The giant letters SQDCM are common sights on visual display boards of teams on the gemba. They stand for the key performance indicator categories of safety, quality, delivery, cost and morale. Many organizations develop or adopt standard layouts to their team boards. This makes it easy to walk into any area, find the Q and begin to understand the quality performance, challenges and improvements under way.
If the long-term success of an enterprise is all about how we treat people, it would seem that M should come first, not last. The placement of M in SQDCM is due to historical reasons rather than importance. The letters QCD were originally used in the automotive industry to provide a balanced measurement of process performance. Without them it is too easy to fall into the trap of “Fast, good, cheap. Pick two.” Many organizations today still sacrifice quality and delivery pursuing the lowest cost, or go over budget to make deliveries in pursuit of sales growth. The three elements must be held steady or improved, none sacrificed.
Safety was a later addition to QCD, as advancing automation and the speed of industrialized processes made safety and health risks impossible to ignore. But securing QCD and physical safety is not enough. The highest performing organizations are filled with people who are motivated, engaged and thriving. Good morale has long been known to result in high performance in the military, athletics, communities and workplaces. It feels odd to tack it on at the end of SQDCM.
Of these five indicators, I observe the widest variation in how organizations measure morale. Some track the level of engagement. This may be the number of kaizen ideas people generate, the depth of cross-training, or employee engagement survey scores. Other organizations correlate continued employment with morale, tracking employee turnover rate, years of service and absenteeism rate in the M section of the team board. Yet others post the photos of pizza parties, family photos, sports team logos or other supposedly morale-enhancing visuals. I have seen smile and frown buttons on team boards, inviting team members to indicate each morning what kind of day they are having.
These are all valid indicators of morale in their own way. If people are not engaging in kaizen, or if they are quitting the company, or straight up telling us they are not happy, there is a morale gap. However, unlike standards for safety, quality, delivery and cost, the standards for morale are often unclear. While SQDC are customer-driven or process-driven, a large element of morale is individual and personal. The best way to measure and improve morale is through a combination of indicators linked to top-level company goals and one or more real-world, day-to-day quality of life indicators for the local team.
Should morale even be a team-level KPI? How much of workplace morale is within the control of the team? Which contributors to morale are related to addressable local conditions and which are due to policies beyond reach or out-of-bounds for the team? How equipped is the area leader to deal with frank discussion of the causes of morale gaps? When SQD or C remain below standard for extended periods of time, there are consequences. How committed is the organization to treating morale with the same level of urgency?
A healthy business needs three things. First, it needs products that customers want to buy. This is a combination of attractive features, fair price and increasingly, a sustainable and ethical the supply chain. Without customers and revenue there is no business. Second, it needs a Lean operating system that eliminates waste, reduces cost and delivers a profit. Daily attention and gap closure on the SQDC charts at all levels of the organization accomplishes this. Third but not least, a healthy business needs a work environment that is pleasant, motivating, and hopeful. Then people can achieve the first two by giving each other their best each day. That’s why we measure morale. What and how we measure should follow from that.