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Kaizen. Continuous Improvement And Balanced Scorecard

Kaizen. Continuous Improvement And Balanced Scorecard

Thus, an entrepreneur or manager who does not know his processes and internal problems, and does not have information about the changes in his environment, is destined to fight feverishly only to lose market share day by day and limit himself to a subsistence level of life. Within this framework, it is not uncommon to find managers who are completely unaware of the human capital they have in their company.

Thus, the management of companies of excellence has implemented continuous improvement as a philosophy and way of operating, to be competitive and give meaning to their own existence and to that of the company as a whole, continuously redefining, for this reason, the objectives of organizational to put them in line with the development of the economy, technology and the ever-increasing needs of users and consumers.

As a way to monitor the evolution of their own company and the place it occupies in the global context, several alternatives were designed, the most famous being ” the balanced scorecard of Kaplan and Norton “, and ” the balanced scorecard model of Kaplan and Norton”. Maisel ” and “ the EP2M ”. This monograph exposes the scorecard from the vision of the deployment of policy developed by companies that practice the Kaizen method as a way to continuously improve their performance levels.

1. Introduction

Within the current economic environment marked not only by globalization and rapid technological and cultural changes but also by environmental pollution and the increasingly intense exploitation of scarce resources, companies are forced to improve their processes every day. day to day to strengthen its competitiveness, satisfying users in the best way with its products and services, and also make more efficient use of resources.

The world today is experiencing strong progress in telecommunications and transportation, which are faster and cheaper every day, combining this fact with the accelerated process of industrialization and economic development of the countries of Southeast Asia and others such as India. Its immense number of inhabitants, of whom a large proportion abandon agricultural tasks, whose yields are growing thanks to the development of biotechnologies, to join industrial activities, forces their governments to plan strong export policies. This not only implies the attack on the various markets, but also an increase in the demand for raw materials.

This not only implies the attack on the various markets, but also an increase in the demand for raw materials.

The changes are therefore very profound until recently the main area of ​​world trade was the North Atlantic basin has moved to the Pacific basin, which is being led on the one hand by the economies of Japan and South Korea and on the other the United States. Companies have been forced to redefine their objectives to reinsert themselves into this new world board marked not only by new power relations but also by the development of information technology, communications, biotechnology, and materials engineering.

Thus, all companies whether they like it or not, compete not only for their markets, but also for the raw materials or inputs that are necessary, and as in the case of athletes, they can only be in the final competition and aspire to the podium by improving day by day. a day. That is why in a country like Japan lacking natural resources, with little land and many inhabitants, they were forced to improve continuously to, first of all, rebuild their economic structure, which was decimated by World War II. World, and on the other, to conquer world markets.

Japanese products that in the 1950s were considered by Western producers as unable to compete with them due to their low-quality levels were improving day by day in quality and design until cornering and defeating in many cases a large part of Western industry, from motorcycles and cars, through watches, music and video equipment, televisions, cameras, photocopiers and film machines, and even financial services, among many more.

The adoption of Western quality control techniques exposed by Deming and Juran added to their developments in process improvement, as well as in the analysis of customer needs, and gave rise to a continuous improvement method and system called Kaizen. The following have contributed to its development: Masaaki Imai, Ishikawa, Taguchi, Kano, Shigeo Shingo, and Ohno, among other important consultants and advisers in matters of quality and productivity.

This methodology called Kaizen requires a strong discipline, that concentration necessary to continuously improve, challenging new brands in terms of quality, productivity, customer satisfaction, cycle times, and costs.

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It is necessary to monitor the proper functioning and capacity of the processes, as well as their continuous levels of improvement, to have a Balanced Scorecard that allows not only to make known the strategic and operational plans at the various levels of the organization and stages of processes but also allows information at various levels about what is happening in the Gemba (workplace).

It should be clarified that for the Kaizen philosophy it is not enough for the executive to have an information system that notifies him of what happens in the production processes (be they goods or services) but it is essential to visit the Gemba several times a day to personally evaluate what happens and why. Unlike most Western managers who focus on the written report of results, kaizen managers give prominence to everything related to the processes, therefore inspecting the places that are the basis of the results. “If you want to improve results, you need to focus on improving processes”.

2. Administration orientation

Kaizen breeds process-oriented thinking, as processes must be improved before improved results are achieved, being as stated earlier in sharp contrast to the results-oriented thinking of most Western managers.

Japanese executive Mayumi Otsubo (Bridgestone Tire Co.) argues that it is process-oriented thinking that has enabled the Japanese industry to achieve its competitive advantage in world markets and that the Kaizen concept is the epitome of Japanese process-oriented thinking. process.

