Lean Six Sigma for non-industrial organizations

Lean Six Sigma is being applied more and more, also by non-industrial organizations. But due to the differences between industrial and non-industrial organizations, a re-interpretation is needed to successfully apply the methods to other sectors.

More and more organizations use Lean management or Six Sigma to improve their processes. These methods are not only applied in the industrial sector, but they have proven to be very effective in other sectors as well. For example, Lean Six Sigma (LSS) programs are started up by an increasing number of hospitals, banks and municipalities. And with success.

It is a logical phenomenon that more organizations want to actively optimize their processes. Company performance is under pressure, because everything has to be better, more efficient and cheaper.

However is it really that easy to simply copy all the ‘tricks’ from the industrial sector to other sectors? Isn’t fabricating a tangible product completely different from delivering a service? In this article I will discuss the differences between industrial and non-industrial processes. It seems that LSS has a lot to offer for non-industrial organizations but it calls for a certain degree of re-interpretation. Based on my experience out in the field I will lay out a few best practices for successful application of LLS outside of the industrial sector.

Service versus industry

The industrial sector has been applying Lean Management and Six Sigma for decades, in contrast with the service sector for which these methods are much more of a novelty. You could say that the service sector runs about 20 years behind on the industrial sector in this aspect. How did this happen? There are several reasons. One simple explanation has to do with the visibility of processes. When you build trucks, an obstacle in the process is quickly visible and tangible for the simple reason that you don’t just put three trucks ‘on hold’. The entire process jams. So if any problems arise, the organization is forced to solve them quickly and efficiently. A bank that processes mortgage applications is much less plagued by jammed processes. Three application files never take up too much desk space to obstruct anyone from continuing to do their job. The process flow in service sectors is a lot less visible.

Secondly, the service sector has gotten away with delivering mediocre quality. When we apply for a permit with the city, we render it normal when this takes four weeks. This processing time is of course completely out of proportion with the amount of time it takes to actually write up the permit. We say the customer is king but what would happen if the actual queen would apply for a permit? Highly probably, the permit would be processed within the hour. But a regular customer is used to a permit taking four weeks to process, including the extra costs that come with inefficiency. Also, everybody involved sets his or her standards to the process taking four weeks. As a result of this, if anything might go wrong in the process, the four-week deadline would not even be met. Organizations don’t need an advanced optimization technique to live up to a standard of a generous four weeks.

Another reason why the service sector runs behind on the industrial sector is the complexity of products. Industrial products rapidly become more and more advanced and compact. To still deliver quality, factories need to have a firm grip on the production process. If, hypothetically, 1000 parts would go into a laptop and for each part 99 percent okay (a pretty admirable standard that most service companies would be jealous of), it would be a statistic miracle to produce a functioning laptop. This is why these organizations are forced to have much higher standards. LSS helps them to reach these standards. For example, an achievement level of 6 sigma indicates 3.6 errors per 1 million possibilities. With these standards you can obviously build well-functioning laptops! But we do see a shift in the service sector as well. Customers are getting more verbal and don’t accept just anything anymore. In this era of the Internet we are getting more and more used to booking a vacation with a push of the button or getting bank account information that is updated and accurate to the minute. We do not accept being put on hold, especially not for weeks on end. We want the product or service fast and for a good price, which we checked online first of course. Organizations have to adopt to these developments in order to compete. In the service sector, we also see a shift to increasingly complex products and services. We don’t just speak about regular insurance anymore, but a plethora of variations: different products for different target audiences, in various combinations, with specific conditions and separate pricing models. We make things rather complex. The government doesn’t make our lives easier either by implementing complicated legislation, which companies have to abide by. And then there is technological development, creating many opportunities, but complicating matters even more.

Wherever LSS has helped (and still helps) industrial organizations to raise the bar and to get a better grip on the process, there are also challenges in the application of this knowledge in the service sector. That means lots of opportunities for LSS!

Lean or Six Sigma?

