Setting Lean Goals That Matter: An Introduction to SQDCM (Safety Quality Delivery Cost Morale)


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, which means much of the world will be talking about goals.

I'm not really a soccer, I mean football, fan but I'm all for goals. In the Lean management system, we generally have five high-level goals. These were the goals taught to us in the auto industry, where I started my career, and they apply in healthcare.

Some organizations (in many industries) might have goals that include:

  • Profit
  • Efficiency
  • Cost
  • Productivity
  • Speed

That's not a very balanced set of measures.

In Lean, we talk about “SQDCM” — or what was originally “SQDC.”

These balanced goals… essentially in order of priority (although we need to – and can- accomplish them simultaneously) are:

  • Safety
  • Quality
  • Delivery
  • Cost

Those are pretty self-explanatory… “Delivery” means getting the customer what they need when they need it… on time, all of the time.

Morale was added onto SQDC at some point to become SQDCM. It's hard to say Morale comes last… it's not the least important thing. But, I think in the auto industry, people got so used to saying SQDC that it was more natural to say SQDCM instead of SQMDC or such.

Employee morale (and engagement) tends to lead to Safety and other measures… and arguably, focusing on Safety will improve Morale. In healthcare, we know that employee engagement leads to better Safety and Quality…. and that leads to better performance in other areas.

Delivery” in healthcare can translate to Access and waiting times. We're trying to get the patient the right care at the right time when they need it. Reducing waiting times, such as emergency department Length of Stay (LOS), leads to better Safety and Quality. Better Safety and Quality leads to better Cost. Improving all of these measures leads to better Morale… and we're back to another virtuous cycle.

Cost is usually listed fourth not because it's not important… but Cost is the end result of doing everything else well. That's why Lean isn't a “cost-cutting” methodology. Cost is an end result, not a primary goal.

So here's my question to you: do you have clear SQDCM goals for 1) your organization as a whole and 2) for your department? Do you have clear measures in each of these five areas of Safety, Quality, Delivery, Cost, and Morale? Do you update and review them daily or weekly instead of monthly or quarterly? Do those goals and measures drive your improvement work?

Do you have SQDCM or is it CCCCC?

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Mark Graban
Mark Graban is an internationally-recognized consultant, author, and professional speaker, and podcaster with experience in healthcare, manufacturing, and startups. Mark's new book is The Mistakes That Make Us: Cultivating a Culture of Learning and Innovation. He is also the author of Measures of Success: React Less, Lead Better, Improve More, the Shingo Award-winning books Lean Hospitals and Healthcare Kaizen, and the anthology Practicing Lean. Mark is also a Senior Advisor to the technology company KaiNexus.


  1. An article by Quint Studer that talks about things CEOs should track daily, quarterly, and yearly…


    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.

  2. 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.

  3. 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.

  4. 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.

  5. 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.

  6. 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.


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