Lean in Government | Episode 10 | KPIs & LSW

In Episode 10 of the Lean in Government podcast, I talk about two critical elements that every organization needs, but very few truly use effectively: KPIs and Leader Standard Work.

Too often in government, we measure activity instead of impact. We track what is easy instead of what truly matters to our citizens. In this episode, I share real examples from my experience in government on how to create meaningful KPIs that actually drive improvement, not just reporting.

I also explain how Leader Standard Work brings discipline and consistency to leadership, helping you stay engaged, support your team, and turn data into real results.

This episode will challenge you to rethink how you measure performance and how you lead on a daily basis.

Key takeaways:

1. How to create KPIs that reflect process health, not just numbers
2. Why you should eliminate KPIs once performance is stable
3. How Leader Standard Work drives consistency and accountability
4. Real examples from government operations and supply chain

If you are a leader in government, this episode is for you.

🎧 Listen, reflect, and start focusing on what truly matters.

Transcript

SPEAKER_00 0:10

Welcome back to Lean in Government Podcast. I'm your host, Alan Gannick. In today's episode, I want to talk about something that every organization says they do, but very few actually do well. And that is how we create and use KPIs, and how leaders show up constantly through leader standard work. In government, we often measure activity instead of impact. We track what is easy instead of what truly matters to the people we serve. And because of that, we miss opportunities to improve, to solve real problems, and to build trust with our communities. But KPIs, when done right, are not just numbers on a board. They are reflection of the health of our processes. They help you see problems early, they guide better decisions. And leader standard work is what brings it all together. It is what ensures that leaders are not managing from behind a desk, but actually they are actively engaged in asking questions, supporting their teams, and driving continuous improvement every single day. So today I want to share some practical thoughts from my experience both in government and in private sector on how to make KPIs meaningful and how leaders stand at work can turn those metrics into real results. Let's get into it. In last episodes, we spoke about LSS, lighting signals and science stock room. We talked about 5S and other things. Today, as I mentioned, I want to talk about two things. Number one, KPI. And number two, leaders standard work. So what is a KPI? KPI is a key performance indicator. It's abbreviation for key performance indicators or indicators. So those indicators tell us how we are performing towards our goal. Are we doing well? Or we need to improve. And I just opened up one of my KPIs that I had in my distribution centers in my warehouses while working for the government. And um certain things we measured for a reason, for a purpose. What mattered to us as an organization as well, what mattered to our internal customers as well as external customers. Because in government we don't serve just internal or just external, we serve both in most cases. So I have to serve my internal customer, provide the products that they need to fix for our citizens and residents things that broke and need to be fixed. I have to have those supplies. I got to take care of my internal customer. If I take care of them, they'll take care of the external customer, which is the resident and citizen of that city. So I'm going to share with you some KPIs that we measured in warehouse. However, what I'm going to tell you today, those KPIs kept changing year after year. And why? Well, when we started to measure things and we improved and we consistently show 100% good results, then I would cancel as a leader, I would cancel that KPI because we perform well. We built the system to sustain it. There's no more reason to show off in front of someone that we are in green constantly. Typically three to six months. I prefer three, sometimes six months, where I, if I'm consistently in green, then I would eliminate and take care of that off the board or KPI report and not report to the leaders or our staff members. All right, let's look at some KPIs here that I have prepared from my old jobs and in the distribution center. One of the things that was important to us in a warehouse environment in purchasing, where we spend millions of dollars of your taxpayer dollars and ratepayers, uh, we wanted to make sure that we spend just enough, that we don't waste money. Number one. Number two, we wanted to make sure that we equally spread that wealth amongst all these different distributors. So we don't want to make one distributor multimillionaire versus another one, a smaller mom and pop shop, not make any business with them. So we created a KPI. So purchasing, management staff, and I agreed on it. So we had listed all the contracts that we have at that time. We listed also what the expiration dates are. And then we color-coded. Green means we have a contract, it's still active. Red