All right. So the first aim of Lean Accounting is performance measures that motivate improvement. And as you can imagine, this is perhaps the most important aim of Lean Accounting. And Firstly, we want to set our principles for lean performance measures. We need performance measures that support the lean philosophy and show how effectively it's being applied. This means we want to be able to establish measures of customer value of flow, continuous improvement of involving and empowering employees, measures that provide strong operational control, but which are simple to collect, analyze and understand, which are connected to strategic goals.

And that means that the focus of lean performance measures is different from what we might call traditional KPIs. Let's look at that. Now. The traditional use of KPIs is typically that they're results orientated, looking at the past They provide top down control and are orientated on authority. They assume the past as a guide to the future, and that they focus on the control of resources, people and results. And more emphasis is given to meeting targets, then to improving the process in lean performance measures are focused on improvement.

So they're concerned with understanding the reasons behind performance issues. And looking at the root cause, and responsibility for the measures lies within the process. The measures are used to reveal problems so that they can be resolved and kept from recurring. frequent feedback loops, drive problem solving and learning and lean performance measures focus on learning and development to improve the process. In Lean Accounting, we use a hierarchy of performance measures. And there are three levels of performance measurement in lean there are the strategic measures These are the KPIs of the whole organization, senior management monitor the achievement of strategic goals and initiate strategy changes based on these top level KPIs.

And these are typically reported monthly. The process output measures, other performance measures for each business process or value stream. They measure the deliverables from a process and they should directly connect with the strategic KPIs and they also guide improvement activity. They are typically reported weekly, as we will see later. In process measures show how our processes running in real time they are tracked by the people that work in the process and corrective action as applied as soon as problems arise. So the real time monitoring of the performance of the process, they're typically captured, reported and action throughout the working day, perhaps every two hours, perhaps at every shift.

I've made a note there about environmental and community measures. These are also important, and there will be included within the three levels as appropriate. What makes a good lean performance measure? Well, it should be something that's clearly defined so that everyone knows what we're talking about. It should be easy to collect so that we can take timely action. It should need little manipulation or analysis to get to the root cause of issues.

It should be available in a timely manner. It should, of course, be reliable and consistent over time. It should be directly linked to the activity that we're trying to measure. And it should avoid creating a perverse incentive, I encouraging us to do things which will damage profitability or damaged performance. In summary, then lean performance measures have the stability of the business process at their core, measuring and managing process stability. feeding into the management to process stability.

We have performance measures for flow, for customer value for quality for delivery, for safety and environment and for improvement activity. As I said, process stability lies at the core of lean performance measures. And this brings us to the two key aims of lean performance measures, firstly, to monitor the stability of the process, and secondly to support process improvement. Because as we've seen earlier, when we stabilize a process, we stabilize its operating cost. And when we improve the flow of work through the process, we reduce cost. And we create capacity to do more profitable work with the resources available and didn't lean and in Lean Accounting, we monitor process stability by plotting performance data as a time series.

Now shown a little example there on the right of the slide taken from a real company We can see this is on time delivery performance. We see the delivery performance of the company for this process over about 12 weeks, I think it is, and their target was 90% delivery performance. And in many weeks they do achieve that. But we can see several weeks there week 28 for example and week 34 were delivery performance was well below expectation, and we would expect the company to be examining the root causes of these problems. Presenting the data as a time series like this gives us a good way to show the stability of the process. This process.

In the example here the on time delivery example, is not really fully stable. We shouldn't be having such dips in performance and work is needed to bring this process under better control. Presenting data in a time series also helps to show when the problems arise. As I mentioned week 28 and week 34 they We need to look at what problems happened during those weeks. So it guides us towards issues for our problem solving activity.