Public Sector and not-for-profit organisations are facing a tough financial outlook for the next five years, and difficult decisions need to be made about how best to allocate resources to continue to offer a service that makes a difference. That would be difficult enough on its own, but it has come after a decade or more of efficiency drives with increasing use of outsourcing, commissioning, privatisation and shared services. In addition to considering which services you can actually provide, you are probably asking ‘ how much can I save on my operating costs?’
Many public sector organisations have established internal improvement teams who are asked to undertake performance or process audits or reviews. Although this may result in some efficiency in a process, there may be less consideration of the real impact on overall performance or whether this process is needed at all! Furthermore, improvements may not be sustained, may be internally focused and neither address the problem from a customer’s perspective nor the impact across other processes in the organisation.
At Ad Esse we are frequently asked to work with our clients’ internal improvement teams to transform organisational efficiency, customer service, or both. We usually find individuals who are well skilled and committed, but may have become disheartened by disappointing results from their previous improvement projects. This is why Ad Esse has developed a Lean diagnostic methodology; a rapid assessment of the organisation as a whole using the principles of Lean Thinking. We have used this successfully in numerous public sector organisations, enabling organisations to identify priorities for improvement based on a full understanding of all the impacting factors. It allows our clients to be fully involved, with effective skills transfer throughout from consultant to staff.
How Does a Diagnostic Work?
The aim of the diagnostic is to conduct a rapid assessment of the current state of your organisation. We then assess the possible benefits and improvements you could derive from applying Lean tools to your processes, and the Lean philosophy and management culture to the way the organisation is managed.
We do not apply generic solutions although we do have a structured approach, illustrated below.
Below we describe the components of the diagnostic work.
Vision and Strategy
At the outset, the project scope, objectives and desired outcomes are agreed with the client senior management team, ensuring alignment with the organisation vision and strategy to be clear whether the driver is to reduce costs, increase productivity, improve customer satisfaction or something else. Ad Esse’s approach is to “work with” rather than “do to” the client to ensure a greater sense of buy-in, skills are transferred and improvements are sustained. Project communication actions are agreed (to ensure staff are properly advised and positively engaged during the project), data collection and the logistics of arranging workshops. Furthermore, Ad Esse provides training in the principles of Lean Thinking as well as in aspects of the leaders’ role. This ensures that senior staff are equipped with the knowledge of Lean so that they can support their teams during the diagnostic and to enable sustained improvement through implementation.
Customers and Stakeholders
Any change programme must be aligned to the needs of customers and other stakeholders. Customer satisfaction surveys can provide some insight into how customers feel, and can be a useful input to the diagnostic, but there is no substitute for looking at the real customer experience. Ad Esse uses Customer Journey Mapping to understand how the customer feels at each of the touch points with the organisation enabling us to visualise interactions and assess their effectiveness in delivering value.
In traditional process improvement projects there is a danger of over-analysing the ‘as-is’ or current state, and a reluctance to move rapidly to the ‘to-be’, or future state. Ad Esse’s approach is focused on what delivers customer value and how that value flows through the process to the customer. Clients articulate their purpose and identify the strategic objectives and the key high-level processes that deliver those objectives. Using performance data key processes that are priorities for improvement are identified.
Value stream mapping (VSM) differs from process mapping in that it shows the flow of information and material, interruptions to that flow (e.g. delays), customer demand and process capacity. Each step is assessed as adding value to the customer or not. Ad Esse consultants facilitate VSM workshops with the client using brown paper and “post-its” to capture the findings. No effort is spent capturing the as-is picture electronically. VSM is a powerful, flexible and highly visual tool that enables everyone to interpret the steps of a process and where to focus improvements.
Ad Esse’s diagnostic methodology includes activities that we carry out to support and reinforce our understanding of the value streams:
- Waste Walks: these involve ‘attaching’ ourselves to whatever passes through the process to see where waste occurs (e.g. unnecessary printing and scanning)
- Day in Life Of (DILO): involves shadowing staff in their role in order to gain qualitative insights into their work
- Data Collection and Analysis: as in an audit, we analyse available data to inform our understanding. Where data is missing, a data collection plan would be created and implemented (e.g. recording reasons for each customer contact).
We are frequently asked ‘how do I measure performance?’ and no diagnostic is complete without an assessment of the organisation’s efficiency and performance. Almost all organisations will already have a set of Key Performance Indicators (KPIs), which may be prescribed by internal and/or external targets. However, these measures may focus on process (“how many calls did we answer?”) rather than on customer value (“how many problems did we fix?”). True performance is only that relating to the delivery of customer value. We also use an invaluable metric known as Overall Effectiveness (OE) to measure productivity. It is calculated during the diagnostic to set a baseline, and is revisited during implementation to assess improvement. OE (calculated as a percentage) is the product of three components (also percentages):
- Availability – proportion of time available resource spends delivering the value-adding service
- Performance – how fast the resource delivers the service compared to how fast they could deliver the service
- Quality – the “right first time” rate.