Should we choose Lean Management or Six Sigma? Or is the combination of LSS better? This may be a recognizable dilemma. We can argue strong points to both Lean Management and Six Sigma, but there are drawbacks as well. For example, a strong point of Lean Management is the speed with which it can be applied. Lean offers standard solutions for standard problems. Six Sigma on the other hand is good at solving complex problems. Because of the emphasis on working with data and advanced statistical analysis techniques, underlying problems surface. Though thorough, Six Sigma can get expensive and requires a lot of patience from an organization.

Then there is also Lean Six Sigma. Is this the best of two worlds? Organizations have their own way of filling in LSS. Some companies choose the Six Sigma approach as a foundation, and add Lean best practices. If you have already chosen to work with Six Sigma, this is a good idea of course. But there is still the disadvantage of high costs. Another approach is to start with Lean Management. This way, organizations can start quickly and book overall good and fast results, at a low cost. Problems that Lean cannot find a solution for are taken care of with Six Sigma techniques. Especially in the service sector, we find that many organizations choose this second approach.

What goes wrong in our organizations?

As mentioned, the service sector runs about 20 years behind on the industrial sector when it comes to process optimization. To some this may come as a shock. There are a few explanatory symptoms that we see a lot in companies and that are probably recognizable.

We lose the customer
Everybody is busy, but where is the customer? We say the customer is king, but we put them on hold for 10 minutes. What value do our activities add for the customer? Do we even know what our customer wants? It is hard to deliver quality if we have no clear sense of our customer.

We lose focus
Endless projects. Continuous re-organization. New applications that become goals in themselves. Organization politics. All this takes a lot of energy. But what is the concrete added value to the company goals? And how does our customer benefit? People tend to spend a lot of time doing things that do not contribute to the company goals.

We reward incorrect behavior
A lot of companies work with Performance Indicators (PIs) and performance rewards. But are we rewarding the right things? We often see that based on PIs the wrong behavior is rewarded. Employees are stimulated to score high on PIs, but end up deteriorating the quality/turnaround for the customer. Poorly designed systems for performance rewards can turn out to be counterproductive.

We complicate things
Company environments are getting more and more complicated. There are continuous rapid developments in new technology, (online) competition, globalization and legislation. We have limited influence on these external developments, but often organizations are also very complex on the ‘inside’. We find complex systems, complex organizational structures, complex products/services and complex processes. It takes a lot of energy to keep control over this complexity.

How does this work in Lean organizations?

Lean helps organizations to reduce waste and streamline processes. Excess inventory, extended processing time and repetitions are unwanted and taken care of. Also the layout and structure of processes, workplace and software is optimized. This way unnecessary movements and transport can be avoided. And when something does go wrong, a thorough analysis takes place: how do we make sure we don’t make the same mistake twice? Lean teaches us to only do what our customer is asking for and is willing to pay for. Everything that costs time, energy and money is tested on added value for the customer. This is what it is really all about! Projects, management and ICT also have to be focused on delivering added value.

As discussed, external developments cause organizations to become increasingly complex. This means that we want less complexity in our process and organization. Lean organizations are typically calm, standardized, predictable and have a continuous interest in improvement. In these organizations, from top to bottom, people are involved in the execution of processes and delivering quality for the customer. There is a transparent culture in which for example the effects of an adjustment at management level will always first be tested in processes in the workplace. This is exactly where things go wrong in many service organizations.

A process-oriented approach

Typical for Lean techniques is a process-oriented approach. The entire process, from customer to customer, is the main focus. Not every department has its own processes but there is a focus on the bigger picture, covering several departments as parts of the whole. As mentioned, processes are visible in the industrial sector and therefore easy to manage and improve. Just follow the production line in order to follow the process. A turnaround is easy to measure, (semi-) fabricated products are visible inventory and the quality is simply visible as a scratch on the paint. It is all very tangible. In these organizations, the process is the most logical way of thinking.

