How Control Charts Can Provide Predictive Statements

Value chain functions and metrics should maintain continuity even through leadership change

I will first describe how long-lasting business metrics can be created at the business level and then illustrate the 30,000-foot-level scorecard tracking of these measurements, where an individuals control chart is used to determine process stability. Then I will show how to make a prediction statement, if a process has a recent region of stability.

In figure 1 below, you see the nine-step Integrated Enterprise Excellence business management system (see the article "Hoshin Planning Issues and Resolution" for a complete explanation). Step 2 of the system is, “Describe value chain, including satellite-level [financial] and 30,000-foot-level [operational] metrics.” I will now elaborate on the value chain portion of this step.

fig 1 nine-steps-of-IEE

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Comments

Confusion over "stoplights"....

With all due respect, i believe you are missing the point on why/how "stoplight" reporting is intended to work.

From my experience, the colors on a stoplight chart are to indicate when a process is unstable or producing undesirable results (Red), when to "keep an eye on things" (Yellow), and when the process is stable and producing expected results(Green).

The underlying data colelction and analysis determine how well the "Stoplight" guides the management of the company to focus on the critical few items that are needed to achieve a future state of "better" for the company.

In your example, ~33% of the results are "non-conforming" (e.g. they don't meet the expectation). IF a ~33% defect rate is acceptable to the business and stable, i would expect to see this coded "green" untill there was a shift in the control chart indicating something is moving the process to a higher defect rate and then be coded "RED". "yellow" could be for shifts indicating lower defect rates or early signs of a shift/trend (e.g. 3 or 4 consectutive increasing points on the I-Chart...not enough for a standard Western Electric rule for a trend, but enough to "keep an eye on it", thus "yellow". realizing that a 33% defect rate is likely unacceptable to a company, i would then expect that measurement to be "red", until changes were in effect to reduce the rate (changing perhaps to yellow until there has been sufficent time to establish "stable and acceptable" before changing to Green).

In most compaines I have worked, presenting the culmination of charts and graphs to display the analyisis behind a "color" would have glazed eyes and managers scrambling for their electronic distractions (blackberries, iphones, etc). While a crisp, Red/Yellow/green, helps focus attention on the critical few items that need the attention and support. The managers that require more detail to understand the events can then review the underlying analysis in as much detail as they need to understand the issue.

I believe it is our challenge to provide this "roll-up" from detailed analysis to a 30,000 ft/satellite view without sacrificing the simplicity of "stoplight" approach.

Stop Lights

I beg to disagree with you, Mr. Johnson. Stop Lights and "Action Limits" are nothing more than tools to increase tampering. Stop Lights give no insight into the underlying system and how it is operating. Managers who are too darn lazy to learn the basics of proper data anlysis to gain the proper insight before taking action need to find some other career where their tampering will result in less devastating effects.

Stop Light Scorecard and uses

Mr. Moore and I agree about the over simplification and use of metrics in companies, which can lead to much firefighting. Mr. Johnson, this was a really scorecard in a major company; i.e., is one of many from a spreadsheet. What this example illustrates is how stoplight scorecards can be treating common cause variability as though it were special cause. This is a big deal. If we have common cause variability and we do not like the response, we need to improve the overall process to achieve a more desirable output. The proof that such an improvement was made to the process is that the control chart shifted to a new improved level of performance. Everyone seems to agree in that business complexity is growing; however, what is missing is a business management system with scorecards that can address this complexity.