LMJ Issue 8

Staying Lean Professor Peter Hines

Lean extremes

Extending even the most benign of ideas or philosophies to the extent of its logical limitations will often result in distortions of meaning and intent.

Lean is no exception and so this issue investigates how to achieve a balanced approach to lean implementations.

Lacklustre lean – Chris Daffy, The Academy of Service Excellence, identifies the missing ingredient in many lean programmes and explores how lean architectures can allow both for standardisation and creativity.

The unions and lean – Professor Gregor Gall, Hertfordshire University, explains union policy on lean.

The long and winding road – Fraser Wilkinson, Tata Steel Europe, gives his perspective on lean improvement. He explains why lean ‘failure’ is relative and that the many roads to success are longer than most anticipate.

The Lean Management Journal is supported by the Lean Enterprise Research Centre, Cardiff Business School

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Issue 08 January/February 2011 www.leanmj.com

In this issue:

Dear reader, Time waits for no man. 2011 is picking up pace and as we approach the end of January the festivities of the New Year already seem a distant memory to those of us who were able to indulge in them.

A recurrent theme in LMJ’s articles over the last year has been the importance of recognising the human elements in lean improvement programmes. So, we must value opportunities to recharge our batteries and allow both ourselves, and those who work hard day-to-day to support continuous improvement, to level up the ever challenging work-life balance. However, there is no denying that doing so creates its own problems around recapturing momentum, maintaining focus and safeguarding gains. And this is just one of the many conundrums or conflicts that lean practitioners must juggle every day to ensure programmes are not blindly optimising one aspect of operations or culture at the expense of another and to the overall detriment of the organisation.

This issue of LMJ investigates a few more of the ‘trade-offs’ that must be considered if lean programmes are not going to succumb to lean extremism. Experience shows us that pursuing one element of success to the nth degree can have serious repercussions for the success of your lean programme and for the health of your company. For example, Mical de Boer considers conflicts between perfecting for the present without planning for an unpredictable future (p10), Chris Daffy investigates the consequences of extending process improvement mentality into service provision (p7) and Julian Wilson and Andrew Holm show how constraining improvements around perfecting service for one customer merely pushes problems under the carpet. It is small wonder that this balancing act confounds so many and that help is often required to see the bigger picture. Getting help however, is not as straight forward as it seems – what sort of help should you look for and who is best placed to provide it? So many consultants and training providers seem to offer the same rhetoric about past successes that it must be daunting to commit to any provision at all.

Taking this into consideration, readers will note from the Events page (p51), that LMJ’s next major event will be dedicated to uncovering just what makes a good external provider and what it is that companies really need help with. Lean Connect will be an interactive event for companies from any sector with plenty of chance to question, consult and share experiences with peers and a wide variety of providers. If you are considering investing in some external expertise to help lay the foundations of a truly lean culture or take your existing culture to the next level I would urge you to join us and look forward to hearing what your provision confusions have been.

Best wishes for 2011,

Editorial

Commissioning editor – Jane Gray j.gray@sayonemedia.com

Design

Art Editor – Martin Mitchell m.mitchell@sayonemedia.com

Assistant Designers – Viicky Carlin, Alex Cole

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Jane Gray Commissioning Editor Email: j.gray@sayonemedia.com Tel: 0207 202 4890

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J A N U A R Y/ FE B R U A R Y 2 0 1 1 c o n t e n t s

05 News 06 Between extremes

Bill Bellows, Pratt & Whitney Rocketdyne, puts this issue’s content in context with some thoughts around balanced approaches to improvement

07 Principles and purpose Lacklustre lean

Chris Daffy, The Academy of Service Excellence, identifies the missing ingredient in many lean programmes and explores how lean architectures can allow both for standardisation and creativity in value creation.

10 Sustainability needs continuity

Process improvement can absorb lean attention but optimising operations will count for nothing if the environment falls victim to disaster.

Mical de Boer, De Boer Structures, explains why experience has shown him that there is a trade-off to be made between total adherence to lean principles and effective protection of the business interests.

13 The unions and lean

Professor Gregor Gall, Hertfordshire University, explains union policy on lean.

16 The long and winding road

Fraser Wilkinson, Tata Steel Europe, gives his perspective on lean improvement. He explains why lean ‘failure’ is relative and that the many roads to success are longer than most anticipate.

20 Lean without limits

The effects of placing boundaries on lean activity can have a distorting effect on results. Julian Wilson and Andrew Holm, Matt Black Systems, explain how they came to this realisation and how a more holistic approach to lean brought both meaningful improvement and tangible bottom line benefits.

22 Special Feature Necessity is the mother of invention

Zoe Radnor, Warwick Business School and Tristan Chapman, supply an update on lean maturity in public sector and government agencies.

26 A lean presence

Nicola Burgess, Warwick Business School, supplies data to support an understanding of the prevalence and maturity of lean improvement programmes in the NHS.

30 Process focus

This new regular feature will assess the application of lean principles to a variety of business processes. In issue 08 John Darlington and Pauline Found, LERC, and Dan Jones, the Lean Enterprise Academy explore how a rethink of financial and accounting processes for alignment with lean objectives could build a better Business case for lean

39 The history and evolution of...

In a new feature for 2011 LMJ will regularly examine the evolving use of the lean tool set. Articles will trace the roots of key lean enablers and explore what problems they are designed to resolve. In this issue Patrick Graupp, the TWI Institute, explains the emergence of the concept of standard work and its importance to lean success.

42 Letters and comment

These contributions from LMJ readers respond to previous LMJ articles and real workplace challenges. This month’s contributors include Gwendolyn Galsworth, the Visual-Lean Institute, Marie Jones, the Child Protection Agency and Lee Philip, Assa Abloy.

50 Book review

John Bicheno reviews Far from the Factory: Lean for the Information Age, by George Gonzalez-Rivas and Linus Larsson.

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Lean management journal: ISSN 2040-493X. Copyright © SayOne Media 2009.

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04 Introducing the editors

Introducing your editors Articles for LMJ are reviewed and audited by our experienced editorial board. They collaborate on comment against articles and guide the coverage of subject matter.

Jacob Austad

LeanTeam, Denmark

Professor Zoe Radnor

Cardiff Business School

Bill Bellows

Ebly Sanchez

John Bicheno

Peter Watkins

Norman Bodek

Wendy Wilson

Brenton Harder

Dr Keivan Zokaei

Pratt & Whitney Rocketdyne

Lean Enterprise Research Centre, Cardiff Business School

PCS Press

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Credit Suisse

Volvo Group

GKN

Warwick Manufacturing Group, University of Warwick

SA Partners

More information on our editorial board, their experience, and views on lean is available on the LMJ website: www.leanmj.com 4

Lean economics A new research group led by LERC is looking at macro-economic challenges through a lean lens.

A small research group comprising academic and industrial representatives is exploring the ways in which selected lean tools and techniques might support better long term economic planning and facilitate a better understanding of economic systems.

Pauline Found and Donna Samuel of LERC and John Homewood of Tata Steel Europe explained the interests and objectives of this new research in an article written for LMJs sister publication, The Manufacturer. LMJ readers can download a copy of this insightful article, free of charge, from the LMJ website: www.leanmj.com

2011 begins with trepidation for managers Almost half of UK managers (48%) are expecting managerial redundancies in 2011.

Furthermore 43% do not believe their organisation has the right people to fulfill its 2011 objectives according to research from the Chartered Management

Institute (CMI) published in December 2010.

The Future Forecast report reveals that skills shortages are the main source of concern when it comes to organisational abilities to meet objectives.

Fifty eight per cent of surveyed managers identified skills as the major blocking factor in achieving objectives; this failing was followed by low employee morale (nominated by 45% of respondents) and a lack of leadership (44%).

Lean government growing up A December report from the National Audit Office returns results on research into the maturity of process management in central government. The report explains, for board level and process owner level, why effective process management is vital to government and also offers insight into areas for improvement. The

report attempts to collate the lessons learned from pockets of excellence across government departments and disseminate them to a broader audience.

The full report is available to download at: www.nao.org.uk/publications

Taking care of hospital productivity and to increase productivity.

Despite this injection of financial resource, however, there has been an average decline of 0.2% per year in NHS overall productivity, with productivity in hospitals falling by around 1.4% a year. A need for better

Lean construction gets PMs nod of approval Prime Minister David Cameron met with the chief executive of BRE (the Building Research Establishment), Dr Peter Bonfield, on December 16, 2010 to view plans for the more effective construction of sustainable housing in the UK. BRE is home to the Construction Lean Improvement Programme (CLIP) which will inform the more efficient and effective building of homes which answer both government and societal needs.

leadership, management and clinical engagement has been identified in order to optimise the effectiveness of care.

The full report, published in December, is available to download at: www.nao.org.uk/publications

If you have any news that you think would interest and benefit the lean community please let us know. Send submissions to the commissioning editor Jane Gray: j.gray@sayonemedia.com

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A National Audit Office report has shown that hospital productivity in the UK has fallen over the last ten years. Since the initiation of the ‘NHS Plan’ in 2000 there have been significant increases in hospital funding to deliver improvements in patient care

Between extremes Bill Bellows shares some introductory thoughts for the issue and urges readers to consider the consequences of misconceived management by extremes.

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ith a focus on lean extremes in this issue of LMJ my mind races to the extremes of zero and infinity. These bear strong resemblance to goals for the elimination of variation and waste and concurrent desires for continuous improvement that we find in many lean manifestos. To my mind this is conflicted thinking.

Such thinking reminds me of the following advice, given by my doctoral advisor when I was a graduate student in the specialty field of heat transfer: If your boss gives you a question and only 5 minutes to answer, there are only 3 possible answers; 0, 1, and infinity. Use the 5 minutes to gather the context and choose the right answer.

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The logic behind his invaluable advice is perhaps more obvious to those able to distinguish the differences between convection, conduction, and radiation, and have appreciation of how often 0, 1, and infinity appear as answers to many heat transfer questions. However, on transitioning careers from heat transfer analysis to become a quality professional I encountered parallels in the methods of Genichi Taguchi.

Taguchi expresses the three possible answers from the 5-minute heat transfer question as three types of product or process outputs, each focused on its own goal: zero, anything finite (such as a quarter-inch hole size), and infinity. In this scenario performance goals for the output of products and processes must be categorised well before the methods are applied, as “smaller-is-best,” “nominal-isbest,” or “larger-is-best,” which align with the goals of 0, 1, and infinity.

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A wholesale ambition to achieve either zero or an infinite amount of something has consequences that can easily be more expensive to the system than the local savings achieved by well-intended work.

Try applying the same attitude to eradicating fat (a common synonym for waste), what would happen to the world’s population of whales? Whales need fat for a reason; insulation, without it they cannot function or survive for very long.