Otsubo suggests that result-oriented criteria for evaluating performance are a legacy of the “mass production society” and that process-oriented criteria are gaining momentum in the high-tech, high-style post-industrial society.

Looking at the role of the manager, the stimulating and supporting function is directed at process improvement, while the control function is directed at product or results. The Kaizen concept emphasizes management’s stimulating and supportive role in people’s efforts to improve processes. On the one hand, the administration needs to develop the criteria. On the other hand, control-type management only looks at a performance or results-oriented criteria. For short, we can call process-oriented criteria P-criteria and result-oriented criteria R-criteria.

P criteria require a long-term view, as they are directed at people’s efforts and often require behavior change. On the other hand, the R criteria are more direct and short-term.

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It is often easy to quantify R criteria. In reality, in most companies, management only has R criteria, since these typically refer to sales, cost, and profit figures. However, in most cases, it is also possible to quantify the P criteria. For example, in the case of Quality Control circles, the Japanese administration has developed complicated measures to quantify the level of effort. These and other figures are added together and used as the basis for recognition and awards.

The process-oriented way of thinking fills the gap between process and result, between ends and means, and between goals and measures, and helps people see the whole picture without deviation. Thus, both P criteria and R criteria can and have been established at every level of management, between top management and divisional management, between middle managers and supervisors, and between supervisors and supervisors. Workers.

By definition, a manager must be interested in results. However, when we look at the behavior of successful managers in a successful company, we often find that such managers are also process-oriented. They ask questions and make decisions based on and guided by both P criteria and R criteria.

3. Kaizen Management

Cross-functional management and policy deployment are two fundamental management concepts that support the Total Quality Control strategy within Kaizen. In Kaizen’s thinking, the work of management is divided into two areas: (1) management maintenance of current business performance to achieve results and profits and (2) “Kaizen management” for process improvement and improvement. systems. Kaizen management relates to both cross-functional management and policy deployment.

Cross-functional management is related to the coordination of the different units to realize the cross-functional goals of Kaizen and the deployment of the policy with the implementation policies for Kaizen.

In the CTC – Kaizen, the transversal functional goals of Quality – Cost and Programming are clearly defined as superior to the line functions such as design, production, and marketing. Consequently, the position of cross-functional goals as top-level goals necessitates a new systems approach to decision making. It is to meet this need that the concepts and practices of both cross-functional management and policy deployment have been developed. Within this context, “quality” is concerned with building a better system for quality assurance; “cost” concerns building a system to identify cost drivers and reduce them;

Management’s dedication to the key concepts of cross-functional management and policy deployment is expressed in the directions provided by senior management. It usually formulates its annual policies or goals at the beginning of the year based on long-term plans and strategies. Such a formulation also encompasses two main categories of goals: (1) goals related to factors such as profits and products and (2) goals related to general improvements in the company’s various systems and cross-functional activities.

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An important aspect of politics is that it is composed of both goals and measures, both ends and means. Goals are usually quantitative numbers set by top management, such as goals for sales, profits, and market share. Measures, on the other hand, are specific action programs to achieve these goals. A goal that is not expressed in terms of such specific measures is just a slogan. Therefore, it is imperative that top management determines both goals and measures and then “rolls them out” throughout the organization.

Even though achieving performance goals is often prioritized as the main objective for managers, the goal of strengthening and improving the organization and its systems is no less important. The first is a company response to external requirements, such as shareholder pressures for earnings; the latter is usually a self-generated movement for improvement in the company’s culture, chemistry, and overall competitiveness.

A business is organized into vertical functions, such as R&D, production, engineering, finance, sales, and administrative services. Through such an organization by functions, responsibilities are delegated and profits are sought.

Among the objectives of the TQC (Total Quality Control) is not only to increase profits but also general improvements in areas such as employee education, customer satisfaction, customer services, quality assurance, cost control, volume, control of deliveries, and development of new products. These objectives require transversal functional efforts that cut across the entire organization. Needless to say, the quality control department cannot by itself obtain the desired quality. All functional departments must be involved. Therefore, cross-functional management is one of the main tools to carry out the improvement of the CTC’s objectives.

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According to Shigeru Aoki (Managing Director of Toyota Motor)“The ultimate goal of the company is to make a profit. Assuming this is self-evident, then the company’s next higher-order goal should be cross-functional goals such as quality, cost, and schedule (quantity and delivery). Without achieving these goals, the company will fall behind the competition due to inferior quality, find its profits eroded by higher costs, and be unable to deliver its products to customers on time. If these cross-functional goals are realized, profits will follow. Consequently, we must view all other management functions as existing to serve the three higher-order objectives of CCP (quality, cost, and scheduling). These supporting administrative functions include product planning, design,

 4. Policy Deployment

Policy deployment refers to the process of introducing policies for Kaizen throughout the company, from the highest level to the lowest. For Kaizen, the term policy describes both mid-range and long-range annual goals or guidelines.

