Lean Government
  Metrics Guide



This Lean Government Metrics Guide is a resource to help government agencies understand and
select metrics to support their implementation of Lean and Six Sigma—two powerful and proven
methods to improve organizational performance. Metrics are the cornerstone of successful Lean
and Six Sigma improvement efforts. When used effectively, metrics can be powerful
mechanisms for helping organizations to achieve, assess, and communicate results. While this
guide draws primarily on metrics experience from the U.S. Environmental Protection Agency
(EPA) and state environmental agencies, it also incorporates metrics and information collected
from other federal agencies.

This guide includes the following sections:
   •   Introduction to Metrics Used in Lean Government Efforts
   •   Lean Government Process Metrics
   •   Lean Government Organizational Metrics
   •   How to Select Lean Metrics
   •   Where to Find More Information

               to                 in

Lean and Six Sigma place a strong emphasis on  measuring, evaluating, and communicating
performance results. In this context, metrics enable organizations using Lean and Six Sigma to:
   •   Identify and target the right problems during Lean and Six Sigma events and projects
   •   Evaluate potential process improvements and select appropriate actions for
   •   Establish baselines for process performance and track progress over time
   •   Understand and communicate the results (outcomes) of Lean and Six Sigma efforts
   •   Inform and monitor efforts to deploy Lean and Six Sigma throughout an organization

This guide explores two major categories of metrics relevant to Lean and Six  Sigma: process
metrics and organizational metrics. Process metrics address a specific process or program and
provide information on key attributes of the process such as time, cost, quality, outputs, and
process complexity. Organizational metrics address characteristics of the broader organization
or agency, providing information on the status of Lean deployment and morale.

It is important to remember that the Lean and Six Sigma metrics discussed in  this  guide should
ultimately support progress toward achieving the agency's mission. In the case of EPA and
many state environmental agencies, this means protecting human health and the environment.  It
is often helpful to  consider goals and objectives that may be outlined in the agency or program's
                              Lean Government Metrics Guide |  Page 1

strategic plan to ensure that Lean and Six Sigma metrics are aligned to measure and drive
progress toward the agency mission and desired outcomes. To select measures that matter, it is
first important to clarify how the targeted process or program is intended to advance the agency's
mission and objectives. Logic models provide simple but powerful tools for describing how
process or program activities produce outputs that (at least in theory) translate into desired short-
term, medium-term, and long-term outcomes.

The Lean government process and organizational metrics described in this guide are grouped
into the following subcategories.
Process Metrics

    •   Time: Time metrics evaluate the time to produce and deliver a product or service to
       customers, the portion of time that is spent processing the product or idle time, whether
       customers receive products or responses on time, and other time-related considerations.
    •   Cost: Cost metrics measure cost savings and the costs of products or processes, such as
       the amount of full-time equivalent employees needed for a process.
    •   Quality: Quality metrics examine  the quality of products or services, such as customer
       satisfaction and whether documents are complete and accurate.
    •   Outputs: Output metrics track the  production or activity of agency processes, such as the
       number of permits issued.
    •   Process complexity: Process complexity metrics describe the complexity and nature of a
       process, such as the number of handoffs and steps in the process.
Organizational Metrics

    •   Lean deployment: Lean deployment metrics measure the status of Lean implementation
       at an agency, such as the number of Lean events or trainings conducted.
    •   Morale: Morale metrics pertain to employee satisfaction and staff retention, including
       responses to staff surveys and turnover rate.

Table 1 lists examples of metrics that government agencies can use in Lean and Six Sigma
efforts. Each of these metrics is described later in this guide.  The next section describes how to
think about identifying metrics that are most appropriate for your agency or organization.

Table 1 : Overview of Lean Government Metrics
                                    PROCESS METRICS
Time Metrics

^  Lead Time
o  Best and Worst Completion
o  Percent On-Time Delivery
                              Cost Metrics
                                  Labor Savings
                                  Cost Savings
                                  Cost per Product
Quality Metrics

^  Customer Satisfaction
o  Rework
^  Percent Complete and
                              Lean Government Metrics Guide  | Page 2