At the opposite end of the spectrum we can see that extreme focus on infinite goals can be paralysing. Consider home improvement.

A homeowner who hopes to profit from their property will not make improvements indefinitely. Instead specific changes are made to optimise for the market context.

Infinite improvement out of context will make the property unsalable and the owner’s hard work useless.

The extremism of zero and infinity as goals for the performance of products and processes extends from the focus on elimination of waste and variation and continuous improvement to include a desire for zero inventory, zero cycle time, zero cost, and zero delivery time. I refer to this well intentioned bravado for achieving “faster-better-cheaper” as management by extremes.

What’s missing from this “big-hairyaudacious”goal setting, known by many as BHAGs, is what the articles in this issue of LMJ reveal; context does matter, and it takes far more than 5 minutes to begin to reveal the context of many of the challenges we face on a daily basis.

This issue of the LMJ provides invaluable reminders of the constant need for contextual awareness. E N D

l a c klus t r e l e a n ch r i s da f f y

hy is it that so many manufacturers make great products that are incredibly reliable, yet deliver a service experience that is flawed? We see this everywhere - a car that hardly ever goes wrong but a routine service experience that’s awful, a laptop that’s fantastic but a helpline that’s anything but helpful. It’s something that’s interested (and irritated) me for a long while.

I have a passion for helping organisations deliver service excellence and, having worked with companies in many different sectors, over the past year or so I’ve had the opportunity to collaborate on service improvement projects with a variety of manufacturers and I think I now know some of the reasons why the anomalies between product and service excellence occur. I’ve also had the opportunity to test and develop what works.

Heartless systems: There are two key elements in any service experience –

Technical people in industries like manufacturing, construction, medicine and so on will have been hired and promoted to senior positions because they are great at using their head for science. It’s natural to them; they’ve studied it and they love doing it. But using their heart for an art does not come as naturally to them. It perhaps makes them feel uncomfortable and awkward so they tend to develop systems that are very efficient...but dull, perfect...but boring, slick... but heartless. They also often assume that so long as the process is right, it doesn’t matter if the person delivering it to the customer isn’t. So they invest lots of time and effort into removing variation or inaccuracy from the product or process, but don’t then go on to ensure the customer service people are comparably ‘fit for purpose’.

P rinciples and

Applying the process improvement approach to service improvement often tends to create one or more of the following issues:

competence and character. Competence is characterised by attributes such as the efficiency, speed and value for money of the product or transaction; character covers the honesty, attitude and ease of use of the systems and people conducting the transactions. Competence is a science; character is an art. That is the crux of this first issue.

purpose

I am convinced that the problems result from the way manufacturers naturally approach improvement projects. They are usually highly skilled in the application of process improvement techniques, like lean and six sigma, so they understandably turn to them when confronted with the challenge of improving a service experience. These approaches are undoubtedly excellent for what they were designed for, improving a process, but my experience is that they are nowhere near as good at improving a service experience; which they may have been adapted for, but were not designed for.

Chris Daffy, founder of The Academy of Service Excellence, has worked with organisations as diverse as BAE Systems and the Dorchester Hotel or Toyota and Pizza Express. In this article Daffy explores the dichotomy between lean excellence and service excellence and why taking lean to the extreme can prevent companies exploiting the growing value in innovative service delivery.

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Lacklustre lean

The goal is not to replace the science based approach with an emotional one, it is just to ensure that both key components, competence and character, are given equal prominence and attention. I’ve found that in all the organisations I’ve helped, there are a few people that ‘get’ the emotional, character stuff. Often though, because they are surrounded by people that don’t get it, and maybe resist or mock it, they go native and keep their emotional side hidden. It is vital to find these people, ensure they have equal status on the planning and implementation teams. Give them tools and techniques to work with that will help them find and develop the emotional customer connections and then encourage and recognise the vital part they are playing.

Paralysis through analysis: If you’re an engineer, a scientist, or an accountant it is likely you will love numbers, formulae, measurements and analysis. That’s why you chose that profession. So when you decide something needs improving, your first inclination is to measure and analyse, looking for the facts that prove what you should do and why you should do it. There’s nothing wrong with that, service experience improvements benefit from good analysis; but to make a really worthwhile difference, they need something more. They also need creativity and experimentation, and this is the core of issue two.

The natural approach of manufacturers is to over analyse any service improvement challenge but this can result in paralysis because the precise proof of what needs to be done often can’t be found. I’ve also seen it lead to the death of good projects because people got fed up and lost interest through doing nothing practical.

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This is not the fault of the ‘analysts’, it’s just what they’ve been trained to do. But it’s too narrow an approach for service improvement projects, where you’re dealing with people, not machines or processes, and it’s difficult to predict how customers

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will react to something until they have experienced it. The best approach is a blend of analysis and experimentation to find what customers value.

You need to keep testing this. As soon as the results of any analysis start to show through, get people thinking of as many ideas for improvements as they can and then ensure they are able to test them with customers to find the ones that work best. What’s important is to quickly find things that show success (‘quick wins’). They give a boost to morale, show the efforts are worthwhile and encourage people to keep going.

Straightjacket implementation: One of the widely used process improvement techniques is six sigma. It is designed to remove unwanted variation from processes so that the outcome can be replicated with perfection - and it’s really good at it. So whenever there is unwanted variation in a service process, for example if the time to answer queries from customers can take anything from minutes to days, or if invoices aren’t always accurate, then this is a good tool to use to find and fix the root cause(s) of these problems.

But in service delivery there are times when we need variation so we don’t want to impose strict rules or routines to make things the same every time. At those times we need well chosen, well trained and well equipped front line people to use their good judgement and do what they think is the right thing to do for the customer and the business. What these people need is simple but well chosen guidelines.

Organisations that are used to implementing a ‘no variation’ approach to their business may find the very thought of this uncomfortable.

They may feel they should be able to control and predict everything that happens between their organisation and their customers. But for customers to experience great service, good variation is vital, so getting used to and comfortable with it is vital too.

l a c klus t r e l e a n ch r i s da f f y

I’ve found that the best way to deal with this issue is to agree where the dividing line should be between predictability and spontaneity. That means deciding what service elements must always be the same, regardless of customer or circumstance, and defining the rules and routines for these. But we also need to ring fence times when good judgement is needed and then create some sensible guidelines for these based on desired outcomes. Guidelines like: Act as if every customer was our one and only customer Do for our customers what you would want done if you were a customer Do what you think is right to make the customer pleased (delighted?) with the outcome All people and all companies are different, so all customers and all situations are different too. It therefore makes sense that some responses to customers and situations should also be different and the best people to decide what those differences should be are well chosen, well trained and well equipped front line representatives.

Focussing on the wrong things: Manufacturers and systems specialists are trained to look for things going wrong and then fix them. It’s a technique that works and is an excellent way of edging ever closer to perfection. But removing

a negative does not create a positive so when you stop being bad you don’t become good. And being not bad is rarely good enough to create loyal customers.

In their research to establish what customers’ view as world class service, Warwick University discovered that ‘going the extra mile’ for a customer was an essential ingredient. Some people call this ‘delivering beyond expectation’, or ‘exceeding expectations’. It doesn’t matter what you call it, what matters is that people understand why this should be done and are then trained, encouraged and empowered to not only deliver what customers were promised but then, where and when appropriate, to add some extra value.

Conclusion

The opportunities for manufacturing businesses to use service as a source of differentiation and competitive advantage are immense; especially in today’s ever more competitive markets. It’s also a fact that in most markets, if one supplier gets a reputation for having a service experience that is substantially better than the competitors, it can lead to many other benefits. I would therefore encourage all leaders to investigate this and discover for themselves how they too could make service excellence a key element of their competitive strategy. E N D

Wendy Wilson comments

Peter Watkins adds:

Even if a process is behavioural we can set standards around it or redesign it with standards and values in mind so that we find a system, in cooperation with staff that they can hold themselves accountable to.

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P rinciples and

Supporting frontline staff in the delivery of flexibility can be difficult and, as the author here indicates, they need clear guidelines. I would add that they also need a thorough knowledge of the processes, roles and responsibilities across the organisation so that they are able to understand what is possible and who they need to talk to in order to deliver what the customer needs. Without this the customer will end up being passed between multiple contact points as everyone tries to help but is limited by their knowledge of how things work within the company.

purpose

This is a thought provoking perspective on the importance of service offerings and the article offers some useful ideas as to how to achieve excellence. Although I would take issue with calling lean a “process improvement technique” and I would argue that companies like Toyota do use a blend of analysis and experimentation to improve their processes (to me, that is where PDCA comes in), I do believe that the author is correct in saying that an appropriate balance between standardised processes and the flexibility needs greater attention.

Sustainability needs continuity

Mical de Boer, business continuity director UK for De Boer Structures, an international supplier of temporary accommodation and disaster recovery services shares his experiences of working with companies who have been brought to the brink of destruction and his reasons for thinking there is a balance to be struck between adherence to lean principles and thought for unplanned scenarios.

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stablished in 1924 and headquartered in Alkmaar, The Netherlands, De Boer now has offices in The Netherlands, Germany, Belgium, Austria, France, Spain, Sweden and Dubai. Its UK offices are based in Brackley, Northamptionshire.

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Over the past 80 years De Boer Structures has built its reputation on supplying temporary facilities to events and exhibitions. De Boer has been associated with globally recognised sports events such as the Olympic Games, FIFA World Cup finals and Ryder Cup and has serviced major international exhibitions including the RHS Chelsea Flower Show and Farnborough International Air Show. Parts for structures in each product range are interchangeable and re-usable meaning that the final structures are flexible and can answer a huge range of functional and aesthetic requirements from exhibition halls and merchandising areas to lavish and elaborate corporate hospitality areas and restaurants.

In recent years however, we have seen a developing opportunity to exploit our offerings and grow our business model in order to answer the needs of a new range of customers. Observing the ability of companies to function in the face of unexpected market conditions or the calamity of a natural disaster there was an undoubted opening for De Boer to expand its portfolio and our structures now offer solutions for the business community including: warehouses, offices, supermarkets, car

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sustainability needs continuity mical de boer

showrooms, hotels, leisure facilities, airport baggage handling facilities and terminals.

As more and more companies invest in lean management principles to improve operations, eliminate waste and seek competitive advantage, we have seen a tendency on the parts of some to think less about the impact of unplanned scenarios, focussing instead on perfecting the present.

I would offer however that for a truly resilient, agile and lean organisation to be able to offer reliable value to customers a rigorous business continuity plan is an indispensible part of overall strategy. Unexpected business interruptions can have devastating effects for organisations large and small and the speed of effective response to an emergency may well determine whether your business survives or dies.

business continuity at sites like Cherwell Valley Services on the M40 in Oxfordshire.

