Organizations operating under the Lean approach should have the same primary goal in mind—continuous improvement. Companies can use Lean to optimize operations, increase customer value, cut back on waste, and anything else that can be improved in the organization for driving innovation and adding value.
But how do you know if your initiatives are working?
Lean metrics are one of the best ways to measure your teams’ performance. They give you a completely honest breakdown of your organization’s ability to continuously improve—showing the good, the bad, and the ugly. In this post, we’re going to look at some Lean metrics that can help you measure and improve your flow of work. That way, you’ll be able to get the most out of your Lean strategy, helping your organization continue to innovate and improve.
FOCUS ON THE RIGHT METRICS
One of the biggest mistakes that organizations take when they adopt a data-driven approach is focusing on too many key performance indicators (KPIs). Metrics aren’t created equal. Some will help you gain more insight into what is and isn’t working with your Lean approach, while others will either waste your time, or worse, leave you confused and misinformed.
There are two types of metrics you want to steer clear of: proxy variables and vanity metrics.
Proxy variables is a term defined by product development consultant, Don Reinersten, to describe a specific group of metrics that don’t facilitate improvement. These metrics take the place of fundamental variables that are often difficult to measure. As such, proxy variables can make it easy to assess key elements of your Lean initiatives but can also be deceiving by offering a limited view of your overall performance. This, in turn, prevents you from understanding the real economic objective—life-cycle profits.
Vanity metrics, on the other hand, are metrics that make you look good but don’t add any real value. They’re hollow metrics that can’t help you make an informed decision about your company’s productivity. In other words, these are metrics that are big numbers, but aren’t relevant in terms of growth.
SO, WHAT METRICS SHOULD YOU BE TRACKING?
The things you want to improve. Naturally, these metrics vary depending on the organization and their current goals and objectives. But if you don’t know where to start, try identifying a common pain point in your organization and look at ways you can remedy it quickly and effectively. And a good place to do that is by looking at flow metrics.
WHAT ARE FLOW METRICS?
The Lean approach focuses on continuous improvement, and part of that improvement is minimizing waste. For many Lean organizations, that waste comes in the form of time and money. As such, teams are often tasked with reducing production time in order to:
- Spend less time on a single task
- Receive feedback quicker
Feedback is an important part of Lean, as it lets teams know what’s good and bad about a product. They can then use that feedback to improve their processes, so they don’t make the same mistakes, saving them more time and money in the future.
Now that we’ve got that out of the way, let’s look at flow metrics. Like the name suggests, flow metrics are KPIs that have to do with the flow of your work. Popular flow metrics include:
- Lead time and cycle time
- Cumulative flow diagrams
These are the metrics that you want to look at when reducing the time it takes processes to move through the workflow—not speed. Too many managers neglect these metrics, focusing exclusively on speed instead. Prioritizing speed without looking at flow metrics usually creates an unsustainable working environment where employees are expected to work longer hours, take fewer breaks, and cut corners to rush through assignments. And that’s the opposite of continuous improvement. Let’s dig a little deeper into each flow metric mentioned above.
Work-in-process is anything you or your team started and hasn’t completed yet. It could be something currently being worked on, waiting to be tested, or even stuck. If it hasn’t made it into the completed section on your Kanban board, it’s a WIP.
Under the Lean framework, having excessive WIPs is a bad thing. They’re distracting and are notorious for preventing teams from completing their tasks. For this reason, you want to keep your WIP down as much as possible, and one way you can do that is through WIP limits. WIP limits enable you to restrict the number of cards on a Kanban board that teams can undertake at once. A task has to be marked as completed before a worker can begin a new one. This is important for ensuring that processes actually get done, rather than sit in the testing or validation queue while teams start a new process.
Blockers are flags that let teams and management know that you can’t move forward on a process. This is usually due to an external dependency or a failure preventing the task from moving forward. As a flow metric, blockers let you see how many tasks are getting stalled and how long it’s taking those tasks to be unblocked and completed. With that information, you can then look at ways to prevent future disruptions so that work moves through the processes with greater efficiency.
This metric lets you see how long work idles in its current position before moving to the next stage of production. Tracking queues help you see which stages of the workflow are negatively affecting your cycle time. From there, you can investigate problems inhibiting your progress and come up with improvements to keep the work flowing efficiently.
LEAD AND CYCLE TIME
Lead and cycle time are two separate metrics that help you understand how long work takes to move through your Kanban system.
- Lead time looks at how long it takes for tasks to move through your value stream, from the creation of that task to the moment it’s completed.
- Cycle time looks at how long an item takes to get from one point to another. Lead time can be used to measure the performance of a team, while cycle time is for measuring the performance of a section within your process. When combined, these two metrics can be used to assess the overall efficiency of your performance as a whole.
Throughput shows you the average number of tasks processed over a period of time. Common measurements include:
- Cards per day
- Cards per week
- Story points per sprint
While throughput isn’t the best metric for making predictions about future performance, it is helpful for measuring your team’s productivity—especially when looking at how ongoing improvements have enhanced the way teams work.
CUMULATIVE FLOW DIAGRAMS (CFD)
The CFD provides you with a visual representation of your WIP, showing how they flow through the Kanban board. This is valuable for helping you identify bottlenecks, as well as coming up with solutions to improve the pace of your team’s delivery. You can even make predictions of future work by calculating burn-up trajectories using the CFD.
OTHER IMPORTANT LEAN METRICS
Along with flow metrics, there are a handful of other KPIs you can track to assess performance under the Lean framework. Let’s take a look at a few of them.
Quality isn’t a single metric, but rather a collection of metrics you can use to measure continuous improvement. Some of the KPIs related to quality include:
- Production defects
- Regressed cards
- Blocked cards
- Lanes over the WIP limit
- Stale cards
When combined, these metrics let you map out your team’s improvement over a period of time. This is important for determining whether your current initiatives have been effective, or if teams need to explore new ways to complete tasks and deliver innovation.
Predictability metrics help with making informed decisions regarding the completion of work items. It’s used to measure consistency with regards to speed and quality. As such, predictability is helpful for mapping out a project’s lifecycle.
COST OF DELAY
Cost of Delay is a calculation used to determine how much money delayed tasks will cost your organization. It helps you better understand and measure the impact time has on your outcome by looking at both value and urgency. The Cost of Delay is a useful metric to use when meeting with stakeholders. It shows the expenses associated with changes in the prioritization, which is important for making informed, data-driven decisions.
FOCUS ON IMPROVEMENT GOALS
The Lean metrics mentioned in this post are instrumental in helping teams deliver continuous improvement. You can use them to identify bottlenecks, improve efficiency, and stop setbacks before they happen.
If you’re just adopting the Lean approach, check out our article on designing a basic Kanban system for optimizing your workflow to achieve Lean production.