Techniques for applying Leading or Lagging metrics immediately!

Daryl Mather, Author of “The Maintenance Scorecard”,

Performance measurement is one of the methods at the heart of

propelling an organization towards breakthrough performance. This
generally takes the form of performance indicators, key performance
indicators, and measurement programs all designed to focus the
attention on various areas of performance.

Within the Maintenance Scorecard, MSC, the approach taken is to create

metrics based on desired performance levels, rather than employing
some form of measurement by pick-list approach to building a metrics
program.

The old adage is “if you can measure it you can manage it”. The
Maintenance Scorecard takes a slight turn from this. Before you think
about how to measure it, fist work out what it is you want to manage!

Regardless of the approach taken, at some stage the organization finds

itself considering some of the advanced techniques within performance
measurement. These include strategic theme key performance
indicators, leading and lagging indicators, opposing indicators, risk-
based indicators, and modern display techniques.

Within this short article I am going to try to clarify how Leading and
Lagging indicators are treated within the Maintenance Scorecard, and
how they can add immediate value to your companies’ performance
management efforts.

What exactly are Leading and Lagging Indicators?

It pays to remember that we are talking about measuring and managing

performance within this area of the discipline. So we need to directly
relate these titles back to the measurement of performance.

Quite simply leading indicators lead performance, and Lagging indicators

lag performance. In other words, one tells you where the performance
of your assets, teams, processes, or other resource, is going to, and
allows you to act in a proactive manner. While the other tells you where
it has been, and allows you to take reactive action!

At first glance this seems counter-intuitive doesn’t it. How can we

measure things that have happened, and think we are going to be able
to predict future performance levels? The trick is to fully understand the
processes you have in place, and how that fits into the rest of your day-
to-day management of the physical asset base.

Some examples of Leading Indicators

So, Leading indicators allow you to take action proactively. So to truly

be a leading indicator they need to predict, or provide some indication,
of future performance levels and/or issues.

For example: most work order systems are managed through some
form of priority rating of the corrective, or reactive, work orders in
progress. This rating is often related to time and is used to determine
how soon after creation the work order should be done.

It is used in capacity scheduling, ad-hoc work order execution and a

range of other business processes that have to do with work
management. The basis of this process is a link to time. This is done,
normally, using a combination of the consequences of the failure mode if
it is left unattended to, and the importance of the equipment to the
company.

Within this process a performance indicator, or report, would be the Age

vs. Priority Report. This report displays the number of work orders, in
their respective priority groupings, that have not been completed on
time. Some of these also display how late the work order is.
Figure 1: Age versus priority example

The graph in figure 1 clearly shows that a number of Priority1 work

orders are between 5 days and 1 week late. In this case we don’t know
what the time horizon is for Priority 1 work orders. But it is probably less
than one week! If you look at the 3-week mark on this graph one or two
have made it out this far. Not good!

So, what is this telling us? It really depends on the underlying work
order prioritization method being used. But basically it is indicating that
we are faced with a higher level of risk than our system is supposed to
manage. This probably means that something is about to fall apart
within the very near future.

This metric, as with any other, should be produced in such a way as to

be able to drill down into the data that produced it. This would take us
to the late work orders, the equipment they were raised on, the failure
mode, or potential failure, that has triggered them and possibly even
the consequences of them going horribly wrong.
This is the essence of leading indicators; they tell you where
performance is likely to go. Things aren’t bad in the priority example
yet, but it looks like they soon will be! If used correctly leading work
orders can add a proactive element to what is normally a reactive
activity.

Leading performance indicators are few; the best proactive measures

come from a specific need within a specific company, rather than
selecting from a range of “off-the-shelf” measures.

Schedule compliance (Yup, that one) is a good example of another

leading indicator. (But with a twist) Normally this metric is used to
evaluate how the scheduling and execution functions are working
together, how the workload is being managed, and as an indicator to
how much unexpected work occurred and pushed it out.

For instance: from RCM we learned that an On-condition task is

scheduled to occur at a frequency less than the P-F Interval. I won’t go
into why as that is a whole different area, but for the sake of this article
we will take this as the principle.

Therefore there is only a limited timeframe for the on-condition or

predictive task to be carried out. If the P-F Interval is 4 weeks, the
frequency of inspection is, say, two weeks, and the actual inspection
frequency is 6 weeks. Then we can see immediately that we are only
going to predict this failure mode occurring by dumb luck!

Once is okay, we can react to that, but if the task is regularly done at
periods longer than the P-F interval then the most likely outcome is that
we will have an unpredicted failure on a failure mode that our analysis
told us needed to be predicted.

Again, the underlying concept is a deep understanding of what it is that

your processes and regimes are trying to accomplish, and the effects of
these on other areas of performance. And again a standard metric can
be used to give a vastly different viewpoint.

Some examples of lagging indicators

Lagging indicators are just about all of the rest. These are indicators
that tell you when something has gone wrong or is in the process of
going wrong. MTBF, Availability, Planned versus reactive ratios (if these
are still used) are all examples of lagging indicators.
Although we have spent most of this paper on leading metrics, that
these are also very important. Without lagging indicators we have no
idea of the impact, good or bad, of the work we are doing on a daily
basis, or of the improvement initiatives, or of recent modifications and
so on.

I hope this has cleared up some issues regarding leading and lagging
measurement of performance in asset management. The intention of
this article was to enable you to apply these principles to your workplace
immediately, so if you do, or if you can see how they would be applied.
Please send me an email and let me know!

Added value bit

If you are interested in receiving a short article containing 7 power tips

for achieving breakthrough performance in asset management please
send me an email to darylm@strategic-advantages.com, hopefully with
some feedback on this article, and I will send them to you immediately!

Daryl Mather is an international consultant and author in asset

management, reliability and risk. He currently works in the United
Kingdom where he assists selected organizations to achieve
breakthrough performance from their physical asset base.