Measuring the People Factor

During the past 20 years, lean Six Sigma (LSS) has proven itself as an effective strategy for business success in virtually every industry sector. The methodology has helped organizations realize their processes are the engines that drive operational excellence and customer value. Recently, however, organizations with mature LSS programs have found that their operational improvement initiatives still leave significant opportunity on the table.

One of the biggest challenges leaders notice is the difficulty in creating a truly engaged culture of continuous improvement, one in which everyone, every day, is motivated to find ways to improve operational performance and customer satisfaction. Cultural transformation is difficult and time-consuming for any organization. This is especially the case for large organizations with multiple sites and a many employees with different skill sets and motivational levers. There’s no better example of this type of business environment than a hospital system.

Creating a continuous improvement culture

Although there are several necessary components for transitioning to a true continuous-improvement culture, research has shown that the three most important are high employee engagement, aligning employee goals and objectives to those of the organization, and improving capable employees’ productivity. I call these three critical components the people factor.

A research study by the American Society for Quality (ASQ) and Metrus Group demonstrates the significant effect the people factor has on quality improvement initiatives. The survey was sent to more than 50,000 ASQ members and customers. Survey respondents represented more than 30 industries, including healthcare, and ranged in size from very small to very large, with the average organization having 16,000 employees. A culture of continuous improvement strengthens high employee retention, customer satisfaction, and financial performance.

The survey explored the following:
• Which quality principles and techniques organizations used
• How effective they considered each principle in achieving improvement
• To what extent were leaders and workers committed to quality
• How did organizations manage employees’ contribution to continuous improvement

In addition to asking respondents what they were doing regarding quality improvement, they were also asked how well they were doing it. They were asked to rank themselves in the top, middle, or bottom third of their industries in terms of applying quality principles, as well as where they ranked in business performance, managing costs, and employee turnover.

The survey findings clearly minimized the importance of any specific quality improvement tool or technique in the success of the organizations’ improvement initiatives. Organizations receiving the highest marks for successful implementation and business results were those that:
1. Had a strong and continuous support from top leadership
2. Developed a quality-focused culture
3. Deliberately and effectively managed employee goal alignment, capabilities, and engagement

Respondents’ positions ranged widely in each of these three areas. Although some had the full support of senior leadership, others were continually fighting an uphill battle. Similarly, only 30 percent of respondents said their organizations had created a quality culture in which all or nearly all employees had quality-improvement training and responsibilities. Not surprising, when organizations with top leadership support and a quality culture were compared with others, dramatic differences in the likelihood of their success in implementing quality initiatives was found. However, the biggest differences seen were in the organizations that deliberately focused on and managed the people factor.

Measuring the people factor

Considerable research has been done on one of the three people factor components: the relationship between employee engagement and organizational performance. Engaged employees—those highly connected and committed to their organizations’ goals and values—outperform their peers on numerous measures, including their attention to quality and service. Creating high employee engagement first requires accurate measurement of current organizational engagement levels. Several companies provide tools to measure employee engagement, including Hay Group, BlessingWhite, Towers Watson, and Gallup. However, few companies offer a tool to measure all three components of the people factor.

With its ACE (alignment, capabilities, engagement) measurement program, Metrus Group measures not only employees’ alignment to goals but also their capabilities and engagement. Its research and clients’ experience confirm that a simultaneous focus on these three elements give organizations a distinct advantage, even when compared to organizations with high engagement scores. Although just slightly more than half the ASQ/Metrus Group survey respondents reported that they effectively managed all three people-factor components, those that did dramatically outperformed others in applying quality principles and techniques, and achieving high customer satisfaction and business performance. As illustrated in figure 1, organizations with high ACE scores were almost twice as likely as low ACE scorers to be at the top of their industry in financial performance. High ACE organizations were six times more likely to have higher quality than low ACE organizations. And high ACE organizations had less than half the turnover rate of their low ACE peers.

One clear take-away from the study was that if an organization’s leaders are serious about quality, they cannot delegate it to a few people with formal quality responsibilities. Experience by other advisory firms, such as McKinsey & Company, confirm these findings: For organizations to sustain high quality and financial performance, quality experts (e.g., Black Belts and lean sensei) should continue to lead carefully selected, cross-functional quality improvement projects, but serve more as trainers and coaches building “line” capabilities for continuous improvement across the organization.

Figure 1: High vs. low ACE organizations. Click here for larger image. (Credit: Metrus Group.)

ACE methodology

The ACE program is survey-based and deploys a five-point rating scale. Figure 2 shows an example of ACE survey questions.

Figure 2: Sample questions from ACE survey. Click here for larger image. (Credit: Metrus Group.)

For networks of similar operational entities such as hospital systems, hospitality companies, and retail food chains, ACE survey results can be invaluable in identifying pockets of excellence and where operations investing in ACE improvement will have the greatest impact. ACE survey findings are presented in a dashboard format called the ACE scorecard like that shown in figure 3.

Figure 3: Sample ACE scorecard for a healthcare system. Click here for larger image. (Credit: Metrus Group.)

In analyzing the sample scorecard results above, it’s clear PrimeHealth does not need to launch the same improvement initiatives in Philadelphia that it does in Houston. In Atlanta, a different level of focus is needed for the Ancillary Group than is needed for Nursing. Further, it’s easy to see that if engagement was the only people-factor component being analyzed, PrimeHealth’s leadership would be getting only part of the picture necessary for managing and maximizing the performance contribution of its workforce.

Hospital case study

ACE was deployed in a hospital system with more than 60 facilities across the United States. As part of this study, an “overall” ACE score was developed for each location by averaging each hospital’s scores for alignment, capabilities and engagement. To the surprise of the hospital system’s leadership team, the composite scores for its hospitals—delivering the same services, running with the same operating practices and using the same hiring guidelines—ranged from a high of 98 percent to a low of 21 percent. Approximately 10 percent of the hospitals rated less than 50 percent, and only 10 percent rated 70 percent or higher, a score that indicates strong performance in ACE. Further, the leadership team realized that the hospitals identified with the lowest ACE performance were also those that were experiencing poor patient feedback, financial issues, and higher turnover. The ACE analysis identified areas for improvement and offered guidance on specific actions that could be implemented for improving lagging ACE scores at each location.

Improving ACE scores and organization quality

ACE scores provide an excellent starting point for improving healthcare organizational performance outcomes across multiple performance dimensions (e.g., patient satisfaction, profitability, productivity, absenteeism, turnover, and patient safety incidents). However, the real benefit of ACE is its ability to statistically select key drivers to improve ACE scores and therefore organizational quality and financial performance. Organizations that become industry leaders in both quality and financial performance not only use best practice tools and processes but have also learned to move beyond them to address the people factor.

Gaining top leadership support, developing quality-minded cultures, and more effectively managing the often missing driver of quality—the people factor—are critical to implementing lean Six Sigma initiatives. Comprehensive tools like ACE can be the catalyst for improving employees’ quality improvement contribution to drive higher levels of hospital performance and patient satisfaction.

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