means it expired. We don't have an active contract. We just had it and we have a date when it expired. And then we had a contract that we don't have a contract at all. And that's okay. You're not going to have contract with every supplier that you have within your organization. That's normal. But then we also measured in this case, I'm looking at 2019 versus 2020, how much money we spend with each contractor, with each, I'm sorry, each supplier and on each contract. So some of the suppliers we spend, I see here one million because we had one supplier and one contract where we would be purchasing water meters. And as you know, water meters are very expensive. So we would spend more than a million with them. However, in 2019, if we look at and in 2018, we spent a lot more money than in 2020. Why? Because we became better in managing inventories. We we analyzed, studied, and we found ways to spend less, even though the demand was higher. It wouldn't make sense typically, but um it does. If you spend less and you only purchase what you need, then um of course you're gonna spend less money with that supply. Another thing is ABC. We looked at ABC, classified uh items, and I'll talk more about that in future episodes, but A items is the most critical item, most expensive item. That's where 80% of your cash is tied in. Do you have lattice few? Probably not, but that's where your money is at, like meters. Let's talk about meters. I had meters for the east of Grand Rapids City that cost just one meter, $15 or $20,000 today. Just one meter. It's a big meter. Um, and then you have a B item and C items, bolts, nuts, washers, things like that. You have millions of those, but the value is not that high. So we measured that. We want to make sure that we take care of A items. That's what keeps the organization like cities running. You ought to make sure you got that on the shelf and just enough to uh support the operation. Then we have another one, not just the number, we had also value by uh ABC. The other thing we had an annual cost of uh goods sold. Um, so we had that measured. So, for example, what was our budget? How much did we spent? Um, we had an inventory on hand, uh, KPI, how much inventory on the hand we have by department, by storeroom. So in the system, we had a different storerooms, even though everything was under one roof, we may have uh five, seven storerooms in that particular case. And then number of inventory turns. How often are we turning that inventory? For those of you who are in the private sector and you are in the supply chain management business, you know what I'm talking about. But many people in government don't understand the importance of having a higher turnovers. I know I had the difficulties when I introduced this to the team. It says, man, this guy's gonna shut us down. He does not keep enough on the shelf. He's combining all these warehouses under one roof. And we used to have two, three years worth of product. Now we're down to three months. So some people will be skeptical and they thought we're gonna shut them down. Well, there's a system in place that we placed that prevented that from ever, ever happening. Thank God. Why? Because we had uh inventory for two, three months on the shelf. We had made deals with our lead uh with our contractors, with our suppliers to store some of that inventory at their locations. One good example in Seagan Raffids for these water meters made a great deal with a supplier of ours where I said, hey, we used to buy two, three years worth of inventory from you. Those days are long gone. I have to store it, they get damaged, I have to scrap it. Um, recalls happen, you have to come. I don't know what's good, what's bad. Uh, the traceability was terrible back then. I'm keeping only three months on A items. B items, less than that. C items, probably a month worth of inventory. However, supply, if you want to do business with us, government here, I want you to store some of that inventory in your warehouse. We made a deal legally. And then they said, Alan, that's all good. As long as you promise me one thing, can you guys buy that inventory from us at the end of the year so we don't pay uh taxes on that inventory? Because in the private sector, they have to pay taxes and inventory. I said, deal. That makes good sense because my busy season starts starting January, December, January, that's when it starts. I'm gonna be burning those three months worth of inventory meters like this. I made a deal with them. No problem. We signed a contract, they kept for us. We had a safety stock. So city would run without any problems. If we ran out in our stock room, we had a backup 24-7. So that's why we measured the inventory turns. More turns you have, more money put in the pocket. Not your pocket, your residence, your ratepayers' pocket. That's how we saved the city $500 to a million dollars per year. We have evidence because we measured everything. Why? Because we spent less, we had more turnovers. And if you multiply that throughout the whole warehouse, throughout the distribution center, you're gonna end up with some extra cash in your pocket. And you know, in government, you don't get any bonus from