tl;dr: In this post, Mark discusses the SQDCM framework, which stands for Safety, Quality, Delivery, Cost, and Morale. He examines how focusing on these five key performance indicators can holistically improve an organization. Drawing on Lean principles, Mark argues that a balanced approach to these metrics can drive continuous improvement, enhance customer satisfaction, and maintain high levels of employee engagement.
Today is the start of the 2014 World Cup. While I'm not much of a soccer–or football–fan, I appreciate a good discussion about goals.
In Lean management, we talk a lot about goals too. But the kind of goals we set, and how we pursue them, make all the difference. When I started my career in the auto industry, I learned that Lean organizations don't chase arbitrary numbers. They pursue purpose-driven, balanced goals that improve performance in a sustainable and humane way.
That's where SQDCM comes in.
Hearing About SQDC for the First Time
I first heard the term SQDC–Safety, Quality, Delivery, Cost–back in 1996, during my first job at General Motors.
Our plant was early in its Lean journey. We were learning from Toyota and others who were demonstrating what a high-performing system could look like.
At the time, SQDC wasn't just a set of words on a poster–it represented a radical reordering of priorities. Most organizations, including ours, had long been driven by Cost and Efficiency above all else. Safety and Quality were talked about, but not always managed systematically.
When we started discussing SQDC in daily meetings, it was eye-opening. The message was clear: Safety comes first–not because it's politically correct, but because it's foundational to everything else.
If people don't feel safe, physically or psychologically, nothing else sustains–not quality, not delivery, not engagement. That realization stuck with me, and I've seen its truth reinforced ever since–in factories, hospitals, and startups alike.
The Power of a Balanced Framework
Many organizations–especially those not yet grounded in Lean–tend to focus on a narrow set of financial or operational targets:
- Profit
- Efficiency
- Productivity
- Speed
These metrics matter, but they tell an incomplete story. They emphasize results without necessarily improving the underlying system.
Lean organizations, on the other hand, use a more balanced and interconnected framework: Safety, Quality, Delivery, Cost, and Morale–or SQDCM.
Originally developed in manufacturing and later adopted widely in healthcare and other industries, SQDCM aligns everyone around what truly matters to customers, employees, and communities.
Understanding SQDCM
Each dimension in SQDCM is essential and interdependent:
- Safety – Protecting people–patients, staff, customers–from harm is the first priority.
- Quality – Delivering products or services that meet needs and expectations consistently.
- Delivery – Providing what the customer needs, when they need it, without delay.
- Cost – Managing resources efficiently as the result of improving Safety, Quality, and Delivery.
- Morale – Building an environment where people are respected, engaged, and able to contribute.
The order matters. Safety and Quality come before Cost. Cost improves as a byproduct of doing the first three well.
As I wrote in Lean Hospitals, “When we improve quality, we reduce waste and rework. When we prevent harm, we avoid cost. When we engage people, we improve both safety and quality.” The priorities are systemic, not sequential.
SQDCM in Healthcare
Translating SQDCM into healthcare means adjusting the language without losing the principles.
- Safety includes patient safety and employee safety.
- Quality means reliable, evidence-based care, and other various of customer service.
- Delivery can mean Access–getting the right care to the right patient at the right time.
- Cost still matters, but as an outcome of improving flow and reducing harm.
- Morale reflects engagement, teamwork, and psychological safety.
When these dimensions work together, we create what Dr. Don Berwick once called “a system capable of continual learning.“
Healthcare organizations perform better when front-line staff use Kaizen to identify and solve daily problems that improve safety, efficiency, and morale–all without top-down mandates. Those changes not only reduced waste but also strengthened engagement and ownership.
Why Cost Comes Last–But Never Least
It's tempting for leaders under financial pressure to put Cost first. But that often leads to false economies–short-term savings that degrade long-term capability.
In Lean, Cost is a result, not a goal. When we improve processes, eliminate waste, and reduce harm, costs go down naturally. When we lead with cost-cutting, we risk undermining the very systems that create value.
Read more about a modern CEO who lives and emphasizes SQDC every day, Larry Culp at GE Aerospace:
The Role of Morale and Psychological Safety
“Morale” might be the quietest part of the SQDCM acronym, but it's often the most powerful.
A workforce that feels disrespected, unsafe, or unheard will not sustain improvement. Conversely, when people feel psychologically safe to speak up about problems or ideas, continuous improvement flourishes.
As I've seen in hospitals, factories, and startups alike, psychological safety is the precondition for continuous improvement. Without it, you might get compliance–but not creativity. You might get activity–but not learning.
Making SQDCM Real
Here are a few questions to reflect on:
- Does your organization have clear and visible goals in each of the SQDCM dimensions?
- Are those goals reviewed frequently–daily or weekly, not quarterly?
- Do leaders use those measures to learn and improve, not to blame or judge?
- Do your teams see the connection between their daily work and these broader goals?
True Lean organizations make SQDCM a living system of dialogue, reflection, and improvement–not just a set of charts on a wall.
A Closing Thought
As I wrote in Lean Hospitals, “Improving patient safety and quality isn't a project–it's a leadership responsibility.”
That principle extends beyond healthcare. Setting and sustaining balanced goals like SQDCM is one of the clearest expressions of respect for people in any organization.
When we place Safety and Quality first, engage every person in improvement, and view Cost as the outcome of doing the right things the right way, we build organizations that not only perform well–but endure.
What about your organization?
Do you have SQDCM–or do you have CCCCC?
I'd love to hear how you and your teams are using these principles to focus, learn, and improve.
Please scroll down (or click) to post a comment. Connect with me on LinkedIn.
