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Establishing Lean Metrics – Using the Four Panel Approach as a Foundation for a Lean Scorecard
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Text Box: Finished 4 Panel As you start the journey to becoming a lean thinker, it won’t be long before the need to develop a data based reporting system becomes apparent. The concepts and practices that are collectively known as lean manufacturing are not difficult. In fact, they are often deceptively simple. But given the demands of managing a business, it can be challenging to maintain momentum over the long haul. When your data reporting system supports the lean concepts, it will be easier for you to stay consistent with lean principles. The Four Panel approach helps in developing this reporting system.

In their white paper “The Balanced Scorecard – Measures that Drive Performance”, Robert S. Kaplan and David P. Horton establish the need for a data based reporting system for managing the critical success factors for a business. “No single perspective paints a comprehensive picture of a company’s health. You need an approach that balances several perspectives and provides measures that enable you to track performance.” A management reporting system asks you to think of your company’s mission and strategy from four key perspectives: 1

  1. How do customers see us?
  2. At what internal processes must we excel?
  3. How can we continue to improve and create value?
  4. How do we look to shareholders?2

1. Establish the Categories for Measurement
We must organize our thinking into a framework to allow managers and employees to easily identify the critical success factors for the organization. With this framework established, it becomes easier to identify what metrics we need to use. Many organizations have so many metrics in place that management of the information becomes unwieldy. If you have dozens or even hundreds of metrics, then you need to step back and revisit your measurement plan, making sure that the critical success factors are clearly identified.

Typically manufacturing operations use five categories. If you are just getting started with your data based reporting system, you should start by using these five categories. They are field tested and effective, and they cover all four of the perspectives identified by Kaplan and Horton.

  1. Safety – maintaining a safe workplace
  2. People – development and retention of people who have the skills to deliver to the customer
  3. Quality – meeting customer, governmental, and internal requirements
  4. Responsiveness – are we responding to the needs of the customer?
  5. Financial Performance – are we making money?

Text Box: Vision Statement 2. Develop the Vision Statement
To make sure your metrics are in fact the critical success factors for your business, it is necessary to take time to think through exactly what needs to be accomplished. If you don’t know what success looks like, you probably won’t recognize it when you see it.

It is important that each of the five categories have a vision statement. To develop them, brainstorm phrases that succinctly define the stance you are taking on the category. Use those phrases to create a statement that clearly communicates to your customers, managers, employees and stockholders the vision. The statement need not be a complete sentence; it will be used to develop the goals, measures and strategy for this category. The vision statement should be established by the executive team or the corporate operations group and must be consistent across all manufacturing operations of the company or division.

Text Box: Vision Statement 3. Establish Goals
Pull the operations leadership team together and discuss the key processes that support or drive the vision statement, concentrating on the “Vital Few” that really make a difference. Establish goals by determining how the processes need to change or improve to bring them into alignment with the previously agreed upon vision statement. State the output of each of these critical processes and identify the level you would like to obtain.

If your company has multiple facilities, it is critical that the leader at each facility is included in the team to establish the goals. Without buy-in from local leadership, it is difficult to implement the system you are designing.

Process Examples


OHSA Reporting
Hazard Identification
Ergonomic Management
Near Miss Identification System


Turnover Management
Skills Assessment
Employee Satisfaction System


Defects per Unit (million)
Supplier Quality
Customer Complaint System
Rework / Repair Management


On Time Delivery
Customer Request Management System
Inventory Management
Field Service System


Warranty Cost Management
Investment Management
Inventory Management

4. Define the Metrics

Text Box: Measures Determine how the performance of the process will be measured for each goal statement. But think about how you will collect and manipulate the data - a good measure that is easy to chart is better than a perfect measure that requires a lot of work. The methods used to obtain, measure, and calculate data need to be clearly defined as slight differences can significantly change the reported results.

The metrics must be numerical targets. Absolute numerical targets, ratios or percentages all can be used. The targets can be constant across the year, variable by month, or they can be cumulative. For example, we may set a training target for a facility at 10 hours per associate for the year. But the training plan doesn’t call for the same number of training hours each month. If the targets aren’t set with this in mind, the measures will be out of control even while we perform exactly to plan.

Text Box: Trend Chart

Lean Metric Examples


Reportable Incidents
Days worked without a lost time accident
Ergonomic Management


Targeted Training Hours
Voluntary Turnover
Production to Skilled Trades Ratio


Delivered Quality
Rework / Repair Cost
Customer Complaints


On Time Delivery
Manufacturing Lead Time
Inventory Turns


Margin $
Manufacturing Space Used
Conversion Cost (Labor $ / Unit)

Metrics fall into two categories, results and drivers. Driver metrics can have a profound impact on the performance of a business because they provide immediate feedback on how a process is running. They facilitate immediate improvement and provide a tool to allow managers to immediately change the behaviors which are causing the issues. For example, a scrap metric will provide the operations team data on which product lines are producing the most scrap, allowing for direct intervention to drive improvements. Financial metrics on the other hand are generally results, as they report after the fact and are difficult to dissect to determine causes.

Keep this in mind when designing the metrics. With slight changes to the definition of the metrics, they can be changed from results to drivers. While data based reporting systems have both result and driver metrics, the most effective systems have a driver to results ratio of 4:1.

5. Plan Your Strategy

Text Box: Strategy For each goal, establish at least one strategy statement, describing the major process changes and improvement efforts. Put some urgency behind the strategies by setting deadlines or target dates for implementation.

A data based reporting system won’t improve your results. It is just a tool which can make the difficult task of running a business a little easier. The strategies that are deployed to drive the improvements needed are how the actual gains are realized. Without a sound strategy to make the changes required, it is unlikely that really significant gains will be had or maintained in the long run.

6. Help for Getting Started
I have developed a template for the 4 Panel Approach which is available for download. You are free to use it, but please make sure that you document this website as the source.

The next step in implementing your own data based reporting system are discussed in detail in my white paper entitled “Establishing Lean Metrics – A Quick Start to your Data Based Reporting System”. Return to this website soon to get a copy.

Good Luck!

[1] Kaplan, Robert. "The Balanced Scorecard - Measures that Drive Performance." Harvard Business Review January - February(1992)

[2] ibid

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