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Five lessons of Lean

Peter Sirman
PA Consulting Group
Public Sector Executive, pages 42-44
August 2009

Lean could help public sector organisations deliver improved services whilst meeting government cost reduction targets, say Peter Sirman.

The release of the Operational Efficiency Programme review, combined with spending pressures, has pushed Lean to the top of the public sector management agenda.

The need to deliver cost savings is not, however, a reason to jump
on the Lean bandwagon. When used for what it was intended, the case for Lean is compelling - improved service at a lower cost delivered by an engaged workforce.

With the government’s high spending, rising debt and a decline in GDP, public sector organisations are under pressure to reduce costs. The release of the Treasury’s Operational Efficiency Programme review has further intensified this pressure.

There are, however, perceptions that to cut cost automatically means poorer service quality, a point of view echoed, in our experience, throughout many parts of the public sector. Yet, we who work within Lean enterprises would strongly disagree. In our world, good operational management is aimed at delivering efficiency. By that, we mean we aim to deliver the best service we can at the lowest possible cost.

Our proposition is that it is possible for all public sector departments to strive to achieve a balance of great service at acceptable costs. To achieve this, requires a change in mindset. In particular, it requires public sector managers to embrace integrated management systems such as Lean.

In the public sector, there are unanswered questions about the effectiveness of Lean in delivering greater efficiency, particularly, outside the large transactional process departments.  

So, are all Government departments able to achieve levels of performance and customer satisfaction and is Lean the right system for them too?

In our view, the answer to both questions is “Yes”, but we qualify this view by sharing five hard-learned lessons:

  1. Lean is not a quick fix and is definitely not just a cost reduction tool

  2. Lean requires change to every part of an organisation

  3. Lean requires a very significant commitment from senior executives

  4. Lean starts with a deep understanding of, and commitment to, customers

  5. Lean won’t work if you don’t free your staff to help you improve your business

If these lessons are applied correctly, then yes, Lean is capable of transforming organisational performance for the better, and can be successful in any public sector department.    

1. Lean is not a quick fix and is definitely not just a cost reduction tool

Having spent half a century perfecting their lean system, Toyota  still consider themselves to be on the journey to operational excellence.  On the other hand, we have had one client tell us “we tried Lean last year, but it didn’t really work so we stopped”. 

Lean is a systemic, focussed and disruptive change.  It requires time, patience and dedication to implement an integrated Lean solution.

There is no doubt that some Lean tools are good at improving process efficiency and reducing costs.  Tools like seven wastes (a method by which one categorises non-value adding activities) spring to mind.  Yet, using tools in isolation, without understanding of the operational context and business objectives, will often lead to fragmented solutions.  This will dramatically reduce Lean’s chance of achieving its full transformational potential.

2. Lean requires change to every part of an organisation|

Lean managers look critically at the whole organisational system. We call this “seeing the whole”, but we do not take the business process re-engineering, approach of, ‘change everything all at once’. Change in Lean organisations is a constant process in which all managers and staff engage, driving out waste by generating huge numbers of sometimes small improvements to ways of working.  At one point, Toyota claimed to be implementing two million ideas each year that had been  generated by their staff:

The Lean approach must also acknowledge that localised improvement efforts can impact other parts of the system and no one department, team or business unit can get there on their own.

Lean should seek to test the extent that organisational targets are focused on increasing customer value and to baseline operational performance against the measures that matter, which may include:
- customer service delivery and satisfaction
- quality and right first time
- end to end process lead times and productivity
- extent to which organisational; capacity is aligned to customer demand
- staff satisfaction and engagement
- continuous improvement and change capabilities.

By doing this, a public sector organisation can start any Lean transformation from a threshold of performance: a level of performance where improvement directly corresponds to increased customer value.

3. Lean requires a very significant commitment from senior executives

We have never seen a Lean system succeed without the total commitment of the senior team.  We don’t mean that CEO should send out a monthly newsletter – we mean that the entire top team (at least three layers deep) lives and breathes Lean. 