Annual profit and kaizen goals are established based on long- and medium-term company goals. Several months before senior management meets to formulate these annual goals, there is a preliminary vertical consultation between the different administrative levels to agree on the details of the plan. Once the new annual top management goals have been determined, they are “rolled out” to all lower levels of management. Goals that were declared abstract by top management become increasingly concrete and specific as they roll down. Unless the policies (goals) of top management are put into practical use by lower-level managers, they will be worthless.

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As the goals work their way down, senior management policy statements are restated as increasingly specific and action-oriented goals, eventually becoming precise quantitative values. Thus, the deployment of policy is a means for the task of top management to be carried out by lower levels.

5. Control points and review points

The concept of policy deployment has its counterpart in Statistical Process Control (SPC). The SPC plot is useful for reviewing the results, identifying the cause of abnormalities, and then working out ways to eliminate these causes. By using control charts in statistical quality control, we go from the results to the source and correct or eliminate the factors that have caused the problems.

By analogy, checkpoints and checkpoints can also be used in administration. Each level of the organization has control points (R criteria) and review points (P criteria) in their work. At a higher administrative level, checkpoints are the policy goals and checkpoints are the policy measures. When these specific points of control and review are established between superiors and subordinates, a series of goals and measures are established, with links between managers at different levels. It is precisely these checkpoints and checkpoints that are used in the deployment of policies in the CTC. For such a system to work effectively, each manager must know exactly what his R criteria (control points) are and what his P criteria (checkpoints) are, and that his checkpoints are well understood as control points by his subordinates. Each goal must be accompanied by measures to achieve it. Thus, “goal” refers to the control point and “measures” to the review points. The goal is results-oriented and the measures are process-oriented.

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6. Strategic Vector

Retracing our steps, and remembering the importance that the achievement of quality, costs, and programming (CCP) have in achieving profits, we can graph based on three axes corresponding to each of these transversal functions the Vector Strategic, which joins the points corresponding to the situation at the time of planning C0C0P0 with the strategic objectives set as goals C1C1P1.

How important is this graph? Its main objective is to serve as a basis for reasoning aimed at recognizing objectives, the interrelation between the different transversal functions, and the review between the proposed objectives and those achieved to meditate on the necessary corrections.

7. Interrelation between higher and lower goals

As Shigeru Aoki well expressed, the ultimate goal of the company is to make profits but to achieve this it is necessary to fully satisfy consumers by providing them with the products and services they require, at the right price, in the place requested, and in the quantity and quantity. required moment. Hence the importance of planning cross-functional goals and the need to have a Balanced Scorecard that allows verifying the proper functioning of the system and processes at all times.

Thus, we have a superior objective, which in the case of a commercial company is the achievement of the highest return on investment and, on the other hand, an objective that has to do with the mission of the company, those consumer needs that it has for goal to satisfy. Only by satisfying these customer requirements can the company survive in the long run. However, to correctly satisfy these needs, as stated before, they must not only provide themselves with products of good design and quality but also at an adequate price, which implies having efficient processes, also requiring products in quantity and adequate terms. The relationship between these three components maximizes the value for the customer/user, and therefore the preference of this for our products or services.

Achieving these objectives implies having to constantly measure and control our processes, verifying their internal evolution as well as their comparison with the environment. It is useless for an athlete to improve his mark if he does not know how far he is from the mark of his competitors.

There are four fundamental indicators, which will allow us to recognize the potential of the company to survive or succeed in the market, being them:

  • Return on Assets (ROA)
  • Value-added per employee (VAE)
  • Market share
  • Customer satisfaction

These four interrelated indicators, and analyzed in their evolution over time and in comparison with the competitors, will give us a first visualization of the level of competitiveness of our company. These are key indicators for the top executives of the company, but it is necessary to make the conclusions known throughout the organization to give a greater impetus to the improvement of the processes.

8. Statistical Process Control and Balanced Scorecard

It is possible to apply the CEP graphs to aspects related to financial indicators, such as those related to processes, consumer satisfaction, and learning and growth.