The fire completely destroyed the main shopping and dining plaza, leaving owners, staff and visitors with the prospect of no permanent facilities.

While a lean mentality to problem solving and empowerment of frontline staff will undoubtedly be of assistance in a situation

As more and more companies invest in lean management principles to improve operations, eliminate waste and seek competitive advantage, we have seen a tendency on the parts of some to think less about the impact of unplanned scenarios

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Cherwell is one of the busiest service stations in the UK and is owned by Moto Hospitality. Justin Shell, Moto’s area general manager, said: “We’ve been very impressed by De Boer. On phase one of the response, the speed of reaction was tremendous. The replacement facility was being created just two days after the fire.” De Boer provided structures for Moto with more than 2,000 square metres

P rinciples and

During the past decade De Boer has been involved in high profile operations to provide temporary structures in response major incidents including the 7/7 bombs in London, Hurricane Katrina in New Orleans and the devastating Asian Tsunami. De Boer has also provided rapid response to more localised flood and fire damage for

like this, enabling a company to get its processes back on their feet efficiently, there will simply be no business if a plan is not in place to conjure a new work environment on demand. Within hours of the Cherwell incident we were on site, enabling an emergency rest area to be opened within a week, followed by the creation of a more extensive temporary service station which will now remain in place until a permanent building is completed in 2011.

purpose

Over the past five years De Boer has developed the ability to offer organisations replacement or additional premises in response to unforeseen disruptions from natural disasters or even terrorist attacks. This operation forms a new business continuity arm to the business and is gaining increasing attention from the insurance world.

Insurers, brokers and loss adjustors see the benefit of insurance liabilities being limited if businesses, suffering interruption, have a clear plan for how they will reinstate normal operations swiftly.

of floor-space. The striking glasssided structure offers a rest area for visitors, with facilities including Marks & Spencer, WH Smith, Burger King and Costa Coffee.

[Lean] work will have nowhere to take place if there is not a thorough operational and financial plan for business continuity

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Another example of how efficient crisis response can help provide continuity for value creating activity followed a fire which destroyed a Co-op supermarket at Oakham, Leicestershire. A complete replica store with shop floor, welfare facilities, toilets, storage and office space totalling almost 12,000 sq feet was made available by De Boer in two weeks. Damian Glynn, head of financial risk at VeriClaim, part of the team that responded to the Co-op fire, said: “The vast majority of turnover following the fire was retained, so the customer base was still there. When the permanent building was created people were able to simply transfer across.”

Mr Glynn, who is also head of the Business Interruption Specialist Interest Group at the Chartered Institute of Loss Adjusters, added: “It’s critical when people have a fire to be able to make decisions. It’s not any single decision but the sheer number of decisions that have to be taken in relation to staff, suppliers, customers and even the media. There are so many things to deal with that having people who can take on responsibilities really takes the pressure off the management team.”

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Again, there is an obvious role here for lean thinking if companies pay proper attention to ending command and control management and allow employees to take ownership of their work. However that work will have nowhere to take place if there is not a thorough operational and financial plan for business continuity. The benefits of creating such a plan not only brings confidence to customers and suppliers (adding value to external partnerships and possibly lowering insurance premiums), but also contributes to staff engagement and confidence – an emergency installation created for Scotland’s largest independent family bakers, Aulds, at their site near Glasgow safeguarded the jobs of over 200 staff for 18 months after the bakery was burnt to the ground.

Companies quite rightly invest in lean principles to maximise the effectiveness of their operations which can obviously bring significant cost savings while improving overall performance. But all this good work would count for nothing if these organisations are not well prepared to deal with the unexpected business interruption.

There are some who would say that ‘what if’ or contingency planning is not a value-add activity for a lean and agile organisation, but the fact is that natural disasters and ‘acts of god’ can strike anyone at any time. In today’s unforgiving competitive environment it is of untold value to you business partners, both up and down the supply chain, that they can be confident you will be able to keep dealing with them no matter what. This means that an approach to lean focusing only on optimising your processes under current conditions is unbalanced. A more holistic approach must think about how those conditions might change at any time and without warning. E N D

Th e u n i o n s a n d l e a n G r e g o r G all

The unions

and lean M

Whether through misunderstanding or bad experiences with mismanaged lean programmes, unions across sectors have frequently expressed commitment to resisting lean initiatives.

Here Gregor Gall, Professor of Industrial Relations at Hertfordshire University, draws on his experience to assess current union responses to lean.

ost union responses to the implementation of new management techniques or approaches can be mapped along the two axes of political orientation and geographic coverage or union size. Such has been the case with union responses to lean and related improvement or management techniques. From manufacturing to the public sector, a wide range of unions and their members have now experienced a variety of lean techniques with varying results.

This is especially true in parts of the public sector where localised ‘marketisation’ or, in effect, privatisation has attempted to bring greater ‘modernity’.

As an example of the way in which negative experiences of lean have contributed to the development of antagonistic attitudes to lean implementations we can look at the PCS union. In the public sector this union has supported industrial action to consolidate opposition to lean, particularly across sections of central government and the civil service such as Her Majesty’s Revenue and Customs (HRMC), the Department of Work and Pensions (DWP), Job Centre Plus, and the Ministry of Justice, where it holds extensive membership.

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P rinciples and

purpose

The Public and Commercial Services (PCS) union’s first substantial experience of lean was in the HMRC where lean management techniques made a very negative impact in the eyes of employees. A senior lay activist employed in the HMRC Edinburgh centre likened the lean re-engineering of his members’ jobs to the process of a golfer no longer being able to engage in the fullswing that leads to striking the ball. Instead, the activist reported – using this analogy – one worker is responsible for the upswing, one for the downswing and another for the through swing.

Rhoda Avanzando, development officer at Westminster Council, testifies to the challenge that union opposition to lean can pose to improvement intentions. Following an email from Avanzando calling staff to sign up to lean development training ahead of tackling identified projects a blanket response from a union representative was provoked. The response included this warning, authorised

by PSU:

Beware Lean

Lean is the name given to the way that DWP want to make the 12,000 job cuts demanded by the Government. It involves changing how work is done or cutting out tasks and then cutting jobs. It makes the job less interesting, stops us giving end to end service and usually does not work because it is all about getting the job done and not getting it done well.

These are impassioned words but Avanzando says that they are based on fundamental misconceptions: “It can be very frustrating when people close themselves off from the training and improvement activity. I tried to make clear that they were putting themselves at a disadvantage. If you don’t engage in projects how can you turn around to those who will inevitably come in and do reviews and show them that inefficiencies are being dealt with. Being able to do this is especially important for us at the moment as the council now has to compete with the private sector for the provision of services and we work on a commission basis. If we don’t compete with the way private sector are creating efficiency and giving value then even more jobs will be lost.”

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Happily for Avanzando Westminster Council’s employees show evidence of being gradually convinced that lean can bring benefits and is not a threat if approached in the right way. Key project successes mean that news of improved performance in areas like the Street Trading department, without any attendant job cuts, are spreading by word of mouth. A second call for applicants for lean training – issued after these pilot projects had returned results - was quickly oversubscribed. Avanzando says: “It does make you smile when you see the change in someone who has realised lean is not just about cutting jobs.”

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In other words, this particular activist observed that lean techniques were resulting in the fragmentation of processes. Consequently job satisfaction was diminished with a knock-on impact on productivity.

In this scenario workers reportedly felt distanced from an appreciation of the overall work process and, consequently, bottle necks were created. Management was seen to have intervened with lean techniques to impose new controls on the labour process with a direct negative impact on efficiency, productivity and, therefore, customer service. This experience became a formative one for the creation of national PCS policy on the issue of lean.

The mapping of union responses to lean covers nearly all major unions from the largest, like Unite down to the smaller ones like Prospect and the First Division Association. On the political divide, the hard left unions have adopted positions of almost total opposition to lean techniques. First and foremost this is because they consider lean to be nothing more than the latest in a long line of management techniques designed to exploit of their members.

A second cause is that they consider lean necessitates management gaining more control over labour process and organisation of work.

Taken together, unions argue that this results in fewer workers doing more work (whether by working more intensively or through longer hours) with the consequence that job satisfaction and, relative remuneration take a nosedive while stress and anxiety rocket. In short, they see the hands of Frederick Taylor and scientific management at work, de-skilling and de-humanising. This position is founded on the ideological perspective that in the private sector

Th e u n i o n s a n d l e a n G r e g o r G all

Meantime, at the other end of the political spectrum, the centre left and right wing unions take what seems like a more pragmatic approach, though no less political or ideological for all that. With different degrees of enthusiasm and agreement, their collective view is that lean represents a combination of the inevitable and the positive. It represents the onward march of the ascendancy of management and the decline of unions in which positivity will be best gained through cooperation. Unions taking this approach aim to secure a hand in the redesign of work, preserving jobs and conditions where possible while allowing for the needs of competitive advantage in the private sector and cost saving in the private sector.

The hard left unions regard this perspective as the politics of defeat.

In their view it gives into management without a fight. However, when we move to the second axis of placing union responses along the divide of national bodies versus local or workplace union groups, the picture becomes more complex.

Previous work by this author

In 2007 Gall was commissioned by the PCS union to deliver pamphlet, Lean and job design (PCS, London, 2007). He has also written on this subject for the Guardian’s Comment is Free website, readers can find this article through the following link: www.guardian.co.uk/commentisfree/2008/ jun/09/tradeunions.workandcareers Most recently Professor Gall contributed to The Oxford Handbook of Participation in Organisations (Oxford University Press, Oxford, 2010) with a chapter entitled ‘Labour union responses to participation’.

The viewpoints discussed in this article denote a fundamental misunderstanding of lean management on the side of the unions. This can primarily be put down to the often fragmented approach to the implementation of lean in public services where the efficiency of parts are given priority over the effectiveness of the whole, and where dumbed-down systemisation has been ubiquitous. My message to fellow lean practitioners, especially within the public sector, is to embrace such concerns earnestly and where possible to work closely with unions in addressing their apprehensions – apprehensions which are a fabric of our own making.

P rinciples and

Keivan Zokaei comments

Whatever the path to resistance, there has seldom been outright victory because of the superior political and economic resources of management. Instead, what we find is that even the most resistant national and local unions have had to settle for attempting to exert some control over the process of lean implementation as well its outcomes. This means engaging in collective bargaining to protect member interests over issues like health and safety, flexible working, job training and workload. E N D

purpose

Even though some unions have a national policy of opposition to lean this does not necessarily mean that the local and workplace branches of the same union will follow suit. This is either because they disagree with

the national union policy or, more especially, because they are unable to implement the policy due to lack of collective force. By the same token, there are some local and workplace branches of national unions which resist lean even though their national union’s policy supports it. The explanatory variables in all these situations are the presence or absence of local and workplace branches with a high union density, a membership that is willing to mobilise itself – through industrial action if necessary – and a local leadership of an oppositional mindset.