For a successful improvement to follow a diagnostic, the organisation needs to be ‘culturally ready’ to accept change. Any deep-rooted management, leadership or communications problems will be a barrier to sustained improvement. Ad Esse conducts a cultural assessment of the organisation to assess how team performance is managed, how information flows, the extent to which the culture allows and encourages innovation and bottom-up ideas for improvement. This is undertaken using structured 1:1 interviews with managers, short focus groups with staff and an internal voice of the customer tool called AB analysis, which enables us to assess internal relationships.
Although clients are keen to compare their performance with other similar organisations, we believe that the focus has to be on improving the internal current state first. This follows an intensive analysis of current performance data as well as activity volumes, process cycle times, demand and capacity for services and staffing levels, which enables us to estimate the financial and operational benefits that implementing Lean could deliver.
The diagnostic findings are fed back to the senior management team involving the internal project team to ensure that they feel comfortable to have ownership of the project going forward. Key recommendations are proposed and discussed and with senior management buy-in, the next steps are agreed and a Master Schedule is developed which sets out a prioritised Lean implementation plan.
What are you left with?
- A full set of value stream maps of your processes identifying value, capacity and wastes
- An assessment of the effectiveness of leadership and the impact this is having on performance
- Analysis of your staff utilisation showing how time is divided between different activities, and the proportion of time spent on actual value-adding activity
- A set of measures that will enable you to track the performance of your organisation through the improvement activities
- Staff who are trained in the use of the tools and techniques required of a Lean diagnostic
- A quantified business case for the financial and operational benefits Lean could deliver
- A plan for implementation showing you where to start improving and where to focus most of your effort.
From our experience of conducting Lean diagnostics there are a number of common themes that emerge.
- The management culture is generally top-down and driven by senior management with little scope for performance improvement to be driven bottom-up
- Management at team level lacks a strong performance focus and teams have become dependent on MIS to provide retrospective performance data, rather than being in control of their own performance
- All processes contain significant amounts of waste. Most organisations operate a “push” system where all work coming in is fed into the organisation resulting in the build-up of work in progress resulting in errors, delays and rework
- There is significant and highly variable waiting time leading to process efficiency ratios. An average of only 5% of the total process time is actually spent with someone doing something – the rest is waiting.
- There are multiple hand-offs between staff at different grades which cause delays in processes, build-ups of work in progress and opportunities for errors
- IT systems create wastes of their own, either because system performance is poor or because bad processes have simply been automated without being improved first
- Key front-line staff spend relatively low proportions of their time in direct contact with service users, usually around 30%. Significant time is spent on administrative tasks, updating systems and dealing with mistakes and errors
- Managers are spending relatively little time actually managing and a significant portion of their time is spent either getting involved in tasks their staff should be able to resolve, or resolving non-compliance with targets.
How can Ad Esse help?
So, what do we look at in a full diagnostic? – the answer is everything that is needed to understand the organisation and how it delivers customer value. This can be a rapid activity; the key is to have a clear methodology to move from the as-is to the to-be as soon as possible. We can do extensive analysis in a relatively short period of time and with minimal disruption to your organisation. We also understand how important it is for organisations to really understand what Lean is all about before they implement, so skills transfer for senior managers is a key element of our approach.
We believe passionately that Lean Thinking can offer a tangible way of achieving cost savings and improving processes to a degree you may never have thought possible because it is a fundamentally different way of working and thinking about how your organisation works. Our clients tell us that our approach is very different to that of other consultants. Ad Esse has undertaken diagnostic investigations for clients in health, local government, housing and charities, enabling them to gain a full health check of their organisation for a relatively small investment. This insight has allowed them to focus change activities in the right areas to deliver rapid and significant improvements.
We are confident in the financial benefits Lean can deliver, and we will show you how they can be achieved rather than just making empty promises. Based on our previous work we are confident that you can achieve double-digit savings and return on investment within a year. A diagnostic is an easy way to get on the front foot with Lean with a relatively small investment, and then decide how to go forward from a position of knowledge and insight into your organisation.
If you think a Lean Diagnostic would help you make sense of the harsh financial realities of the next few years, please contact us at: firstname.lastname@example.org. We would be happy to talk to you about how Lean could make a difference to you.