Its application is of great importance due to the advantages it implies. In the first place, it allows knowing the capacity of the processor system to generate products of adequate quality and cost, to satisfy in a sustained way the requirements of clients and/or consumers, and to maintain regularity in productivity levels. Secondly, it allows differentiating between variations due to special causes, from those motivated by common or random causes, thus avoiding making mistakes in decision-making concerning adjustments (see graph). Third: it allows knowing at the moment if the processes are under control or not. Fourth: the methodology is used to verify both review points (P) and control points (R), achieving in such a way to ensure the achievement of the desired levels (call them quality, costs, productivity). Fifth: It allows detecting in time changes in the processes that can bring consequences (positive or negative) adopting measures in this regard. And sixthly, it is an optimal and adequate means to apply the processes of “Plan – Carry out – Evaluate – Act” (PREA) and “Standardize – Carry out – Evaluate – Act” (EREA).

Among the indicators related to the process, we can graph, among others, the CEP corresponding to:

  1. Quality
  2. Inventory levels
  3. preparation times
  4. Supplier response time
  5. Response time to customer requests
  6. Average Process Costs
  7. Poor Quality Costs
  8. Productivity
  9. Repairs
  10. Production cycle times
  11. Inventory turnover
  12. Days of stock of finished products
  13. accidents
  14. Evolution of collections
  15. Sales evolution

Regarding levels of satisfaction, we can subdivide it between clients (wholesale distributors) and end-users or consumers on the one hand. Also between type of customers by geographical area, type of customer, and size of purchases. Concerning customers, we can measure and graph satisfaction rates for products or services or with brands or the company as a whole. In addition, both general (or global) and concept satisfaction indices can and should be graphed. For example: in a sanatorium, the satisfaction of each client can be measured by the quality of medical services, nursing care, bureaucratic procedures, food quality, and cleanliness, among others. From this, we will obtain a global periodic index and another by concept,

Another aspect of fundamental importance is the measurement and graphing of the levels of employee satisfaction with the company, the levels of satisfaction of internal customers with suppliers (internal or external), and even the satisfaction of suppliers with our company. company (fundamental aspect for a company that practices Just in Time).

Thus, financial indices can also be graphed using CEP, thus achieving all the advantages related to analysis and decision making.

Thus, each management level corresponding to the different processes and functions of the organization will be able to track through the computer the current state of the processes and their evolution, recognizing whether they are under control or out of control, and their capacity.

9. Key Tracking Issues in a Kaizen Environment

Because the Kaizen system uses six fundamental systems such as Just in Time (JIT), TQM (Total Quality Management), and TPM (Total Productive Maintenance), suggestions, group activities, and policy deployment, it is essential It is important to build the dashboards and comprehensive dashboards based on the objectives or operations of said systems.

So in the case of Just in Time, it is of fundamental importance:

  1. the number of providers
  2. quality levels and supplier delivery compliance
  3. the number of qualified suppliers (just in time participants)
  4. number of parts used per product/service
  5. inventory and stock levels
  6. overproduction
  7. inventory turnover
  8. waiting times – preparation times
  9. physical space used
  10. costs (Average Cost of the Process; and Maximum Acceptable Cost over Upper Control Limit – CMA / LCS)
  11. polyvalence rate
  12. kanban quantity
  13. amount and length of detention
  14. automation levels
  15. cycle time
  16. internal transport length
  17. Existing Human Resources “RHE” (in terms of skills, knowledge, and experience as well as quantity) on Human Resources Needed “RHN”.

Its current status, its evolution, the level of compliance with the proposed objectives, and its relationship with external data (benchmark) must be shown. For example: if the point is the suppliers, the aspect to consider is the current number of total suppliers and quantity per input or product, its evolution over time, how far (in percentage terms) it is from reaching the objective(s), comparison with several suppliers that other competitors have (the best and the average in the market).

In the case of Total Productive Maintenance (TPM), indicators such as:

  1. Downtime and empty time due to breakdowns or equipment preparation and adjustment times.
  2. Process speed losses due to operation at reduced speed or idle times and shortstops
  3. Defective products or processes due to quality defects and rework, and due to loss of performance during the start-up phase of the process.
  4. Overall equipment efficiency
  5. Operating coefficient for stoppages
  6. Cycle operating coefficient
  7. availability coefficient
  8. effectiveness coefficient
  9. quality coefficient
  10. charging times
  11. operating time
  12. actual operating time
  13. Efficient operating time
  14. Meantime between preparations
  15. Frequency of preparations
  16. Average time per preparation
  17. preparation rate
  18. Loss of efficiency due to preparations
  19. Meantime between failure
  20. Average time lost per failure
  21. Failure rate
  22. Inefficiency due to breakdowns
  23. Provisional failure rate
  24. time forecast rate
  25. Rate of maintenance improvements
  26. Planned maintenance completion rate

As far as TQM is concerned, both the variables and the attributes corresponding to the various products and services for internal use as well as those intended for marketing can and should be monitored. It is extremely important to keep track of the Sigma level of the aforementioned products and services.

