A company wished to instigate a system of continuous improvement and it was felt that post contract reviews would be very helpful in identifying improvements. However the company delivered in the region of 2000 “projects” or “assets” per year and to review all of these would not be viable due to time and cost involved. So projects were reviewed by exception. Exception generally meant “bad” projects. “Bad” meant projects that were significantly late or significantly over budget. The problem was that no one knew what “significantly” really meant and there was no operational definition of “bad”. To compound the problem, “good” projects didn’t ever get reviewed which obviously overlooked potential opportunities to improve.
So in order to build a system of learning and review that made sense it was essential to create an operational definition of “good” and “bad” that could be measured and agreed. In this way a useful trigger for a review could be established not based on gut feel or superstition; learning could come from “good” projects as well as “bad”.
One method that helps us distinguish between boundaries of variation is Statistical Process Control (SPC). This method is able to provide an operational definition of normal levels of variation in a process as well as abnormal levels. This helps management make informed decisions of when to launch an enquiry. It can be very expensive to go looking for problems that aren’t there or to overlook a serious problem that for some reason goes unseen. In fact the prime purpose of SPC is to “minimize the economic loss of making mistake “a” or mistake “b”. Mistake “a” happens when management react to normal levels of variation as though something special happened. If improvement action is taken in this instance this can be regarded as “tampering” and has proved to actually make performance worse. Mistake “b” is failure to spot an abnormal or special cause of variation.
This system was developed empirically by Dr Walter Shewart and built upon by the quality gurus Deming and Juran. More recently a very good source of understanding can be gained from the work of Don Wheeler in his books such as “Understanding Variation” isbn 0-945320-35-3
Or for a more holistic approach, Brian Joiner in 4th Generation Management isbn 0-07-032715-7