Designing the lean enterprise performance measurement system

Abstract

The research contained in this thesis explores design attributes of the enterprise performance measurement system required for the transformation to the lean enterprise and its management. Arguments are made from the literature that successful deployment of the lean practices, across three different stages of the evolution of lean thinking, requires a supporting performance measurement system. The increase in scope of lean practices at each stage of the evolution increases the complexity in achieving synchronization across the enterprise subsystems. The research presents various attributes of the performance measurement system required at each stage and further derives the three key attributes for the design of the lean enterprise performance measurement system. These three attributes are: enterprise level stakeholder value measures, the causal relationships across performance measures at each level, and Uniform and consistent set of performance measures. A detailed case study of an aerospace and defense business of a multi-industry corporation which has embarked on a journey towards creating a lean enterprise is presented.

(cont.) It highlights several challenges in the transformation from the perspective of performance measurement. The key challenges identified are: First, disconnect between the performance measurement for the lean practices and regular business practices hinder the adoption of lean practices. This disconnect exists due to the existence of both legacy performance measures and the new measures. Second, lack of understanding of the cause-effect relationship between performance measures across different enterprise levels poses difficulty evaluating the impact of lean related efforts. Third, use of non-uniform performance measures across various enterprise subsystems leads to non-lean behavior. The theory underlying performance measurement is reviewed including the widely-accepted performance measurement frameworks suggested for the design of enterprise performance measurement system. Analysis of these frameworks reveals that none of the existing frameworks completely capture the desired attributes for the lean enterprise performance measurement system.

(cont.) To design the lean enterprise performance measurement system, this research suggests a conceptual design that explicates the use of various tools and techniques to address the critical attributes. To identify stakeholder value measures this design demonstrates the use of stakeholder value analysis. Use of system dynamics modeling and structural equation modeling is suggested to establish, validate and evolve the cause-effect relationships between performance measures. And, to maintain the uniform set of measures the creation of measures dictionary is explained. Further, research is needed to empirically validate the model as a means for successful transformation and management of the lean enterprise.