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lean is about increasing rates of profit, while in the public sector lean is about reducing state expenditure.

The long and winding road L

ean thinkers always want to know how much of a company’s success is down to the application of lean and, more specifically the application of the five lean principles of customer value, value streams, flow, pull and perfection.

In 2006 the steel maker Failure rates for lean Corus Strip Products programmes are still UK launched a corporate programme called ‘The staggeringly high if available Corus Way’ to build on statistics are to be believed, but the ‘Restoring Success’ why is this so? Fraser Wilkinson, initiative that had business improvement leader brought the parent at Tata Steel Europe, shares his company, Corus, back perspective that ‘failure’ is a into profitability.

relative term and that the long routes to lean success are many.

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The Corus Way aimed to embed a continuous improvement (CI) culture, based on lean thinking, as defined with the help of lean consultants.

To help with deployment the organisation employed and trained over 30 CI coaches and engaged the senior management population in lean training and awareness. During this time the business continued to take huge strides forward in many areas including safety, morale, cost management and quality, but how much of this was down to the systematic application of the five lean principles?

If we were to assess the application of the lean principles at Corus Strip Products back in 2006 there would certainly be a mixed picture of the benefits being gained. The business was definitely improving overall despite lagging behind major European competitors, so we

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were gaining improvement, but the experiences of the CI coach population indicated little evidence of lean being systematically deployed. We weathered the global financial crisis admirably but, despite the training, the workshops and the 5S activities, lean thinking was definitely on the decay curve when Tata Group took the company over from Corus in 2008.

We had a lot of work to do in getting a coherent view of the market, its segmentation, the product contribution and what the customer was really interested in beyond, “I want my steel when you told me I’d get it”

With Tata Group at the helm a difference in approach became apparent, not in the content of the principles but in the means of applying them.

This difference is subtle. The takeover did not mean a massive raising of the profile of lean, indeed to this day lean is very rarely mentioned despite the fact that we are undoubtedly a much leaner company than in 2006.

The secret is that Tata, as a global entity, has a powerful unifying tool in its armoury and it is not lean or six sigma or TQM but a simple set of questions wrapped up in what’s known as the Tata Business Excellence Model (TBEM). This model is based on that of quality professional and former US Secretary of Commerce, Malcolm Baldrige, yet enhanced immeasurably by the internal Tata improvement organisation, Tata Quality Management Services (TQMS). As with most lean implementations that ‘fail’ it’s not so much the ‘what’ but the ‘how’ and the ‘why’ in Tata’s approach that makes the difference. Similar in nature to the Toyota supplier development group TQMS provides the glue that binds this conglomerate together and makes the whole far greater than the sum of its parts.

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P rinciples and

purpose

The TBEM model is applied with enormous enthusiasm, vigour and passion and it is driven from the very top to create a fantastic cadre of business excellence leaders drawn from all the geographies and sectors within the Tata family. This group of senior managers, executives and business excellence professionals are required to conduct assessments of other Tata companies, not just to give the host company a thorough examination of their operating model but, equally importantly, to expose these individuals to the process of assessing a business in a holistic but pragmatic way. The elements of leadership, customer focus and strategy are the starting

If we were to assess the application of the lean principles at Corus Strip Products back in 2006 there would certainly be a mixed picture of the benefits being gained points and from a lean implementation perspective the customer section forces the participants and the assessors to fundamentally question the value proposition. All Tata managers involved in TBEM are clearly focused, as a group, on serving the customer first and foremost.

So, the first formal assessment of the Corus Strip Products business in 2009 was a real opportunity to refocus on the first lean principle and correct our alignment so that we were in tune with the wider conglomerate, but also with a better practical approach to lean implementation.

Although efforts were already being made to be more customer focused we had a lot of work to do in getting a coherent view of the market, its segmentation, the product contribution and what the customer was really interested in beyond, “I want my steel when you told me I’d get it”.

Our delivery performance had remained resolutely stable despite some promising peaks and this can be related, to a primary focus on volumes and plant utilisation over customer requirements. Balancing these competing needs is a tough act for a steel plant with a lumbering asset base but the assessment process forced us to think hard about the fundamentals of our operating model. In this context the TBEM assessment process was the vehicle for creating a shift in thinking.

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Although TBEM is a ‘soft mandate’ for Tata Group companies, there is an expectation that a newly acquired business be exposed to the process. This creates the compelling need for the leadership team to reflect on, and make plans to address, the key business factors. The ‘what’ and the ‘how’ are important considerations in implementing lean but of far greater bearing are the ‘why’ questions and that’s the benefit of a process that asks the simple but challenging questions first.

With Tata Steel Strip Products UK taking over from Corus our recently instated MD, who is a disciple of the

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excellence model, has further promoted the lean agenda. He and his Tata associates espouse all of the lean principles without directly referencing them, indicating that for the more mature Tata companies it’s just the way they think about business.

For lean practitioners and the wider lean community it’s easy to forget that there are many routes to becoming a world-class organisation.

For the Tata Group the chosen route is through developing a pool of senior people who are taken through a series of intensive and real life learning experiences via the assessment process. These people are not lean or six sigma or TQM but they are, above all, business excellence people and that is surely what the lean movement is striving to develop. When organisations embark on lean it is often announced via programmes of cleverly constructed plans and activities rather than seeking to explore what the five principles really mean. So for organisations where lean may be on the downward trend, it could be time to go back to business basics. E N D

Ebly Sanchez comments

This is a great, real business example of a lean journey in an acquisition environment and I believe key learning points are as follows: Top management are drivers for change: involving senior management in hands-on leadership including leading assessments themselves can make the difference between success and failure with lean. This engagement brings knowledge based changes but also support for the growth of a common lean transformation culture across the whole organisation Communicating in the correct way is key: a description of why we are implementing lean will help support buy-in for the lean implementation process. Participants need to know what lean transformation means for them.

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References which might help readers consolidate the lessons available in this article are: Becoming Lean by Jeffrey Liker (Productivity Press, 2004) and the shop floor manual Implementing World class Manufacturing by Larry Rubrich and Madelyn Watson (WCM Associates, 1998).

P rinciples and

Assessment is an important part of the lean journey: assessment is the ‘C’ of the PDCA cycle to check that the system is in place and that it supports continuous improvement.

Assessments allow the initial identification of losses and the corresponding improvement action plans.

purpose

Implementing lean is a process not an end point: to consolidate a lean journey, it is important to consider developing an operating system to use in the day-to-day operations.

Lean without limits Julian Wilson, and Andrew Holm, experienced engineers and directors of defence manufacturer Matt Black Systems, share their experience of lean and give a warning to others on the journey – beware the effects of boundaries.

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n 2003 we were enrolled on a supply chain programme with one of our major customers. This was a ‘shotgun marriage’ and we had to commit a substantial sum of money to the program, a commitment which was hardly voluntary since we were told that only those on the programme would remain suppliers in the longer term.

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We undertook a cost benefit analysis and ended up with a plan for some easy and beneficial (sometimes both) projects. This plan was then introduced to everyone in the firm, both to educate and allay fears that the changes were simply a ploy to lose jobs, cut overtime or to make them work harder.

After 12 weeks we had rearranged work spaces, introduced new production tooling, working practices and test equipment, repaired and modified machinery and established a new visual management system. The consultants calculated that the benefits represented a saving of £100,000 per year, of which a significant proportion was attributable to the sponsoring customer’s product. The programme was deemed a great success and we were able to offer our customer the necessary price reduction linked to our savings.

The customer made no secret of their intent to push down supply chain prices and restore their failing margins. Our cooperation was essential since our future business depended upon their survival.

Only we didn’t see this money appear on our bottom line. Perhaps this was due to the costs of implementation; perhaps it was due to mistakes in our approach. Whatever the case, the savings trickled away through a thousand unforeseen routes.

The customer appointed a facilitator to oversee the programme and contracted Industry Forum to provide the lean consultancy. Our financial contribution, which was a weighty one for a company of our size, went towards the cost of this, and was approved from the top.

For example, new inspection equipment highlighted problems we never knew we had resulting in the need for more expensive parts from suppliers. Each unintended consequence like this didn’t add up to much in itself, but when combined meant we were no better off.

To begin making headway on the programme target we chose areas of constraint in the business to apply lean tools (such as waste reduction, OEE, poke-yoke etc). Given that the programme was sponsored by our customer, they insisted upon a direct focus on processes that involved their products (in order to get their price reduction), so our choices were constrained.

I want to use an analogy here; imagine a congested road junction on your commute to work. After considerable investment and several months of construction a new flyover appears, on time and in budget. The congestion has turned into a magical fast track to work and consultants calculate the flyover saves massive amounts of commuter time and cuts pollution; just the time alone

l e a n w i t h o u t l i m i t s jul i a n w i l s o n

saves nineteen thousand minutes a day – what a saving to the local community!

programme’s constraints to ensure a positive impact on the chosen measures.

Your experience however is that you are now queuing at the next junction along, a junction that never used to be congested. You are told things are much better, yet somehow your commute time hasn’t changed.

After our false start, we vowed to use the lean tools to dig deeper. This more profound approach took us down a very unconventional route as we looked to address our underlying dysfunctions and indirectly deal with the symptoms. It took time to develop this holistic approach, one that results in the lean techniques (and others) being drawn in by our people from wherever they can be found, but the results are far more enduring.

My advice is to beware the measures and boundaries that you allow to be set for a lean project. Make sure they are not too narrow and that they reflect your wider goals. Lean tools often highlight more problems than they solve and these new problems quickly drift away from what is immediate. Like untangling a ball of string, it doesn’t matter what thread you start with, pretty quickly you are led to the heart of the tangle.

Going back to that original customer who sponsored our lean journey; we went from being one of their bottom nineteen suppliers, to their second best global supplier in four years. The deep changes we made to our business means our improvement efforts didn’t stop with the official lean program. Dozens of self generated changes take place every month as our organisation continues to innovate, optimise and cut costs as the world around us changes.

To anyone seriously considering embarking on a lean journey I recommend reading the seminal work by Taiichi Ohno, Toyota Production System: Beyond Large-Scale Production. Reflect long and hard on the boundaries of their journey, not on the tools that were discovered along the way, for it is here where the secret of lean lies. E N D

P rinciples and

The presenting problems that are usually the focus of a lean program are often symptoms of a deeper underlying dysfunction. However it is not unusual to find a lack of appetite for addressing these broad and complex issues. Instead the common response is to tighten the

Our answers guided us in cutting away the hidden anchors within our organisation and we achieved much greater improvements in important areas like quality, delivery, profit and conformance – things our customers care about.

purpose

We all have problems we don’t know we have, some small and directly linked to the issues in hand, others more complex, systemic or even cultural in nature. The lean toolbox comes equipped with some great tools to help but again the issue of boundaries impacts on how much benefit you will gain from their use. If you bound your lean activity to discrete areas the underlying causes of the problems, and therefore the symptoms, will remain.