that. You don't get any percentage from that. You don't even get to touch that. But the accountants can spread that wealth with the ratepayers, and that's what they did. They cannot hold that money. Governments cannot make profits. What can they do? Give back to the residents, to the citizens, or the ratepayers. That's why we like these higher turnovers. Charge outs. Here's another one I'm looking at a charge outs. What is a charge out? So something you issue today, you give to the people over the counter. That's a charge out. So we measured on a monthly basis for every account. How many things did we charge out in dollar amount? I don't care about the numbers, in a dollar amount, and how much did we replenish? So when I saw discrepancy that we're spending more money in replenishing, a lot more money in replenishing, than what we're charging out, that's a red flag. That's a red flag team. I would go and reach out to my team and say, why are we spending more than what we charged out? Sometimes there's a good reason. Sometimes we have work on a project, sometimes we are asked and say, hey, can you build up this inventory? We're gonna have this huge project between us and the private sector. We're gonna activate some private sector to help us out, but we need to provide the inventory. That is understandable and acceptable. Those circumstances get noted and explain when you review this with the leaders and with your staff on a monthly basis. And then, of course, we had an annual budget versus um uh uh current spending, and we have this listed here for each account code. So we always want to see what is our annual budget, how much money have we spent? We because we don't want to go over the budget. Our goal is always to come under the budget. Why? Because we work in government to serve people, not to make money. We don't make extra bonuses just because we save city money. Nobody will. And I remember always Pam Brisbane, my boss, when she said, Alan, you'd be lucky if somebody says, thank you for all the work you and your team are doing in government. And that's a fact. But that's why it takes a special person like you to work in government to serve us. People outside the world in the private sector don't appreciate you enough. And I know what it means to work for government. I spend and serve my government for 14 and a half years, thanks God, for that opportunity. So that's why we measure that because we want to help our residents. And I know you want to do that as well. These KPIs, this is a report that I would review with my boss every month. She would come to my office, we'll sit down, and we'll review it, and I give her an update. On one side, I had my Hoshan Conry plan, and on the other side, so I use only one side, one piece of paper, I had my KPI. And I would give it to Pam. I said, Pam, here is or Scott Beer, he was a uh CFO. I will share with him too. And then we start in a review and I tell him where we did well, what we need to improve, and why I need help from my leader. And that's why we had those KPI meetings. And then also on the other side, I know this is not the topic today. I would review my Hoshan Conry strategic deployment, strategic planning uh for monthly, annual, and my long-term plans and let her know where I was at. Now, this is all good. And then we had also out on the shop floor, every warehouse needs to have a KPI board on the shop floor. And they don't get placed there to be colorful wallpapers. They need to be meaningful. You start with one KPI that matters to you and to your customer, and then you keep adding as many as you need to take care of issues. You need to monitor your progress and your goals. You need to see where you're improving, where you're not improving, and you need to come up with new solutions, work on root cause analysis and creating new countermeasures, new ideas for improvements, and assign those uh countermeasures to your folks who's gonna own them and take care of them. That's the KPI. I remember one of the first KPIs when I, for the first time, started introducing this was the number of stockouts. Because my customer, when I first took over the warehouses and I told them I'm gonna turn this into a distribution center and I'm gonna lean them out. I know this is not a good terminology, but I'm gonna make sure that we're as lean as possible to the best of my ability. So we save the organization money, we save our citizens and our taxpayers' money as much as we can, and we provide the best possible service to our customers, internal customers. So they don't have to come to the warehouse and find out in the middle of the night they don't have a part that they need. That was shameful. But it's not somebody to be blamed in lean, we blame the process. The process I saw was terrible. I never blame the department head or any of those employees because those same folks, the department head of our warehouse, and every employee working for that department did an excellent job after we improved our processes and eliminated waste in the process. They performed, and I guarantee you they performed till today. Why? Because we built a system. As long as they follow that system, keep that system intact, they're