                                     PROCI§§ METRICS
 Time Metrics
 ^  Processing Time
 o  Activity Ratio
 o  Value Added Time
 o  Non-Value Added Time
 o  Non-Value Added but
    Necessary Time
 ^  Percent Value Added Time
 Output Metrics
 ^  Production
 o  Backlog
 o  Work in Process
 o  Inventory
                              Cost Metrics
Lean Deployment
o  Lean Events Conducted
o  Lean Event Participation
o  Lean Training
Quality Metrics
•=;  Rolling First Pass Yield
                              Process Complexity Metrics
                              o  Process Steps
                              o  Value Added Process Steps
                              o  Decisions
                              o  Delays
                              o  Handoffs
                              o  Loops
                              c  Black Holes
                                  QRGMffllMWM, MifRICf
                               Morale Metrics
                               o  Employee Satisfaction
                               o  Turnover
Process metrics—metrics that address a specific process or program—enable agencies to
achieve, assess, and communicate compelling process improvement results. Lean government
process metrics support several objectives, including:
    •   Measuring wastes (non-value added activity) in processes (e.g., comparing processing
       time or value-added time to the total time to produce a product, including idle time)
    •   Informing selection of specific process improvement actions
    •   Evaluating progress made to address those wastes and the benefits of Lean and Six Sigma
       projects (e.g., cost savings, reductions in process steps, etc.)
    •   Assessing the overall performance of a process (e.g., customer satisfaction, percent of
       products delivered on time, etc.)

Government agencies can use Lean process metrics to answer the following types of questions:
    •   Time metrics: How long does it take  to produce a product or deliver a service? How
       much of that time is processing time and how much is idle time?
                               Lean Government Metrics Guide |  Page 3

    •   Cost metrics: How much does the process cost to operate (e.g., the number of full time
       equivalent employees)? What cost savings did the team identify in the Lean event?

    •   Quality metrics: How often does the process lead to mistakes (e.g., incomplete or
       inaccurate forms) that require rework?  How do customers view the process?

    •   Output metrics: How many products (e.g., permits) are completed or processed each
       month or year? What backlogs exist in the process?

    •   Process complexity metrics:  How many steps are in the process? How many times is a
       document handed off between individuals, offices, or departments in the process?

It is important to note that some types of metrics will likely be of greater interest to certain
audiences, although all types are useful for understanding the varied dimensions that affect
process performance and outcomes.  For example:

    •   Lead time, customer satisfaction, and other measures of product or service quality may be
       of particular interest to key "customers," those who receive and/or benefit from the
       process outputs and outcomes; and

    •   Other process metrics, such as those related to process complexity and efficiency, may be
       of particular interest to internal audiences such as managers of the process.

Table 2 below presents a range of Lean government process metrics. The table provides a brief
description of each metric, an example of how the metric is used, and identifies whether one or
more environmental agencies have used the metric in Lean government efforts.  A special
discussion of time metrics is included after Table 2,  as several aspects of time metrics may be
particularly new to those who are not familiar with Lean.
Table 2: Definitions and Examples of Lean Government Process Metrics
 Time Metrics*

 Lead Time
 (a.k.a. Elapsed
 Best and Worst
 Percent On-
 Time Delivery
Total time (from start to finish,
from the customer's perspective,
including waiting time) to develop
a product or deliver a service to a
customer. Typically expressed in

Estimate of the shortest (best)
and longest  (worst) time to
complete the process (lead time
is the average).
Note: Lead time is more relevant
to the customer.

Percent of time the
product/service is delivered on
time, from the customer's
Time between when a
permit application was
submitted (even if
incomplete) and when
customer receives a

15 days vs. 350 days
45% of permits are
issued within 90 days of
receipt of application (as
promised to customer)
                               Lean Government Metrics Guide | Page 4

 Time (a.k.a.
 Cycle Time or
 "Touch Time")

 Activity Ratio (or

 Value Added
 Added Time
 Added but
 Necessary Time
 Percent Value
 Added Time

 Cost Metrics

 Labor Savings
 (or Freed
Time to complete a process or
process step, excluding wait time.
(Lead time > total processing time
> value added time)

Processing time divided  by lead
time, expressed as a percentage

Processing time that adds value
from a customer's perspective
(i.e., when information and
materials are transformed into
products or services a customer
wants).1 Typically expressed in
minutes or hours.

Time that  does not add value
from a customer's perspective
(i.e., when information and
materials are not transformed into
products or services a customer
wants). Typically expressed in
minutes or hours.