They lead their teams in driving change by understanding customers better, by coaching and facilitating problem solving problems on the shop floor, by rewarding successes, by recognising great ideas and by behaving in a ‘lean way’.
This means going beyond a simple technical or tools-based definition of Lean. It means addressing challenges such as transformational leadership:  creating the capability within managers to create a vision and strategy for end to end change.

The departments that are seeing benefits across their entire organisation (back office, front office, and support functions) are those that have been able to secure senior management commitment and have set ambitious performance improvement targets. 

One of our clients said: “In hindsight, we did not do enough to get senior management buy–in. Making senior managers aware of the changes that Lean will bring, alone, is not sufficient. We need to set ambitious goals and develop the capability in our managers to lead transformational change”.

4. Lean starts with a deep understanding of, and commitment to, customers

It has been our experience that public sector organisations have very limited understanding of the needs of their customers and, in fact, are often confused about who their customer is. 

We once asked a senior operations manager in a Government department, “who is your key customer?” and were told ‘the minister’.

Yes, the stakeholder map can be complex and in some organisations the normal rules do not apply but in general the public sector serves those members of the public who come to it and ask for services or products.  We do not argue that this is always right, but it is a very good starting point.

Understanding the drivers of customer value can also be difficult. Feedback from customers is often limited to an annual satisfaction survey.  This is not at a sufficiently granular level to drive operational service improvement.  Our impression is that few public sector organisations have gained insight into customer views on the relative importance of the various value drivers or their observations of the organisation’s current performance in relation to these key drivers.

We think that customer feedback should look to identify the detailed causes of “failure demand”, that is demand that is placed on the operation as a result of poor initial service.

This generates additional work for the organisation.  At one recent client, over 30% of calls placed into a call centre originated because customers could not understand the application forms.  Here, we see an alignment of interests and creation of value – fix this problem and the customer gets a high quality service and the organisation reduces its costs.

Such types of customer insight can be delivered through voice of the customer analysis, including the investigation of customer complaints, failure and value demand analysis, and proactive tools such customer survey and focus groups.

We particularly like the very simple techniques of bringing customers together with operational staff, as part of performance improvement events, to ask:

“What is it like coming here for help?”  Try it, you will be amazed at how staff are affected by the answers and how they then go back to work and set out to improve the customers’ experience.

5. Lean won’t work if you do not free your staff to help you improve your business

Continuous improvement is the lifeblood of any Lean transformation.  However, building a culture of continuous improvement is a significant challenge to any organisation that wants to be Lean. 

We have seen recent examples across the public sector where, once the early enthusiasm for Lean or the ‘big idea’ wanes, performance drops as teams return to the older, more comfortable way of working.

Without overcoming these types of challenges, the benefits of any Lean change programme will be quickly undermined.

A more sustainable approach will require changes to organisational mindsets and ways of working. Part of the answer will be building and supporting continuous improvement processes which are based on identifying and improving operational problems in a structured manner. 

This needs to start bottom up and may require the introduction of Lean through a series of cell-based pilots (a manageable team that is co-located around a product, customer outcome and process with supporting infrastructure). 

By building continuous improvement with front-line teams, anticipated outcomes from this type of approach would include:

- making visible and demonstrating at team level, the culture and organisational mindset required to sustain Lean,

- implementing new approaches to structured problem solving,

- establishing new accountabilities for performance management.

Each approach to Lean varies and needs to be adaptable. They are broad in scope and difficult to define precisely.  We are passionate about Lean, because if applied effectively it helps managers and staff to deliver great service to customers without wasting resources on tasks that no-one values, whilst providing staff with the means to contribute to the improvement of their organisation.

However, to be successful in any public sector department managers need to apply the five lessons we outlined earlier.

For those public sector organisations that can apply Lean in this way, the benefits are transformative change: improved customer service, at a lower cost, delivered in a sustainable way.

For further information or to speak to one of our Lean consultants, please contact us now.

Peter Sirman is head of operations consulting, PA Consulting Group


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