going to be providing good customer service to their residents. So you post that on the floor. Why on the floor? Well, you want your internal customer to see it and you want your employees to see it every single day. Put it somewhere where both of you can see it. And the best thing is to do a pencil and write down every day your numbers, your dollars, inventory turns, stockouts, safety, accidents, whatever you had. Write that down on your KPI board. Review this daily with your staff. That should be a 5, 10, 15-minute meeting, max every day. Every day, religiously, you should do this. If you're not at work, have somebody else assign. Rotate so everybody knows how to lead that meeting. That is very, very important. So what did I do at first? I started stockouts. Why? Customer told me, Alan, the biggest problem we have here, we have $4 million worth of product, and I come here in the middle of the night, I don't have a part that I need. That is shameful. I agree. I said, sir, ma'am, we're gonna change that. We're gonna start measuring stockouts and we're gonna make sure that we have parts that you need, and we don't overspend on parts that we don't need. That's gonna take years. And we're maybe never gonna use it. And I'll talk in future episodes about another warehouse where we have stored products that we never use it. We had to scrap some, sell some, whatever we could do, give some back to the supplier to get some credits. We're done it all. And I'll talk about that more about that in future episodes. What I want to talk about today is that KPI is very important. Most people, unfortunately, fake it. Most people make it like a shiny wallpaper. That's not right. Not right at all. So don't do that. Measure what matters after you improve, get rid of it, measure another thing. There's always room for improvement. Enough about KPIs. Let's move on to leader standardwork. Leader standardwork is something right after I created KPIs, I had my leader standard work for myself that I created, but then I thought my uh direct uh reports, my supervisors. I trained them, developed them, let them create their leader standardwork. Now their leader standardwork aligned with my leader standard work. We were reviewing this on a weekly basis. They had alignment. There were times where I gave them more work that they could handle, and they were able to show them leader standard work. I had to take something off their plate, so I helped my employee. After my supervisors saw the benefit of leader standard work, they now created for day team members. It cascaded down. Why? Because leader standard work, we're humans. They will keep us intact. They will tell us when we need to do a KPI report, when we need to update something, when we need to have a certain meeting. What do we need to measure? All that needs to be part of the leader standard work. Now, how do we develop leader standard work? This is not the time. This is just a podcast that tells you, kind of gives you some ideas and tells you things you could do to improve. But leader standard work should be implemented, not just in the private sector, everywhere. Everywhere. We should not just practice this in the military. Our military, if you uh serve the country, are very um stick, they stick to the schedule. They schedule well, and they follow up on their schedule, and they do a very good job. So good. I met many military people, I had Marines working for me, and um, they explained to me what you're teaching us. A lot of that stuff was done in the military. We had to follow these rules, and we had a lot of success because of these standards. So leader standard work is another standard, right? So why should we only have uh standard work for the employees on the shop floor and we leaders don't have it? Of course, our leader standwork is gonna have less structure higher you go up, less structured it is. But every leader should have it, including your city manager and mayor. I promise you, they should have it, and I promise you, if they do have it, they're gonna be more successful. And I know I worked in the city where they had leader standard, they didn't call leaders standwork, but they had scheduled every day. Throughout every day, you can see where they're gonna be. They know when they're gonna go and cut the ribbon somewhere, if it's a mayor, they know when they're gonna have a city commission meeting, what needs to be prepared, when is the time for agenda. So they did a very good job, and I have to compliment them. But they had their secretaries do it and they had uh access to that as well. But now I'm talking about to you, mid-level managers, you should have a leader standard work. People below you, managers below you, supervisors, team leaders, all those folks that are in leadership role should have leader standard work. Leader standard work will make sure that we do those KPI reviews, that we measure what we need to measure, that we do reports that we need to report, that we solve problems that need to be solved on a daily or weekly, monthly basis, that we work on the projects at certain times. This will help us structure. Today I had a conversation with my own mother, and we were talking about