In search of world-class performance

opportunity-18World-class, or best-in-class, are terms that organizations like to use to either describe themselves or to use as a benchmark comparison. These terms are often used as some kind of blanket description. For example, the company is a world-class leader in product design, or customer service, or supply chain optimization. Unfortunately, it often doesn’t mean much to customers and it’s not a very helpful term when you’re focused on performance improvement. Most performance improvement initiatives are either function or process based and the more granular you go, the more difficult it is to accurately define what makes an organization world-class when compared to others.

Consultants have tried for years to develop “capability maturity grids” for various functions to try to create a way to determine how close your function is to being world-class. The basic idea is to identify a number of critical things a function is supposed to do and then have descriptions of varying degrees of “maturity.” You then determine which box best represents the current function. Although maturity grids can be useful to provide some guidance as to where you might look for opportunity in an organization, and what direction you might head, we haven’t had much luck with them as a tool for improvement. It’s difficult to gain agreement on which box a part of a function belongs in, and the standard maturity descriptions sometimes come across as a little too “canned” to front-line managers.

We find the simplest way to express how a process or function compares to other well run organizations is to observe its current productivity level. This is the percentage of the day the resources within the process or function are adding value. The definition of “adding value” is very important here. We define “adding value” as activities a customer would readily pay for to receive a product or service, if they knew about them. If something needs to be reworked, for example, because of some kind of internal error we see that as not adding value. This is why many managers overestimate their current productivity because often the work to fix something is both significant and required, but it’s not adding value from the customer’s perspective. Customers would be harsh critics if organizations let them assess their productivity, but it’s a helpful perspective for performance improvement.