Let’s build a culture of continuous improvement and psychological safety—together. If you're a leader aiming for lasting change (not just more projects), I help organizations:
- Engage people at all levels in sustainable improvement
- Shift from fear of mistakes to learning from them
- Apply Lean thinking in practical, people-centered ways
Interested in coaching or a keynote talk? Let’s talk.
An article by Quint Studer that talks about things CEOs should track daily, quarterly, and yearly…
Daily:
1. Outpatient no-shows (Cost, Access)
2. First case start-times (Cost, Quality, Morale)
3. Patient volume (Cost, Access)
4. “Door-to-doc” time in the emergency department (Safety, Quality, Access, Morale)
5. “Decision to admit to departure” time in the ED (Safety, Quality, Access, Morale)
6. Number of patients who leave without being seen in the ED (Safety, Quality)
7. Agency and overtime costs (Cost, Morale)
8. Major service issues (Quality, Morale)
9. Major engagement issues. Are any physicians or employees upset? (Morale)
What I see missing are direct measures of patient harm…. SAFETY. Where are measures of medication errors, employee harm incidents, near misses, etc. etc.?
That’s critically important. Even a luminary like Quint doesn’t, to me, put enough focus on Safety, unfortunately.
Ditto that.
Studer’s approach can be complementary but insufficient for the long-haul unless you believe you can smile and care your way to lasting improvement.
The approach is highly attractive because it can move patient satisfaction scores, at least in the short term, and is relatively simple to do for the leader that believes this is a fundamental way to reinvent the way of managing.
I’ve seen this as Productivity Quality Cost Morale. Do you know where the set comes from?
Where PQCM comes from? I don’t know. SQDCM is pretty standard in the auto industry anymore – Toyota or otherwise.
[…] See on http://www.leanblog.org […]
My reply to Michel Baudin’s post/comment about this topic:
Thanks for reading and commenting, Michel. Sure, these aren’t going to be the only five “true north” things that matter or the top five for any software business. And, they’re probably more directions than goals. You’re right that these need to be turned into measures… and they can’t just become something that “degenerates” into meaningless targets or quotas (like the waiting time scandal with the VA). Part of the inspiration for my post is seeing hospitals that barely give lip service to safety… what they’re really measuring and really caring about is cost, cost, cost. That’s not right.
Mark –
As you seem to have a knack for doing, you’ve hit the nail on the head. SQDCM are great first steps in measuring any business. I’m of the persuasion that, early in a Lean Transformation, the Champion and their staff need to hold phase 1 of a Hoshin Kanri and establish top-down metrics against which to hold themselves accountable.
I typically have this core group (Champion & Staff) review their mission statement and ask the questions:
* What does our mission commit us to do?
* What will we measure to know whether we’re achieving those commitments?
Once the core group has established these top-level metrics, they need to appoint one of their own members to be “accountable” for each metric. This accountability comes in two forms: posting performance & improving performance.
Next comes the cascading of each top-level metric to every subordinate leader, establishing a goal for each metric and holding each subordinate leader accountable for publishing and improving on each.
Over time, elements of these metrics get cascaded down to every leader in the organization. In each case, leaders need to post their performance publicly and establish an ongoing list of Actions that will improve performance of each metric. These public postings become a focal point for senior leaders, during their daily Gemba Walks, to initiate conversations targeted at coaching their subordinates.
That, in turn, establishes a new form of leadership: “servant” leadership. The role of leaders transitions from command & control, to helping their subordinates identify the root cause of their problems and, using the Socratic Method, work through the resolution to them.
In some cases, the subordinate will not have the positional power to overcome their obstacles. In those cases, the servant leader will use their own positional power to overcome the obstacle; or, will escalate it upward until the appropriate power is brought to bear.
This methodology not only improves performance, but forges “relationships” between leaders & led. The fact that leaders initiate each activity by first performing it themselves, creates another key element of Lean: leading by doing.
In these ways, leaders not only improve performance throughout their organization, but begin to change the culture itself. That, of course, improves the ‘M’ of your metrics: morale.
[…] Having a balanced set of goals, putting safety, quality, and patient flow first… […]
[…] the Lean mindset, I was taught that the key priorities for an organization were SQDCM – safety, quality, delivery (think of this as patient access), cost, and morale. If this […]
[…] In the next presentation from a Chinese hospital, the speaker started talking about the need to “improve [patient and employee] satisfaction through Lean management” and that “we have the same goals and purpose” as I expressed in my presentation… namely safety, quality, waiting times, cost, and employee morale (SQDCM). […]
[…] focused on value, which means better quality and lower cost (or the typical balanced set of SQDCM metrics), not just cost or […]
In SQDC, how is Cost measured? You said Cost is the end result, and I agree. Because of that, it seems to me that on an SQDC board if Safety, Quality, or Delivery were red, then Cost would automatically be red, because cost is related to the others. Is there a set of circumstances where Cost would be red and Safety, Quality, and Delivery were green?
Cost could be measured in a number of ways, depending on the level of the organization. It could be a “labor hours per unit” measure, or a cost per unit, etc.
Green / red is pretty arbitrary since we’re comparing to goal. It’s quite possible for SQD to be “green” if the goal isn’t very challenging and for cost to be “red” if there’s a really aggressive goal that’s being met.
I really enjoyed how you are drawing a parallel between the Lean management system and the excitement of the 2014 world cup. The vlog provided and pointed out the importance of setting clear goals using the “SQDC” which stands for Safety, Quality, Delivery, Cost. These goals are important for guiding a principles or your team’s action and efforts. I like how the vlog emphasizes the importance of balanced approach and that lean isn’t a cost cutting methodology it is the end result not the primary goal.