we would normally have planned, but the job needed to be run slowly so the press crew could maintain control over the substandard foil they were running.

At no time was the customer aware of the problems we had in producing their order.  The product ran fine on their lines.

At our next communications meeting, the management team recognized the crew who ran the yogurt lid job, and they got lots of cheers from their union mates - and a lot of respect from our management team.

In this case, the men on that crew wanted to demonstrate their skill in running a very challenging job.  None of them wanted to let the customer down.  They came through without the traditional union-management rhetoric.  it was just one instance in which union and management showed they could both be on the same side - the side of the customer.

 

Ron Jamieson

 

I'm a leader who transform businesses by igniting the sales and marketing teams to significantly grow revenue and profits by entering new markets, developing and launching innovative new products, and by forming strong alliances with customers and suppliers.

View my complete profile