Time that  does not add value
from a customer's perspective
(i.e., when information and
materials are not transformed into
products or services a customer
wants), but is still necessary due
to regulatory requirements.
Typically expressed in minutes or

Value added time divided by lead
time, expressed as a
Change in the number of full time
equivalent (FTE) employees
needed fora process (i.e., FTEs
that can be reassigned to other
tasks/positions because of
efficiency improvements).
• FTEs required = (Sum of
  processing time [hours] X # of
  occurrences/year) •*• 2,080 work
1.5 days processing
1.5 days processing
time •*• 30 days lead time
= 5%

Actual time for
substantive review of a
permit (without
interruptions or delays)
Time for transport of the
document around the
office; waiting time for
someone to review the
document; unnecessary
approvals or signatures

Time required by law for
the public comment
period for a permit (this
is non-value added from
the perspective of the
4 hours value added
time •*• 30 days lead time
= 0.56% value added
(14 hours processing
time per permit
application x 300 permit
applications per year) •*•
2,080 hours per year = 2
FTEs required

5.5 FTEs for current
state (before Lean
event) - 2 FTEs for
1 Value added time is widely used in Lean manufacturing, but difficult to define in administrative contexts. Processing time is easier to measure
for office processes, so it can be used as a substitute.
2 Value added time is widely used in Lean manufacturing, but difficult to define in administrative contexts. Activity ratio (processing time
divided by lead time) can be used as a substitute for percent value added time.
                                  Lean Government Metrics Guide |  Page 5

                 • Freed capacity = FTEs needed
                   for current state - FTEs
                   needed for future state

Cost Savings     Dollar savings from Lean or Six
                 Sigma projects, such as:
                 • Dollar value of FTE savings
                   (e.g., from staff attrition and
                   avoided need to hire)
                 • Reductions in contractor costs
                   (after subtracting Lean
                   facilitator costs)
                 • Other office cost savings (e.g.,
                   energy/utility costs,
                   consolidating office space,
                   avoided costs such as not
                   needing a new IT system)

Cost per         Labor, material, and overhead
Product          costs to produce a product (or
                 service product)
Quality Metrics

Complete and
Accurate (C&A)
                 Qualitative or quantitative results
                 from customer satisfaction
                 surveys (e.g., about a service or

                 Percent of products or work in
                 process that needs to be redone
                 Percent of occurrences that work
                 in process (e.g., a permit
                 application) released to the next
                 step does not require a
                 downstream customer to make
                 corrections or request information
                 that should have been provided
                 initially. This is another way to
                 measure rework.

Rolling First      Percent of occurrences that the
Pass Yield (or    product or document passes
Rolling           through the entire process without
Throughput       needing rework.  This is the
Yield)            product of the C&A percentages
                 for each process step, expressed
                 as a percentage.
                                                  future state (after Lean
                                                  event) = 3.5 FTEs freed

                                                  Saved $3 million from
                                                  Lean events
                                                  ($500 labor + $500
                                                  material + $1000
                                                  overhead) •*• 100
                                                  products per month =
                                                  $20 per unit
                                                  Customer satisfaction
                                                  ratings improved from
                                                  4.2 to 7.8 out of 10
                                                  Percent of permit
                                                  applications that are not
                                                  complete and need to be

                                                  30% of permit
                                                  applications received
                                                  are complete  and
                                                  30% C&A x 60% C&A x
                                                  90% C&A = 16% rolling
                                                  first pass yield
                                Lean Government Metrics Guide  | Page 6

Output Metrics

Work in Process

Number of products or service
products produced

Number of products or service
products that have not been
started or entered the process

Amount of products or
transactions that are being
processed or waiting to be

A supply of raw materials,
finished products, and/or
unfinished products in excess of
customer demand
Process Complexity Metrics
Process Steps
Value Added
Process Steps
Total number of steps in a
process where a task or activity is

Number of process steps that add
value from a customer's
perspective (i.e., steps where
information and materials are
transformed into products/
services a customer wants). This
number typically does not change
with Lean.

Number of points in process
where a choice is made about a
course of action

Number of points in process
where time is wasted by waiting
for something to occur

Number of times work is passed
from one entity to another
Number of times when there are
a series of steps that loop
backwards and repeat
themselves at least once

                                 Number of permits

                                 A Lean project
                                 eliminated a backlog of
                                 300 permits.

                                 49 permit applications
                                 are in the process
                                Additional paper
                                supplies beyond that
                                needed for finished
                                A Lean event reduced
                                the number of process
                                steps from 55 to 12.

                                3 steps are value added
                                (e.g., they involve
                                substantive review of
                                permit conditions and
                                writing the permit).
                                 Before the Lean event,
                                 decisions were made at
                                 4 points in the process.

                                 The number of steps
                                 with delays was reduced
                                 from 22 to 12.

                                 The process had 18
                                 handoffs between
                                 individuals before the
                                 Lean event and 6 after
                                 the event.

                                 One of the loops
                                 between the permit
                                 reviewer and permit
                                 writer was eliminated
                                 with the new process.