A quick search of the internet will reveal all the business improvement techniques you could ever want. The question is: why aren’t they being implemented in your organisation already?

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This is an effect of boundaries. Grand claims can be made about the efficacy of a project when measures are kept within tight boundaries, yet overall the benefits may be few. So it is with the bottom line.

A lean project may make savings, but it’s difficult to squeeze these savings through the complicated systems of a business and see them appear intact on the bottom line.

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Necessity is the mother of invention T

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Senior interest, independent review and credible in-house expertise provide a perfect platform for lean government. Tristan Chapman, National School of Government, and Professor Zoe Radnor, Cardiff Business School, review how government is reacting to a new improvement imperative i the UK.

he impact of the comprehensive spending review and departmental settlements is now being worked out across government departments. A degree of savings are being made by management structures being rationalised and departmental headquarters shrunk but this on its own will not be enough. With the scale of budget reductions it is inevitable that efficiencies, both direct and indirect, will be required from across public services.

When efficiencies are required at the point of service delivery we rely on the skills and experience of local managers and public service professionals to manage the reduction with minimal impact on the public. In the past a typical ‘cost improvement programme’ expected efficiencies in the range of 2-5% percent per year. In those times managers could make short term tactical decisions such as holding a vacancy for six months or cutting back on training. In reality these tactical decisions were not driving efficiency or improvement and often created a negative impact on the morale of frontline staff.

The current situation of resetting budgets demands action beyond a short term tactical response. The unprecedented need to make significant cost savings while maintaining delivery to the public and morale in the civil service leads inevitably to lean and other continuous improvement approaches. The choice should always be to remove waste or those elements of a service which do not add value to the customer before reducing that service.

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An example of reducing a service leading to reduction of costs but also to value creation could be raising the referral criteria to a clinical service in the NHS or, the threshold for prosecuting marginal criminal cases in the courts. To avoid possible cost increase (as the eventual referral may lead to longer time in the system due to complications) managers and professionals need the skills and experience to identify and remove the appropriate waste and inefficiency in the system, not the service. Examples of this include reducing tasks or activities which add no value to the public, such as: updating multiple IT systems; poorly managed meeting time; planning around average process times or avoidable transport and travel time. Identifying re-work which is a result of poor quality standards would also be beneficial. For example police forces often employ a cadre of officers to review evidence prior to submission to the Crown Prosecution Service. This is a classic inspection role which could be dramatically reduced with better training and management of officers producing the initial evidence.

So, at a time of reducing budgets the importance of skilled, high quality operational management has never been greater.

The skills and experience of our workforce is one of the greatest assets in the public sector and for this reason maintaining both morale and employee engagement will be of paramount importance. A lean management approach provides a structure to harness the skill and capability of our staff. When Dan Jones spoke with a government audience in early 2009 he made the point that time was running out to invest in the reform of public services. Reducing resources makes the cost effective development of our internal capability all the more important. The recent moratorium on consulting in the Civil Service is intended to allow a chance to grow and stretch internal staff, complementing a lean approach. The Civil Service Core Learning Programme is one example of government making a targeted and cost effective investment in skills and capability.

Recently, HMRC announced that nearly 50% of the organisation was now operating in a PaceSetter way (HMRC’s lean associated programme) with the business reporting over £600m in additional tax yield and an average 30%

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It is by no means all doom and gloom. Some areas of government have been making good progress over a sustained period, from a plethora of home grown improvement programmes in the NHS and local authorities to large established corporate programmes in HM Revenues and Customs (HMRC), Department of Work and Pensions (DWP) and HM Courts Service (HMCS).

increase in productivity, leading to reported gross salary savings of well over ÂŁ300m. They hope that the success will continue, with an ambition of having 95% of the workforce using PaceSetter by 2013. HMCS aims to introduce lean in all 500 courts over three years and have achieved more than 320 courts in the 21 months so far. HMCS have calculated that although it was estimated to take over three years for the Lean implementation programme to break even, between the investment made and the benefits returned, in actuality the programme broke even after a year. However, HMCS also noted that while lean has undoubtedly brought financial benefits, it has also yielded a range of qualitative benefits.

Standardising work has improved productivity and helped focus more on activities that add value, while staff feel more engaged and empowered by the chance to shape decisions about their work.

However, the recent National Audit Office (NAO) Process Management Maturity Assessment tells us we still have a long way to go. The study reviewed 14 government departments, 41 business processes and 3000 evidence statements. This analysis concluded there are pockets of good practice but that no single organisation consistently demonstrates the characteristics of strong process management.

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NAO identified three key performance gaps for government: 1. Understanding the level and type of customer demand and implementing a planned response to changes in demand: This limits the ability to plan controlled process changes and redistribute effort without impacting on cost, quality and delivery in response to changes in customer demand 2. Creating an environment where staff have an obligation to improve business process performance: Few organisations provide staff with the skills, training, time and support to enable them to improve processes or provide improvement incentives 3. Making the case for change and proving the benefits: Few organisations follow up to ensure the predicted benefits from improvement activity have been realised. There is limited use of Return On Investment calculations [for example, payback periods] to inform decisions on where best to target activity.

Reflecting on these it is critical to understand the level and type of demand so services can be developed and designed appropriately. Currently, too many ‘runner’ operations (such as changing of address) are managed through the same system as the more complex demands (such as reporting multi addresses or jobs). Systems and processes should be designed for the needs of the customer not the worker. The lack of capability poses a serious risk to service quality and it is important

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The NAO evidence comes at a critical time. It provides government departments with an informed assessment of their existing capability and this snapshot of progress provides an opportunity, but also a challenge, for central government. On December 10 a Cabinet Office delegation including Francis Maude, Minister; Ian Watmore, Permanent Secretary; and Gus O’Donnell, Cabinet Secretary visited Unipart, a leading UK private sector lean organisation who have worked as advisors to government departments in the past.

This suggests operational excellence, and how it is delivered, is becoming a priority.

Further Reading

‘Spotlight on Lean in the Public Sector: a Wired-Gov Special report’ www.wired-gov.net Maturity of process management in central government, December 2010, NAO www.nao.org.uk/publications Civil Service Core Learning Programme, National School of Government, www.nationalschool.gov.uk

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Bernadette Kenny, director general at HMRC and ICI’s chair, called for an approach which was “enabling, but with an edge”. In terms of enablers active members of the government continuous improvement community have arranged a pilot Government Lean Academy to run

Will the existing bottom-up improvement combined with the burning platform provided by the comprehensive spending review move the public sector towards the tipping point where expectations of operational excellence become the norm? The triangle of an independent evidence base, an existing cadre of internal government experts and an unprecedented level of interest and understanding from the centre of government suggest there will never be a better opportunity to reform our public services and drive in operational excellence. The challenge will be grasping this opportunity with coordinated and focused action. E N D

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Driving lean, process improvement or operational excellence from the centre may be viewed with some scepticism by those with an informed view of lean management.

Mandation is unlikely to work for an approach that demands wholehearted support and senior management participation. At their recent steering group meeting the government wide Innovation and Continuous Improvement (ICI) group concluded that centrally driven mandation would not produce an effective response. However, time pressures are such that a soft approach poses a different set of risks.

in the spring of 2011. This is being run as collaborative effort from the existing four government academies, led by HMRC. The challenge for the centre is to provide the ‘edge’ that will bring the required management attention and pace of change. The drive for transparency in the management of government departments should encourage senior managers to look closely at lean, as their operating numbers are more open for scrutiny and more comparable between departments.

The new focus on behavioural economics in the Cabinet Office may also provide the expertise to assist and unlock this challenge.

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to remember that building our internal capability is a low cost, low risk solution with greater sustainability prospects that expensive short term contracts with external advisors. Finally, without proving the benefits (preferably using third-parties for verification), process improvement activity or lean programmes can be dismissed as fads and ignored by senior managers.

A lean presence B Nicola Burgess, research fellow at Warwick Business School, puts the scale of public sector lean in context for healthcare and suggests the challenge for progressing lean maturity in this environment through sharing data from recent research.

ased on an evaluation of the Annual Reports of 143 general acute hospital Trusts in England, 78% of English hospitals reference the use of lean methodologies for the year 2009/10. This figure represents an increase from just 62% of the same sample using lean to varying extents during the operating year 2007/08.

So what does this perceptible and increasing popularity of lean methods in healthcare mean in practice?

Evidence of Lean

Identifying elements of lean methodologies in the body of the Annual Reports required the use of a key word in context approach. Given the length of the reports (between 30 and 150 pages), it was necessary to identify key words that highlight the context of improvement activity, and evaluate the approach to lean implementation. Following a pilot review of 20 annual reports the following words were selected as search terms:

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Lean: as evidence of an application and/or awareness of lean methodology Productive: as evidence of implementation of the national Productive Ward programme (and latterly Productive Theatre) which uses techniques and principles associated with lean Release: as above, the tagline ‘releasing time to care’ is found to be used synonymously with productive ward Waste: as possible evidence of an application of lean methodologies Improvement: to highlight activities related to service improvement that may or may not be related to lean Project and programme: to identify the existence of projects in the Trust that may be associated with lean

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The search words were often embedded within a description of lean applications, service improvements or pathway redesign projects. If the term lean has not been used but the word ‘waste’, for example, has been identified in the context of a description of improving patient care or redesigning a patient pathway, then the term ‘lean’ is typed into the search facility of the corresponding hospital Trust’s website. This action identifies any documents relating to the Trust where lean methods have been referenced and documented. Frequent examples include, minutes of board meetings, staff newsletters and other similar archival documents. If no results are produced by this search then the hospital is not deemed to be presently implementing lean. The same process was used for Annual Reports that seemed to echo the use of lean principles without specifically using the term. However, unless the term ‘lean’ is explicitly identified in the Annual Report or through the Trust website’s search facility then the Trust is not counted as implementing lean.

Figure 1 Tentative – The hospital Trust is contemplating lean, tendering for external management consultancy to help with implementation or piloting a small isolated project.

Productive Ward Only – The hospital Trust is implementing Productive Ward and or Productive Theatre but no other evidence of lean implementation is identified.

Few projects – The hospital Trust is found to have used lean principles and methods to underpin identified projects relating to certain functions or pathways within the organisation.

Systemic –

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The hospital Trust refers to lean principles underpinning a programme of work that usually has an expected duration of between 1 and 5 years.