something, and she reminded me of this. She said, Oh my son, I know you're busy, you do a lot of stuff, um, community, work, family, podcast, social media. But she said, I don't know how you do it. I know you organized ever since you've been a child, you've always been organized. And I told my mother about this leader stand of work concept. I said, Mom, if I did not have this concept, I know you think I'm smart and well organized since I was a kid. Those are some of the facts. But that would not help me if I did not have this tool called leader stand of work. And I explained to her, I said, Mom, next time you come for a visit, I'll show you. I showed other people. My day is scheduled from the morning till the evening. I know what meetings I will have. I plan when to take a nap, I plan when to go for a walk, and I plan my whole day, not just work, but my private life as well. So I plan today, and it's part of my leader's thing work to do this uh podcast. I know we haven't done it in a while, but I put on my list and say today I'm gonna do it. And I kept my promise. Yesterday I recorded something else for the community event that we're gonna have this weekend. So I was uh recording a promotional video. So all these things need to be planned out. If you plan out and you have a leader stand at work and everything's planned, and you check and you follow up on it, you don't just make it again like a wallpaper, you really follow up on it, you'll see soon that you can't work without it. You're gonna say, Where is this before? You're gonna be more productive, you're gonna have more time for your family. You're gonna be able to serve your community. Why should you spend 12 hours at work if you can spend only eight hours? Get all that job done that you need to get done and more and spend the rest of the time with your family, you do your hobbies. I know people and I help people in government. I know one person that was in a very high position working 12, 11, 12 hours, seven days a week, ended up having a heart attack. That person, I I advised to work on leaders and work and develop leaders and work. I worked with that person. We always with sticky notes in her office. But after we developed the leaders 10 work and she really followed up on it, she reduced her working times to eight to ten hours five days a week. Weekends she spent with her granddaughter, with her family. And she was able to relax a little bit more. And this is a real story. This is something that really impacts people. It can impact your health. So don't think this is a tool, like a screwdriver or a power drill. Okay, think about this. This is good for you. So lead a standwork is good for you. The KPIs I mentioned earlier is good for you as well. Why should you pull your hair out of your head at the end of the month if you go over budget? Measure daily. Look at it. You're going to know before you go over budget. And if you have to go over budget, which I have done, then I must have a reason. I go to the boss and I go ask. I used to go to city commission and ask for an increase of certain account codes, asking for more money. But I had evidence. I told them why. You know, we have this unexpected project that we need to do. I need an additional $250,000 for this, just for this account code. We manage many account codes. I can't even remember how many between all the warehouses. There's so many. But I would go to the city commission if you have evidence and you show them the KPS. Yep, you got everything, black and white. Approved. Never had an issue. Never had an issue. And it was a quick approval. There were not a lot of questions. If you bring them everything and you're transparent, it will help you. All right. So that is what I wanted to share with you today. As we wrap up today's episode, I wanted to leave you with this. KPIs do not improve anything on their own. Nothing. Boards do not solve any problems. If you think that will solve your problem, don't even spend money on boards. Reports do not create change. People do. You. I'm talking to you. You will make that change. And it is the role of leadership to create clarity around what matters, to focus on right metrics, not the fake ones. What really matters, right metric. One, one. You don't have to have a color for like your buddy in the other department. Focus on one and then keep adding, like I said. And to build the discipline through leader standard work to review, reflect, and act. If you are a leader in government, ask yourself the following three questions. Are we measuring what truly matters to our citizens, our residents, our ratepayers? Are we using our KPIs to learn and improve or just to report? And am I showing up every day in a way that supports my team and drives positive results? Lean is not about tools. I mentioned this many times before. It's about people, habits, and culture. If we get that right, the results will follow. Promise. Thank you for listening to the Lean in Government Podcast. If you found this episode valuable, please share it with someone in your organization who is ready to think differently and lead better. Until next time, keep improving, keep learning, and keep serving your community with purpose.