                               Lean Government Metrics Guide  | Page 7

    METRIC             DESCRIPTION
 Black Holes    j  Number of extreme combinations
               j  of loops, delays, decisions, and
               j  handoffs from which no further
               j  progress is made or where years
               i  can pass before proceeding with
               I  the process
The Lean event
eliminated the "black
hole" in the process.
Special Considerations about Time Metrics

Lean methods give special consideration to various aspects of process time. By examining how
time is spent within a process, one can find important clues that reveal waste (non-value-added
activity) and improvement opportunities. Keep in mind the following considerations about time
    •   Lead time is greater than total processing time which is greater than value added time. A
       common goal of Lean initiatives is to reduce lead time and total processing time to be
       closer to the value added time.
    •   In some cases it may even make sense to increase value added time (e.g., to improve
       quality) while simultaneously reducing overall lead time and processing time.
    •   In the manufacturing context, it is relatively easy to determine the portion of time that is
       value added—when workers or machines physically transform the form, fit, or function
       of the product in a way the customer is willing to pay for. In administrative processes, it
       can be more difficult to delineate what portion of the time is truly value added, from the
       customer's perspective. For example, only a portion of the time a staff person reviews a
       permit application and drafts a permit is likely to be value added.
    •   Some Lean office publications suggest using "processing time" (also referred to as "touch
       time") as an alternate metric to "value-added time," since processing time is easier to
       measure. The activity ratio (ratio of processing time to lead time) then becomes the
       substitute metric for the value added percentage (ratio of value added time to lead time).

Lean  Government Organizational Metrics

Organizational metrics—metrics that address topics such as Lean deployment and morale at an
organizational level—help agencies to sustain and expand  results that contribute to the  agency's
ability to fulfill its mission. Lean government process metrics support a key objective:
    •   Inform and monitor efforts to deploy Lean and Six  Sigma throughout an organization

Organizational metrics can help answer the following types of questions:
    •   Lean deployment metrics:  How many Lean events have we completed this year? How
       many employees have participated in Lean training classes?
                              Lean Government Metrics Guide |  Page 8

    •   Morale metrics: How satisfied are employees with the agency or office? What is the staff
       turnover rate, and how does it compare to the average for government agencies?

Table 3 provides descriptions and examples of Lean government organizational metrics.

Table 3: Definitions and Examples of Lean Government Organizational Metrics
Lean Deployment Metrics
Lean Events Number of Lean events
Conducted conducted (e.g., value stream
An agency conducted 5
kaizen events this year.

 Lean Event
 Lean Training
 Morale Metrics

mapping events, kaizen events,
etc.).  Some organizations only
count implementation-oriented
events (e.g., kaizen events).

Number of employees who have
participated in Lean events. This
can be broken down further, such
as the number of employees that
have participated in:
• 1-5 Lean events
• 6-12 Lean events
• 13-25 Lean events
• More than 25 Lean events

Number of employees who have
undergone formal Lean and/or
Six Sigma training
Qualitative or quantitative results
from staff surveys
Percent of staff who leave the
agency over a certain time period
(e.g., month or year).
• Turnover = # of employees
  leaving in a certain period •*•
  total employed that period

It can also be useful to distinguish
between voluntary and
involuntary turnover.
100 employees
participated in Lean
events this year.
5 employees completed
Lean Six Sigma green
belt training; 50
employees attended a
"Lean 101" course.
70% of staff rated their
employment with the
agency as "good" or
"very good" in a survey.

Staff turnover was 14%
last year.
                                Lean Government Metrics Guide  | Page 9

      to         I .can

This guide presents a menu of options for Lean government metrics, including examples of
metrics that EPA and state environmental agencies have used in Lean and Six Sigma efforts.
Not all of these metrics may be relevant and useful for your agency or organization, however.  It
is important to choose metrics that make sense for your agency, given your agency's overall
goals and objectives. Consider these guidelines when selecting metrics:
   •   Determine the purpose of the metrics.  Measures can drive behavior and focus attention
       in powerful ways.  As a result, it is important to think about the behaviors that are likely
       to be encouraged by use of specific metrics.  In selecting metrics, consider questions such
       o  What is the purpose of the metric? What aspects of the process are we trying to
          improve? What wastes are we trying to eliminate?  What behaviors are we trying to
       o  Who are the key audiences for the metric?
       o  How will we use the measurement data?
   •   Use just a few metrics. No more than a few metrics per category are needed. Having too
       many metrics dilutes the focus of the improvement efforts and can create unnecessary
   •   Use only the most appropriate metrics. Ask whether there is something important about
       a targeted process related to each category of process metrics, and do not worry if the
       answer is "no." Also consider which metrics would be useful to evaluate across the
       agency, depending on the overall status and goals of the Lean or Six Sigma initiative.
   •   Focus on customers and agency leadership needs.  While a range of metrics can show
       improvements made during Lean events (e.g., reductions in the number of process steps),
       only a few metrics matter to customers, including the time it takes to receive a service or
       product (lead time) and the quality of the service or product.  Make sure to include some
       metrics that reflect key interests of customers, along with metrics that will resonate with
       agency leadership and support the agency's strategic goals.
   •   Engage data  users in the design of the metrics.  It's important to engage people who are
       familiar with the process in the design of metrics and the development of a system for
       collecting and reporting performance data. Without consulting front-line employees,
       agencies risk choosing metrics that are poorly understood, irrelevant, or inconsistently
       used by the people who do the work.