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Programme –

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The hospital Trust refers to the embedding of lean principles across the Trust as a whole so that it becomes ‘the way we do things around here’. A systemic implementation of lean will also emphasise training in lean for all staff.

Divergent approaches to lean

The above method was conducted using two sets of data, one being Annual Reports relating to the year 2007/08 followed by a second set of Annual Reports relating to the year 2009/10. Despite clear evidence to support the notion that lean in healthcare is increasingly widespread, the research found stark differences in the implementation approaches from one Trust to another. These different approaches are represented in fig 1 and the distribution of these approaches across the two data sets is shown in fig 2:

Figure 2: Approach to lean implementation by English hospital Trusts

Approach to lean implementation during 2007/08

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Approach to lean implementation during 2009/10

In 2009/10 we can see that 15 of the 143 hospital trusts were identified as implementing lean systemically compared to just five in 2007/08. Interestingly, one of the Trusts clearly advocating the use of lean principles as the basis of the ‘way we do things around here’ in 2007/08 appear to have dropped their approach completely in 2009/2010 with no reference made in the Trust’s annual report or extractable from the Trust’s website. Of the 15 Trusts identified as implementing lean systemically in 2009/10, seven are located

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in the North West, with the remainder spread across the nine other health sector regions in England. Of the 15 systemic Trusts, five have seemingly progressed from a programme approach to a ‘systemic’ approach and three hospital Trusts appear to have progressed from a ‘few projects’ approach to an ostensibly systemic implementation.

The remaining 2 systemic hospital Trusts appear to have leapt from either a ‘tentative’ approach to implementation or no implementation at all to a systemic approach.

Lean is popular, pragmatic, but can it be pure…?

The data shows clear evidence of the increasing popularity of lean implementations in healthcare, however it also signifies a divergence of approaches to lean by hospital Trusts in England. The concept of lean is considered by some to be ‘rich in nuance’, others go as far as to delineate between real lean and fake lean. The notion of lean implementation as a ‘few projects’ is one that attracts some criticism given its tendency to promote islands of optimisation that at best can bring about only localised benefits. However, if we consider lean to be a journey then the data shared here could portray a trajectory of organisational learning that germinates from a few projects and matures into a programme of improvement and ultimately a system for the way things are done day to day. E N D

Jacob Austad comments

Although it is interesting to read this description of the altering use of lean in hospital annual reports the research raises a number of questions in my mind. Looking at other service industries, like banking, insurance, IT and so forth, would we see the same picture? Many organisations purport to work lean, but their understanding of what this involves rarely extends beyond implementing daily board meetings, making some value stream maps, removing ‘waste’ and waiting for the expected measurable increase in productivity. After a while the results fade out because they put in a tool not designed to solve their problem.

This research does suggest that English hospital Trusts are making progress with lean but let’s raise the bar and make an effort to improve by redesigning the entire system from the customer (patient) perspective. It’s not about doing lean, it’s about what can be done to design a system doing the right thing.

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SPECIAL

FEATURE

It’s great to see organisations (employees and managers) wanting to improve, but lets’ be honest; no organisation with respect for itself and wanting to be taken seriously should be leaving the word lean out of their annual reports these days. The key is to see through the name dropping and assess whether lean is truly being understood. This understanding must cover knowledge of the system and how value and failure-demand effect the way work is done.

Process focus

Finding the financial

impact I

n issue 07 we established that for a commercial organisation lean should be more about increasing sales and value than cost reduction.

The equivalent policy in a non profit organisation would be to increase purpose with the same resources.

These statements may look naïve given the propensity for government to justify cost cutting under the protective banner of “the state of the economy”. However, actions always have consequences and if the cost cutting is applied indiscriminately and with indecent haste then service levels i.e. the purpose of the organisation will deteriorate. The first manifestation of that is likely to be longer lead times.

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We also explained last time that there is a conflict between financial accounting, which has its roots in law, and management accounting which has more to do with decision making.

In manufacturing the bridge between these two sub-systems is the calculation of the product cost. This calculation coupled with the associated transactional arrangements causes all sorts of problems for lean manufacturers.

A disturbing trend for service organisations is the tendency to try and mimic this unit cost calculation and hence mentality. As a consequence we have heard over the last 12 months about the “cost of a case” in the law courts; the “cost of a

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In 2011 LMJ will be regularly investigating how lean affects particular processes and actives within organisations. We start the year with an investigation of flow accounting which builds on the thoughts shared by John Darlington in his LMJ issue 06 article ‘Accounting for Lean’. John Darlington and Pauline Found of LERC and Daniel T. Jones of the Lean Enterprise Academy pool their thoughts to build a business case for lean.

child” in the Child Protection Agency and even the “cost of hole” in the Highways Agency.

These attempts to create unit or product costs are quite futile; there is no such thing as a product or unit cost. All product costs are inventions. If you want to test the validity of the above statement then take the advice given in The Wire, (Game Day 2002) and “follow the money….” Go to the accounts payable department or glance down the purchase ledger. We pay people to attend the factory, we pay suppliers for raw materials, consumables and machine tools, and we pay rent and rates. This is real money. But never do we write cheques to a product. This is pretend money.

The fact is that finance professionals take all the money we spend and have to come up with a method of spreading it around over all the goods and services we offer in a way that complies with a legal financial accounting requirement. The downsides of this are very real and were described in the last edition.

The key point is that as an invention rather than a truth, we are at liberty to come up with a different way of looking at costing that assists in the scoping out the opportunity

Finding the financial impact process focus

To begin, however let’s illustrate why putting lead time compression at the heart of the business case for lean is much more important than a traditional accounting approach would recognise. The six competitive edge factors illustrated below were identified many years ago, but are still for the large part unrecognised despite being central to developing a proper business case for lean implementations.

The overall impact in the order fulfilment process of applying lean based on lead time

stability then compression is in the order of 5% to 20%. It does of course depend on the opening position and whether a parallel growth strategy has been thought through.

For service applications the impact of shorter lead times are: Better performance to customer expectations Higher quality of service, i.e. less failure demand Faster introduction of new options for customers Less queuing Higher reputation; a firm foundation for growing service offerings

process focus

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and encourages the right behaviour.

We offer some insights into this ‘flow cost’ later.

LONG LEAD TIME

SHORT LEAD TIME Queue

Process

The quality impact

Hours

Defects are detected days or weeks after the problem occurred. What are the chances of recreating the circumstances in which the error happened and building a proper countermeasure?

Hours

Defects are detected hours after the problem occurred. You might even be able to stop the process before the entire batch is contaminated.

The engineering impact

Hours

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The improved product process will not be available until many days or weeks after engineering make the change. How important is speed to market for you?

Why do you think you have an Inventory provision for obsolete stock?

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Hours

The improved product process will be available in hours. Much less obsolete inventory.

Finding the financial impact process focus

LONG LEAD TIME

SHORT LEAD TIME Queue

Process

The margin impact

Hours

5

Customer’s due date

If the manufacturing lead time is longer than the customer expectation then changing priorities expediting premium freight and overtime will be the penalty.

Hours Customer’s due date

If the manufacturing lead time is shorter than the customer expectation no premium money will be required.

The investment impact

When a little flows all the time peaks are smoothed out and the extra investment is not required.

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Where the lead times are longer pressure to ship puts the last operations under peak load typically at important times like month end. To cope with this peak, extra capacity is often laid down which is not required for most of the time.

Hours

process focus

Hours

LONG LEAD TIME

SHORT LEAD TIME Queue

Process

The due date performance impact

Hours

If the lead time here is 5 weeks then what the customer has indicated they want is launched in 5-6 weeks time. So the customers have 5-6 weeks to change their minds and they will because their customers change their minds. To everyone in production it looks like no one knows what is going on as quantities change regularly.

Hours

Customers know much more clearly what they want over the next few days. The shorter the lead time the more certain that what you are launching is really required.

The finished goods impact

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Hours

In many environments of which make to stock is the most obvious the lead time through the process is an important element of the calculation of finished goods holding.

The longer the lead time the larger the finished goods have to be because it has to survive demand consumption during a longer replenishment period.

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Hours

If the lead time is shorter not so much finished goods are required because they can be replenished more frequently.

Finding the financial impact process focus

Flow costing

We do not build a business case every day but it can be done periodically, in line with future state development plans, which may have time horizons of three or six or even 12 months duration depending upon the degree of difficulty taken on. So what of day to day activity and the plotting of smaller steps and interventions?

Here we use flow cost. The concept is quite simple and emerged from observations made during value stream mapping (VSM) events.

There can be many useful programmes that spring from mapping but one of the critical and most interesting outputs is the relationship between the value added (VA) or conversion time and the overall lead time (LT). VA is almost always a very small part of the overall LT as in the case above. And yet the product cost is worked out on the basis of this VA time. If we look at how a product or unit cost is worked out and contrast it with the flow cost the latter is revealed as a system that is more in tune with a lean organisation.

Imagine we have a simple four stage process in manufacturing: -

Conventional unit costing

85

37 3145

60

75

2775

Quantity to Recover

2220

Quantity to Recover

Demonstrated Efficiency

87%

Demonstrated Efficiency

85%

Demonstrated Efficiency

98%

Demonstrated Efficiency

91%

Costed Quantity

2575.2

Costed Quantity

2358.8

Costed Quantity

2176

Costed Quantity

2862

Total

Process Costs

£1,805

Process Costs

£2,495

Process Costs

£1,915

Process Costs

£2,563

Process Costs £8,778

Target Cost Recovery Rate

£0.70

Target Cost Recovery Rate

£1.06

Target Cost Recovery Rate

£0.88

Target Cost Recovery Rate

£0.90

Unit Cost £3.53

Both methods start by collecting data on what it takes to run the processes, which will normally include labour, tooling, consumables, possibly supervision and maybe even energy depending on circumstances. In conventional product costing there will be overhead allocation to consider. This is not the case in flow costing.

Overhead is not allocated back to production at all. Why bother?

Allocation does not reduce the expense. If you want to do something about the size of the expense go work a lean programme out in the overhead department.

P rocess focus

2960

Quantity to Recover

Quantity to Recover

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37

37

80

Hours per week

Hours per week

Hours per week

Hours Per week

Rate

Rate

Rate

Rate

We do not want this “accounting issue” to get in the way of the deeper discussion so for the time being let us assume that the process costs noted above (£1805, £2495, £1915 and £2563) exclude overhead. This is, as far as we can tell, the real money the business uses to satisfy current demand (otherwise known as the capacity).

In conventional product costing the time available to produce the volume of parts is now used to work out a recovery rate. In the instance above the total parts available to be made in the time allowed has been degraded by demonstrated efficiency.