Control of the levels of quality costs (or poor quality) is also essential given the level that these costs have as an average in the companies about the total invoiced.

The CEP corresponding to the levels of satisfaction and the number of repairs, returns, and complaints or claims is a critical point and must be carefully observed and analyzed.

Regarding small group activities, the following should be monitored:

  1. Number of quality circles
  2. Percentage of participating employees
  3. The average number of employees per team
  4. Number of suggestions or problems solved
  5. Average suggestions per team
  6. Benefits produced in total by the suggestions
  7. Average Earnings per Suggestions
  8. Number of suggestions applied / number of suggestions made

In terms of individual suggestions we have to observe:

  1. The number of suggestions per period
  2. The average number of suggestions per suggestive employees
  3. The average number of suggestions per employee
  4. Suggestions approved on suggestions made
  5. Total Earnings
  6. Average Earnings per Suggestions

10. Conformation of the Balanced Scorecard

By conformation, we must understand the values ​​and objectives to be monitored, the relationships that the main objectives will have with the secondary ones, as well as the indicators that the various sectors or areas will follow, and the relationships that will be kept among themselves. This must be clearly distinguished from setting specific objectives, which will constantly evolve as a result of internal and environmental changes.

Thus, the main steps to be carried out would be:

1st Strategic Planning (Mission – Objectives – Values ​​– Vision)

2º Determination of the key or determining points (FCE – Key Success Factors corresponding to each area, sector, or process.)

3º Set what data must be loaded, who, when, how, and where.

4th Format of the information on the screen. Design and graphics.

The level of detail will increase as the indicators approach the processes or operational areas. The question is how much data to monitor and which ones? We should distinguish between fundamental data, for which a maximum of seven is considered appropriate, according to psychological studies, as an amount that can be kept mentally by the user, but in addition, all indicators that are out of control must be reported by exception. (either positively or negatively). This does not imply that the interested party can access information on all the indicators if they wish to carry out a detailed analysis, but the information format must be such that it reports the key data and those that constitute a need for decision-making.

A distinction must also be made between indicators corresponding to different periods. While the level of failures in production processes will be reported every 15 or 30 minutes, every hour, the level of customer satisfaction can be reported weekly, fortnightly, or monthly, inventory turnover levels will be reported, market share monthly, inventory level can be reported automatically when a certain level is exceeded (which will cause production to stop), the number of suppliers will be reported per month.

Thus, each Manager or Supervisor and even the employees or workers will have their monitors with information corresponding to different indicators and periods. All components of the company must-have information for self-control and as a way to improve their own processes.

The possibility of having data to carry out Paretian Analysis should be foreseen in the computer system. This refers to the fact that if, for example, an excess of expenses is reported, the Pareto composition of said excess can be immediately accessed (the vital few and the trivial many), to be able to adopt decisions aimed at correcting the deviations.

  1. Bibliography
  • Kaplan, Robert – Norton, David – How to use the Balanced Scorecard – Management 2000 – 2001
  • Kaplan, Robert – Norton, David – Balanced Scorecard – Management 2000 – 1996
  • Cuatrecasas, Lluís – TPM – Management 2000 – 2000
  • Imai, Masaaki – How to implement Kaizen in the workplace – McGraw Hill – 1998
  • Imai, Masaaki – Kaizen – CECSA – 1989
  • Hernández, Arnoldo – Just-in-Time Manufacturing – CECSA – 1998
  • Hope, Jeremy – Hope, Tony – Competing in the Third Wave – Management 2000 – 1997
  • Cárdenas, Agustín – Administration with the Japanese method – CECSA – 1993
  • Hayes, Bob – How to measure customer satisfaction – Oxford – 1998
  • Hronec, Steven M. – Vital Signs – McGraw Hill – 1995
  • Harrington, H.James – Total Management of Continuous Improvement – ​​McGraw Hill – 1997
  • Olve Nils – Roy, Jan – Wetter, Magnus – The Balanced Scorecard – Management 2000 – 1999
  • Illescas, Blanco – Integrated Management Control – Limusa – 1997
  • Lefcovich, Mauricio L. – Cost Reduction-Kaizen Costing – Monografía.com – 2003

Author:  Mauricio León Lefcovich  – Operations Management Consultant

Specialist in: Kaizen, Six Sigma, Just in Time, and Strategic Planning.

The monograph was finished writing on 10/30/03

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