A widely used framework for choosing metrics is the "SMART" model—metrics should be
Simple, Measurable, Actionable, Relevant, and Timely.3 This framework includes the following
3 There are several variations on this model, which is consistent with the principles for performance measurement outlined in Peter Drucker's
1954 book, The Practice of Management. Alternate terms for the SMART mnemonic include: Specific, Meaningful, Attainable, Reliable, and
                               Lean Government Metrics Guide |  Page 10

       Simple: Make sure that metrics are transparent and simple enough to be easily understood
       by everyone in the agency.  Metrics should also be hard to fool or game (e.g., avoid
       situations where people could show results even when nothing had actually changed).
       Measurable: Select metrics for which you can relatively easily collect performance data;
       don't rely on estimates or assumptions. In some cases, you may need to set up a system
       for collecting input, such as a customer satisfaction or voice of employee survey.
       Actionable: Metrics should provide information that managers and staff can use to take
       actions to improve the agency's operations and outcomes.
       Relevant: As is often stated, what you measure is what matters and gets managed. Select
       metrics that support the agency's strategic objectives and that specifically relate to the
       process or task at hand.  For Lean efforts, this often means using metrics that correspond
       to the seven "deadly wastes" targeted by Lean (defects, overproduction, transport,
       motion, inventory, over processing, and idle time).
       Timely: Consider the "just-in-time" model for metrics—provide the right information to
       the right people when they need it for making decisions.
As mentioned earlier, this guide provides an introduction to metrics that government agencies
can use to implement and assess their Lean and Six Sigma initiatives. It is important to consider
what metrics make the most sense given each agency's specific goals and objectives. Lean and
Six Sigma books, articles, and training courses provide more information and guidance on
selecting and using metrics. While numerous Lean and Six Sigma publications describe metrics,
the following list of selected references include information on the use of metrics in
administrative or office contexts:
    •   Fabrizio, Tom and Don Tapping. SSfor the Office: Organizing the Workplace to
       Eliminate Waste. New York: Productivity Press, 2006.
    •   Keyte, Beau and Drew Locher. The Complete Lean Enterprise: Value Stream Mapping
       for Administrative and Office Processes. New York: Productivity Press, 2004.
    •   Martin, James William. Lean Six Sigma for the  Office. Boca Raton: CRC Press, 2009.
    •   Martin, Karen. Kaizen Event Planner: Achieving Rapid Improvement in Office, Service,
       and Technical Environments. New York: Productivity Press, 2007.
    •   Tapping, Don and Tom Shuker. Value Stream Management for the Lean Office: Eight
       Steps to Planning, Mapping, and Sustaining Lean Improvements in Administrative Areas.
       New York: Productivity Press, 2003.

EPA's Lean Government website (www.epa.gov/1 ean)  has a variety of resources and information
on Lean and Six Sigma efforts at government agencies. For additional information and context
on the use of Lean metrics, see EPA's Lean in Government Starter Kit., which provides guidance
and resources on implementing Lean events at government agencies.  EPA's Lean Government
website also has case studies and other publications describing results and lessons learned from
                              Lean Government Metrics Guide | Page 11

EPA and state environmental agency Lean events.  EPA is interested in the results, experiences,
and lessons learned from your agency's Lean and Six Sigma efforts.
                       EPA Lean Government Contact

 To learn more about EPA's Lean Government Initiative and to share your ideas and
 experiences, visit the EPA Lean website (www.epa.gov/lean) or contact:

       Jamie Burnett
       U.S. EPA, National Center for Environmental Innovation
       (202) 566-2205
       burnett. jam ie(S)epa. gov
                           Lean Government Metrics Guide | Page 12

United States Environmental Protection Agency
                July 2009