The costed quantities are now divided into the process costs and a target cost recovery rate is the result. And if we add up the results from each of our four processes we have a product or unit cost of £3.53. The mechanics and details may differ in your own organisation but this is substantially how products costs are arrived at.

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Now let us add some other features to our picture of costing and make the links back to VSM.

Just look at the demand! It is 1740 per week at present. And we have a batch size of 500. The disposition of the work in progress is revealing; physical inventory does tend to accumulate in front of the slowest operation, i.e. milling, and this production line will never produce more than 60 units per hour as long as milling stays on the same shift pattern as the others.

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Finding the financial impact process focus

Given that we have data regarding cycle times we can do a rough cut calculation of the lead time. (There are a number of valid ways to work this out we just need to be consistent).

13 batches in work in process.

Cycle time per part 45 secs 48 secs 60 secs and 42 secs Processing 18.75 hrs + 12.5 hrs + 41.7 hrs + 17.5 hrs = 90.45 hrs Total manufacturing lead time 2.4 weeks So like every mapping event we have a lead time far in excess of the cycle time for a

part. We can however, calculate the flow cost now for comparison with the product or unit cost.

The calculation of the flow cost hinges on the lead time not the process time.

The flow cost is the time the product or service has taken or been exposed to the money it takes to run the system. The longer it hangs around the greater the cost. The shorter the lead time the less it is exposed so the smaller the flow cost.

We can easily apply a similar logic to warehouses where pallets of goods hang around for week after week.

Batch size 500

Demand 1740/wk

Operating Expense of the System £8778 per week Product exposed to the money it takes to run the system for 2.4 weeks or 12 days 2.4 weeks x £8778 = £21067.20 Divide the Total System Cost by the demand (sold) 1740 = Flow Cost of £12.11

Conventional unit costing

Target Cost Recovery Rate

Lean Intervention Pull System Real 5 “s” SMED

£1.06

Target Cost Recovery Rate

£0.88

Target Cost Recovery Rate

£0.90

Impact on Unit Cost One off cash increase No impact Increases unit cost

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£0.70

process focus

Target Cost Recovery Rate

Flow cost versus product cost

So what are the implications for a lean enterprise? Let’s look at a few examples of lean activities and the relative impact that traditional costing and flow costing have on their sustainability or apparent success. Say an enterprise introduces a pull system to put a cap on work in progress, applies 5S, including standard work in progress and modifies set up to change batch sizes.

Conventional costing is immune to these changes. In fact, because of a quirk of double entry book keeping, reducing work in progress by these three means will actually result in lower perceived profits. This is a well known phenomena but nobody does anything about it.

Batch size 500

Demand 1740/wk Batch 4

Batch 6

Batch 5

Lean Intervention Pull System Real 5 “s” SMED

Batch 3

Batch 2

Batch 1

Impact on Flow Cost Cash + Flow cost down by £5.59 Cash + Flow cost down by £0.94 Cash + Flow cost down by £2.79

COMPETITIVE EDGE Imagine how many good lean programmes have been derailed because of inflated inventories and the clumsiness of the financial accounting definition of value added!

On the other hand, because flow costing responds positively to lead time compression it encourages these lean activities.

The cash and the flow cost reduction are only the tip of the iceberg; do not forget the 6 competitive edge factors as well.

Flow costing, which uses lead time to calculate flow, penalises delay and draws greater attention to how we use and lose time - the most precious asset we have. Flow costing is designed for lean practitioners to help them focus and to promote the right lean behaviours. E N D

Further information...

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For greater insight into finding the financial impact of lean see Darlington and Jone’s recent paper Building a Business Case for Lean, available for download at www.leanuk.org

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history and evolution patrick graupp

The history and evolution of...

standard work As lean maturity moves forward and enterprises become adept at nurturing lean cultures the importance of understanding core lean principles is becoming the talk of the practitioner town. This is a positive development which should enable organisations to support far more sustainable improvement programmes, but, at the same time, it is crucial that we do not forget the valuable tool kit that supports lean work. Indeed the move towards principlesbased lean should inform a much more sensitive and appropriate use of that tool kit.

histor y and

When the world went to war in the 1930s, the US realised that it would need to ramp up production to supply its allies. When it later entered the war and saw much of its skilled labour go and fight in Europe and the Pacific, it also had to develop a new workforce largely consisting of housewives, farmers, fishermen and cowboys who had never worked in a factory environment before. To meet these

e v olution

efore lean, there was TWI. In fact, many of the concepts we think of today as quintessentially Japanese, like continuous improvement, worker involvement and standard work, actually came from a program that was developed in the United States during WWII and later taken to Japan.

The Training Within Industry program, or TWI, laid much of the groundwork for what would become the lean revolution.

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B

To support a more principles driven use of improvement enablers LMJ will be investigating a series lean tools and techniques in articles which trace them back to their origins, investigate reasons why their use may have changed over the years and clarify what problems they are designed to help resolve. This month Patrick Graupp, senior master trainer at the TWI Institiute uncovers the history of standardised work and its relevance to lean thinking.

challenges, and do so quickly and effectively, they developed the TWI program with a focus on frontline supervisory abilities in three areas: 1. Skill in instructing 2. Skill in improving methods 3. Skill in leading Between August of 1940 and September of 1945, 1,750,650 certificates were passed out to supervisors taking one or more of the three TWI modules in 16,511 plants across the country.

Of these, a total of 1,305,570 supervisors were trained in job instruction and they, in turn, went on to train 10 million workers - fully one sixth of the nation’s entire work force - in how to do their jobs. Historians have credited TWI with not only helping win the war but also shortening its duration.

After the war, while the Americans reverted back to their prewar patterns of managing, the Japanese, who had been brought into contact with TWI through General McCarthur’s occupation forces, embraced TWI and its principles. In particular, they appreciated the concept of humanism in industry which came with TWI. Here are a few lines taken directly from the 1940s’ training manuals which sound very similar to the lean concepts that have come back to us via the Japanese: If the worker hasn’t learned, the instructor hasn’t taught.

Operators have good ideas too; often just as many as we (managers) have—sometimes more!

Remember there will always be a better way. Keep searching for further improvements.

Make the best use of each person’s ability.

Today, just as was the case when it was developed 70 years ago, TWI is giving front line supervisors the basic skills they need to help their organisations survive in the world wide competitive environment. If anything, where companies go wrong is when they try to change the TWI formula to some modern ideal that contradicts the age-old wisdom that the principles are founded on. In order to succeed in their mission of winning the war of production, the TWI founders came up with a set of training parameters that are as applicable today as they were in 1940:

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A 4-Step method for learning each skill 10-hour classes given over five days, two-hours per day Standardised delivery following well defined trainer manuals Small classes of just ten people each Hands-on practice by each participant using real jobs for learning by doing

history and evolution patrick graupp

By sticking to these guidelines, supervisors can successfully master essential skills that enable them to meet their daily responsibilities of providing quality output at the proper cost.

Moreover, these skills provide the foundation for lean success and sustainability. The three TWI modules enable companies to cut to the core of what lean is all about - unsurprising when we consider that lean tools were developed based on TWI philosophies. Here is a little more detail on what the three TWI modules comprise:

Job Instruction:

This module gives supervisors a method for teaching correct, safe and conscientious approaches to work in an easily memorable format. It shows them how to break a job down into its essential elements - important steps (what to do) and key points (how to do it) - so that learners get just the right amount of information needed for efficient and effective task completion. Moreover, by identifying and teaching the reasons for these key points, we can enable learners to understand their jobs more fully. Skill in training is indispensible when it comes to creating and enforcing successful standard work and it is the missing piece which often prevents lean implementations from achieving their full promise.

Job Methods Improvement:

This module teaches supervisors how to analyse jobs in order to produce greater quantities of quality products in less time by making the best use of available manpower, technology and materials. By learning to question the current method, supervisors can generate improvement ideas and develop new methods on a repeatable basis. Continuous improvement is what lean is all about but it cannot be achieved if employees are not given a sure and reliable method for generating ideas.

Job Relations:

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histor y and

Based on timeless principles, the TWI methods are serving today the same purpose for which they were designed so many years ago - providing management with the essential skills they need to get the most out of their people on a daily basis. E N D

e v aluation

None of these efforts will generate true benefits if the supervisor cannot get people to cooperate in the work. This TWI module enables supervisors to build strong human relations, it gives a method for resolving people problems in a way that treats people as individuals and also approaches problem resolution so that root causes can be uncovered effectively. In addition, the method teaches how to prevent these problems from happening in the first place using solid foundations for human relations that, when practiced daily, keep communication strong. This directly relates to the respect for people element of lean which must be present for true success.

etters

a n d

c o mm e n t

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The ‘l’ in lean

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In 2010 LMJ held two highly successful seminars ???????????????? dedicated to the discussion of lean leadership roles and the importance of leadership in lean success. In this comment business and supply chain improvement specialist at EPG Solutions, Sigi Osagie, gives his views on the theme.

B

efore the millennium I read somewhere that lean would become the predominant business philosophy globally. And now it does indeed seem as if everyone, from all kinds of private enterprise and through to public sector, is donning the lean hat.

For me this is an interesting trend, considering that most lean implementations fail to deliver the expected benefits – a fact even lean practitioners openly admit. Estimates of failure rates range up to 50% and higher, depending on which survey you read. As a lean six sigma black belt myself, with experience across several sectors, I have had blessings and misfortunes in several initiatives, some of which I would prefer to erase from my memory.

The uptake of lean, despite the less-than-stellar success rates, suggests that we may be falling into the same delusions that have beset organisations for ages: that there really is a magic bullet, some sort of business panacea, that can eliminate all challenges and give companies key advantages over their competitors ad infinitum.

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Well, we have been here before haven’t we? Remember, justin-time, TQM, Six Sigma, et al? At one time or another in recent history many of these tools and methodologies were hailed as the key ingredient for business success. And many organisations jumped on the bandwagon. Yet, it is interesting that these days we no longer hear of any companies loudly proclaiming the benefits of their TQM implementation. I my opinion that’s because TQM rarely delivers the all-encompassing performance that is promised and neither does any other methodology.

Valuable business tools or philosophies, like TQM or lean, demand certain prerequisites for sustainable success. Trying to implement lean on poorly-defined or uncontrollable processes is a non-starter, as is taking an ill-defined implementation approach. Successful lean can deliver benefits that transcribe to advantages in strategic, financial and human capital terms. But those benefits can only really be sustainably attained when lean is properly applied by

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which I mean; the implementation should include a pre-assessment of the suitability of lean principles to the particular situation at-hand.

This is where many businesses fail – they forget that lean is a tool, albeit a potent one, and that it was never developed to be a business cure-all. The disjointed thought process that leads to adopting lean inappropriately is a direct manifestation of ineffective leadership. Unless the decision-making process for the adoption of lean and, crucially, how it will be implemented, is robust, you simply end up with another ‘me too’ lean programme. This typically results in operational efficiency, but not in effectiveness.

