Facts Matter - Data Driven Management
Updated: Jun 24, 2020
In the news about COVID-19 these days, you see constant talk of the models. Models for the length of the “pause”; models for resource levels (doctors, nurses, hospital beds, ventilators, and PPE), these are all dependent upon the assumption from various inputs into the models, like R-Naught Factors (transmission rates), length of hospital stays, rates of intubation, etc. Driving much of the unknown information is the lack of testing and scientific data (FACTS).
As managers, we watch these conversations unfold and immediately ask, “How can they make all these critical decisions without FACTS?”
We also recognize the behaviors that take over in the absence of FACTS:
Denial of reality – Challenging the few facts as they emerge
Debates of one’s opinion vs. another
Hoarding of resources
Inconsistency on the direction and plans
Lack of consensus around decisions – In fighting and dissent
Locked in our “home offices,” we are forced to watch this horrific case study rollout on a global scale. What can we learn from this and apply it to our businesses?
The underlying problem is a complete lack of facts. Some of the deficit of facts is because COVID-19 is a novel virus, a virus not seen before. Some of it is a self-imposed pain, a lack of scientific data, and a lack of data gathering. This is compounded by a rush to make decisions without facts, rather than rushing to gather the facts.
The attempt to problem-solving without facts is one of the most common problems we see in business today—managers seeking to control a complicated situation with little or no FACTS.
Examples of this Problem in Business
A lack of data collection and tracking >> Results in no data to make decisions
People often do not have the will or patience to invest in data collection: “It’s too hard” or “We don’t have the resources/time required.” We go with our gut feeling because it’s easier, faster, and may have even worked at times. This always results in higher resource usage due to overallocation, misallocation, and expediting activities because our “gut” remembers the pain of hard times more than the days where processes work, and we over allocate resources to avoid the possibility of pain.
>> You see this with COVID-19 in a rush to make decisions without proper levels of testing to gather the facts required. The medical consensus is that we need more data and facts (testing) to enable appropriate problem-solving and decision making.
This lack of tracking and data gathering >> Results in unknown or inconsistent productivity rates and operation lead times.
Most organizations do a poor job of tracking, measuring and understanding productivity. Productivity, the amount of work completed per unit of effort, is critical in understanding the capability of the organization. It is the key link between demand and resource allocation. Without a firm grasp of productivity, it is impossible to properly allocate resources. In the absence of good information, the tendency is to over allocate. In our experience, organizations routinely over allocate resource by 25% to 50%.
>> You can see examples of this with COVID-19 related to the capacity of hospitals. Without good data as to the effort required to care for COVID patients, it is difficult to determine the proper staffing levels and equipment in the hospitals.
The lack of consistent productivity rates and lead times >> Results in the Overallocation of resources (people, equipment, space, inventory) to attempt to meet customer requirements.
Inevitably the lack of facts, and the information that is derived from them, results in the overallocation of the resource (hoarding). Often this is done intentionally, “Just In Case”, in case something unknown occurs. Just as often it is done unintentionally, often by management that has a zero tolerance for problems. Instead of seeing problems as an opportunity to improve, problems are seen as failure. This environment, combined with a lack of facts, will always result in a subconscious desire to have extra resources to ensure the pain of failure is avoided.
>> You see examples of this with COVID-19 in the states’ projections and requests for
hospital capacity – doctors, nurses, beds, ventilators. The lack of true facts is causing purchasing and allocating of resources for the worst-case scenarios (overallocation). At this point, it is prudent to plan for the worst-case scenario, but moving resources in advance will only results in more hoarding and shortages across the whole country. Material should only be move based on actual demand using Just In Time (JIT) Techniques.
This complete lack of facts feeds into this negative overallocation loop that is hard to stop until we commit to the importance of data in all situations.
A key principle of Lean is Fact-Based Decision Making. We call this Know Your Business (KYB), and it matters now…more than ever.
It is fundamental and crucial in the ability to adjust quickly to changes in your business environment. KYB needs to be dynamic and built upon understanding your operational performance and customer expectations.
When managing any operation, KYB allows us to accurately allocate resources to achieve customer requirements in the shortest lead time while minimizing and controlling cost.
The key data needed for KYB includes:
Demand / Volume – How much work does the customer require?
Productivity by functional area – How much work can be completed by an operator in a specific area and amount of time? Typically measured as an hourly rate.
Currently available resources – How many resources are available?
Required processing window by priority type – What is the customer required lead time? Are there varying priorities based on the urgency of need?
We collect data to create a plan and then frequently check against the plan to determine if the process is progressing on schedule. Where it’s not, we launch the problem-solving process to close gaps.
The solution in action:
Progress control boards are a great example of several of those critical concepts coming together.
We use demand history and forecasts to project the required volumes
The productivity rate is used to determine the number of hours of effort required
The hours required divided by the lead time results in the required resources and allows us to plan the amount of work that can be completed each hour
We can now effectively allocate the current resources
Then as we manage the operation, each hour, we can compare the planned workload against the actual workload completed. This allows us to make timely decisions based on the facts in front of us and maintain control.
Another key usage of this data is for achieving Level and Balance. Unevenness (Mura) is one of the three sources of inefficiency in Lean, along with Waste (Muda) and Overburden (Muri). We will be exploring this topic in our next blog, Flattening the Curve – Level and Balance.
As a result of the pandemic, most of your operations have experienced an extreme volume shift – either blowing through your capacity or dropping to unsustainable levels. Does KYB still apply in these extremes?
Is your KYB data still accurate?
Have you changed the way you are tracking or using KYB data?
When the pandemic is over, and things begin to return to “normal,”
Will you collect the data and use it to make a fact-based decision?
How will you know what the “new normal” is?
Will you use KYB or just assume things will return to the “same as it ever was”?
What can you do now that will help you come out more competitive in the future?