This is totally different for administrative processes. These processes run through several (information) channels via systems, paper, people, departments and more systems across the organization. There is barely anything tangible about these processes. They are invisible. In order to apply Lean techniques successfully in an administrative environment, we must increase the visibility of processes. Employees have to learn how to look at their organization from a process viewpoint. When processes are made visible throughout departments, systems and information channels, a new perspective is born. Our experience has been that even just gaining this new perspective can have tremendous effects. A few examples of problems that surface when we increase visibility of processes:

  • Unnecessary checking or double-checking in processes;
  • Unclear or bad management that leads to awkward and/or expensive process designs;
  • Exceptions that become the norm;
  • Bad communication between different departments;
  • Bad quality of ICT support;
  • Inefficient activities that don’t add value for the customer nor for the organization.

Employees have to learn to look at their organization from a process viewpoint

Obstacles, waste and frustrations in the process become visible and this opens up communication. This is tremendously important! The customer is on the radar too. Besides, waste leads to unnecessary expenses, a big pet peeve of the management. Lean solutions take care of these things smoothly within the organization. In figure 1 we can see an example of how to graphically portray different types of waste in a process model.

 

Figure 1. Types of waste portrayed in a process model

Lean culture

LSS offers various practical aids to improve the efficiency of processes. In an industrial environment this could simply mean hanging a drilling machine at the correct height on a string, for easy access. These best practices can be re-interpreted for a non-industrial environment by improving the layout of processes and software, so that for example unnecessary (mouse) movements are prevented. It would be wrong though to portray Lean as a collection of these types of ‘tricks’.

In production environments, we often that employees are proud of the product they make, and the process and techniques behind it. In service-oriented organizations we overall find a lot less pride. The ‘product’, the process and the customer are too much out of sight for pride to arise. By applying Lean techniques we can create much more transparency. If people are involved in Lean projects and are challenged by them, this will eventually have a profound effect on the company culture, which will evoke more pride.

Successful Lean (Six Sigma) organizations apply the methods in all layers of the company. It is not true that we can only create more efficiency in de workplace. Many sources of waste and inefficiency occur in other areas of the organization. We already discussed the many projects that are focused on internal affairs. But also on a management level it is interesting to test meetings on ‘added value for the customer’. In Lean organizations, everybody from top to bottom is involved in the primary process. The customer is on everyone’s radar.

Working with LSS

Would your organization benefit from LSS? Highly probably it would! Especially for processes with certain feasibility, LSS offers many techniques to streamline and reduce waste. And because of all developments we will be forced to. In 10 years time all organizations will be ‘lean’. A lot leaner than now anyway.

This doesn’t say that everything has to become cheaper and utilize less people. Many of us strongly associate LSS with budget cuts. This idea occurs because of frequent misuse of the method. Some companies apply LSS to realize a forced 20 percent lay-off. It should always be the other way around. Lean helps us to streamline processes and improve quality of our products and services for our customers. A result of this can be that we could perform the same amount of work with less people. Companies that are new to LSS are advised to start by taking small steps. Lean Management offers many opportunities for a good start. Lean instruments are easily accessible and deliver quick results. Furthermore, Lean helps organizations to develop a more customer- and process-oriented way of working. This process-oriented approach is very powerful. Six Sigma can come in right after Lean and take care of more specific problems.

A few of our best practices for companies that are planning to get started with LSS:

  • Involve employees in the process
  • Make sure upper management is supportive
  • Start small
  • Focus on the process, from customer to customer
  • Find the inefficiencies in the process. This is where there is room for improvement!
  • Involve the customer: what does the customer think of your service?
  • Book some fast initial results and translate those to cash
  • Get rid of COMPLEXITY!
  • Celebrate success and use it to get wider support

Good luck with working with LSS in your organization!

Author: Peter Matthijssen is a consultant and trainer at BiZZdesign. As an experienced Lean Six Sigma Black Belt, he helps organizations take steps and book successful results in process improvement. Peter is author of several books, including ‘Thinking in processes’.
E-mail:
p.matthijssen@bizzdesign.com

Article source: http://www.modernanalyst.com/Resources/Articles/tabid/115/articleType/ArticleView/articleId/2077/Lean-Six-Sigma-for-nonindustrial-organizations.aspx

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