Following a successful pilot study, we tracked over three year the impact of capability on performance in a large mining organisation. Here we report on the first part of the study.
In the previous blog (see Does Capability Really Work? – Part 1) we described how our first pilot study led to a contract to monitor, manage and improve the capability in a facilities maintenance group and study its impact on performance. The total duration of the contract (renewed yearly) was three years. We did not know it at the time but these three years would be divided in two separate periods, each with its own set of engagement, measurements and results. The first part of the study covered seven quarters and can be characterised as a period of full dedication and participation by all concerned. This is the subject of this blog. The second period, one in which dedication lapsed, will be the subject of the next blog.
The pilot study demonstrated the benefits, over three reporting periods, of measuring capability. It gave management a fine-grained understanding of the performance drivers in the teams involved. This post-pilot study then formalised the methodology in the management of the miner’s outsourcing contract with its supplier.
A SIMPLE METHODOLOGY Every quarter, performance was recorded using a scorecard comprising a set of cost, quality, safety and timeliness KPIs. Capability was measured using a survey. The capability model was described in a previous blog (see The Six Core Elements of Capability); it is summarised with the diagram below.
Once the results were in, performance was plotted against capability. Then a debriefing session took place in which shortcomings were identified and initiatives to correct these shortcomings defined. Typically, shortcomings in capability were addressed first, with the rationale that once a capability initiative was successful, then the improved capability could be leveraged to improve the processes that determine performance. Care was taken not to have too many concurrent initiatives so as not to overwhelm the teams concerned.
VERY POSITIVE RESULTS The figure below shows the results for the seven quarters (horizontal axis) for KPIs and for capability (CCIs). There were four townships involved and the results shown are the averages for those towns. The straight lines are the lines of best fit for KPIs and CCIs respectively. It is clear that, as capability increases over the quarters (green line), so does performance (blue line). The green and red blocks at the bottom of the image represent the initiatives, the successful ones in green and the not so successful in red.
These results can be summarised on a single graph, as shown below. The seven quarters are represented by the seven blue diamonds, with the quarters going from lower left (quarter 1) upwards to the top right (quarter 7). The trend line is the blue arrow: as capability increases, so does performance.
HIGH RETURN ON INVESTMENT The supplier had a profit share agreement with the miner. Increased performance resulted in a win-win outcome, with the miner gaining from better services and the supplier from increased payment for its services. Managing capability was found to be a very profitable investment for both parties.
WHAT WAS LEARNED The outcome was deemed very positive and can be summarised in a few points:
Increasing capability correlates with increased performance
Low capability correlates with low performance
Capability can be used as a predictor of performance success
Effective performance management implies managing capability
Managing performance without managing capability is sub-optimal
WHAT HAPPENS WHEN CAPABILITY IS NOT MANAGED Had our involvement with our customer stopped after seven quarters, then we would have deemed the experience very successful. However, circumstances in the organisation changed drastically after the period reported on here. This gave us the opportunity to study what happens to performance when capability is not managed adequately.
This second period in our three-year involvement is the subject of the next blog. Make sure to read it to get the full picture:
WHAT HAPPENS WHEN CAPABILITY IS ACTIVELY MANAGED AND WHEN IT ISN’T.
It makes for fascinating reading.