Sustainable performance is never achieved via one route alone. Companies must consider the various dimensions of performance: processes – both production and transactional, people - including the organisational structures and culture in which they work, enablers, e.g., IT systems and performance management systems, strategy – everything else must be aligned to this and leadership – the key ingredient..

Organisational benefits are unlikely without consideration of all these factors and the most crucial of all of them is leadership. This is the single most important factor that predetermines success or failure. If ‘lean’ was an acronym, the ‘l’ would stand for ‘leadership’ within which we need to understand leadership at executive level and leadership of the lean activities themselves.

While many global multinationals (Danaher, Deere and Toyota) have implemented lean with very visible benefits, there are also many highperforming companies, large and small, who have not adopted lean. What one finds in such businesses instead is a collective mindset of effectiveness and efficiency, driven by sound leadership capable of orchestrating the various dimensions of performance.

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C ase letters studies and

Sigi is keen to take this discussion further – if you would like to take up any points with him one-to-one he is happy to be contacted at sigi.osagie@epgsolutions.co.uk.

implementation comment

Lean on its own cannot be a competitive differentiator. You or I can pick up any kitchen tool or utensil – potato masher, serving spoon, chopping board, but using the tool doesn’t necessarily guarantee that our cooking will come out like Gordon Ramsay’s or Nigella Lawson’s. In the same way, any company can implement lean, but that doesn’t mean they will become high performers.

Just as the key cooking factor in the kitchen is the chef’s culinary skill, in the corporate landscape a company’s leadership capabilities determine successful, sustainable outcomes. E N D

Responding to ‘Accounting for lean’

It’s not child’s play Marie Jones, a senior manager with The Child Protection Agency, responds to John Darlington’s issue 07 article ‘Accounting for lean’ and gives her perspective on the potential of flow accounting.

L

ately the intense scrutiny of both child protection services and public sector finance has resulted in increased regulation, demand and expectation for The Child Protection Agency.

This comes at a time when resources are shrinking and the challenge of financial management and performance analysis has never been greater.

the completion of the BPFM was constrained by data deficits, broken information flow and IT technicalities. Despite this, there was a visual representation of the main service routings which showed dependency between process and shared services and understanding of the relative importance of the measures to the service.

It was a necessity therefore that the topic of my MSc Lean Operations research comprised the right mix of academic interest and business relevance.

Titled ‘To what extent does lean make financial sense in local government?’, my study explored the relationship between improvement activities in local government and financial policy – focusing on the driving forces of change and how to define improvement in monetary terms. A critical issue of conflict between an objective of cost reduction and lean philosophy arose.

The world of children’s social care differs greatly from the business sector – an organisational measure of success would not be profit. However, this does not remove the tension of business functions that sit awkwardly but necessarily alongside this welfare service as a means of managing the available resources. At a service level the cash-limited budget is relatively simple; the service is accountable for what it can control and not subject to the distortions of the commercial world but the available budget is a necessary operating condition – a finite resource.

A principle aspect of the project was a case study of flow accounting which brought together an evaluation of the elements of lean required to support cash release. I explored the extent to which the method can direct and support improvement in a children’s social services department and at the time of the study the service had concluded a commissioning review and was 12 months into a project to implement the Integrated Children’s System. This initiative had met with professional resistance and there was a baseline of increasing costs with a reported decline in performance.

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Previous lean improvements within the service had lacked rigour. The narrow focus had been on waste removal and had not resulted in sustained improvement or cost benefits. In contrast the practical application of flow accounting exposed the importance of flow principles, in particular the relationship between flow, variation and demand.

Central to the methodology is the development of the Big Picture Financial Map (BPFM) and defining the measures of throughput, inventory and operating expense. In the context of the case study this was not straight-forward as

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The service experiences a number of obstacles to aligning finance and lean principles, for example: Service is driven less by the views of its customers than by the demands of society and government by means of policy, regulation (operational and financial), inspection and performance targets The process of calculating the key measures; throughput, inventory and operating expense, challenges service definitions and understanding of capacity, demand, variation and work in progress Commissioning and brokerage functions are not sufficiently commercial and competitive pricing is constrained by a limited market of specialist provisions Despite these constraints, the systematic steps of flow accounting supported the service in furthering its knowledge of expenditure and performance. This knowledge, combined with the research underpinning the Commission Strategy and analysis of social work practice, provided a clear pathway to improvement and a compelling business case in the political arena despite the financial constraints facing the authority. E N D

l e t t e rs a n d c o mm e n t

Unlocking potential Lee Philip, general manager at Assa Abloy, manufacturer of door solutions, relates how learning about flow accounting has impacted the organisation’s direction with lean activity.

We have now been implementing lean techniques for over five years and are committed its development in the UK. This year we were awarded the Manufacturer of the Year Award 2010 by the Black Country Chamber of Commerce and won the EEF Midlands Award for Innovative Working Practices. It has not been an easy journey to achieve these standards and we still have many years of hard work ahead of us but a recent milestone for me has been the work we did with John Darlington.

Like many modern organisations our challenge was not if but how to implement lean; our customer base is extremely wide and demand volatile so our ability to smooth demand and balance to a stable Takt time is limited. It is also fair to say that while our organisation had embraced lean as a strategy, and could demonstrate good use of lean tools and techniques in our operations we had not achieved the breakthrough we had hoped for in terms of improving customer service, reducing inventories and cost – Why?

Order fulfilment is a chain of events connecting sales forecasting, order entry, planning, manufacturing, purchasing, distribution and of course getting paid! Problems may exist in all areas of the order fulfilment supply chain, but become most visible in the stock. Put simply we either have too much resulting in poor cash flow or too little resulting in poor service!

The work we did was invaluable in helping us to realise the importance of really mapping out your business processes and understanding how lean tools and techniques can be used to help improve our ability to improve customer service, at a lower cost, with less money tied up in inventory all leading to our goal – to make money! E N D

letters and

Prior to the implementation of this system our production lines were plagued with shortages and as a result our service was not where it needed to be. By implementing the new system for both finished goods and internal supermarkets we have significantly improved customer service levels to be consistently higher than 95% OTIF and in parallel reduced inventory by over £2.5m.

In addition operating costs have reduced as stock is better aligned to demand we do not have to waste time and effort in chasing down arrears and expediting supply. The reduction in inventories has also enabled us to free up manufacturing space and consolidate our manufacturing and distribution sites.

comment

As I sat in a lecture room listening to John Darlington present his ideas on materials management and pull systems, the importance of remembering our ‘goal’, and the challenge of really considering the importance of the relationship between throughput, inventory and operating expense I experienced a true ‘light bulb moment’. That day I began to understand the importance of designing a production system and using the lean toolbox to help achieve our main aim - to make money. John explained that while all of the lean tools are useful, there must first be a diagnostic study completed to understand how the production system works in relation to

managing demand, inventory, operating costs and of course financial profitability. With John’s advice and guidance were able to assemble a large cross functional group and create big picture maps. These helped us visualise and understand our current state and diagnose where the problem areas were. We had done mapping before but the flow accounting approach made for a refreshing change; introducing the financial dimension and demonstrating very clearly the big gains that can be made by correctly aligning demand, inventory and capacity.

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ssa Abloy is better known in the UK under its brand names including Yale, UNION, Mul T Lock and CHUBB. We still manufacture at our main manufacturing site in Willenhall and at the heart of our strategy is the delivery of world class customer service through the application of lean thinking.

A new era for Bolton In LMJ issue 06 Glynn Finney reported on the Royal Bolton Hospital lean journey in ‘Foundations for change’. Here Joy Furnival, head of lean transformation and Carol Bernstein, improvement lead anaesthetics and surgery division at Bolton give their insider perspective on the improvement journey, and share where next steps are heading.

R

oyal Bolton Hospital NHS Foundation Trust started its lean journey back in 2005 and pioneered the use of lean in healthcare in the UK. Lean was chosen as it offered an organising philosophy and framework for transformation that clearly focused on patient (customer) value. However, the methodology needed some adaptation for the complex world of healthcare and so the Bolton Improving Care System (BICS) was born. The BICS Academy was also developed to significantly transform the organisation’s skills and capability with lean.

During the last year, the Trust has gained a new chief executive, Lesley Doherty, who led much of the early development of BICS and integration with the local community healthcare provider as COO. This work has launched the beginnings of a new era for BICS and with it new challenges.

These challenges are three-fold. Firstly the purpose and intent of the new-style organisation is changing, with a much bigger focus on population health, allowing more detailed transformation activity along the end to end value stream. Secondly approximately 1800 staff will join the new organisation who have had little exposure to BICS and thirdly the organisation has to deliver unprecedented levels of savings over the next four years in line with government austerity measures.

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This challenge offers many insights for other organisations going through acquisition and merger. Often during times of major transition organisations can feel pain via reduced performance and lower morale. During our integration, focus has relentlessly been pinned onto the needs of the patient and ensuring this has primary focus.

This has helped leaders and staff throughout the organisation think outside their own interests and be prepared to redesign the way care is delivered.

During November 2010, the organisation hosted an enterprise wide value stream analysis – a vision and strategy BICS event for the top

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120 leaders and stakeholders across the organisation. This celebrated the achievements of the old organisation, but also to recognised the needs of the future for both patients and staff. This was an important milestone for the organisation; it helped to start the relationships and design the principles of the future clinical model and thus design the organisational structure, building foundations for meeting the new organisational challenges. In keeping with lean, the new structure makes a significant step forwards in moving us towards value stream management. The BICS Academy will also have a major role in training and exposing new staff to BICS language and methodology during the first 18 months.

Ann Schenk, director of strategy and improvement says “The challenge for BICS now is how it will adapt to the new organisation, continue to spread, deepen and increase engagement in and delivery of transformation activity. Perhaps most importantly, however it will significantly widen patient involvement in redesign activity to ensure all of what we deliver is focused on value�. E N D

Fig 1: The Bolton Improving Care System

Understanding Value

Value for Money

Joy and Pride in Work Redesigning Care

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Best Possible Care

letters and

Improving Health

comment

Delivering Benefit

Learning to See

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A balanced equation Gwendolyn Galsworth, the Visual-Lean Institute, writes in response to the LMJ issue 07 focus on customer value and value creation

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peaking as a visual – lean practitioner with nearly three decades of implementation experience, I was struck by the discussion of customer value in the last issue and would like to offer the following comments.

In the important discussion on understanding customer value, through the customer’s eyes, a strange disconnect can occur that could work against both customers and organisations in the business of pleasing them. If we restrict our definition of success to the pursuit and capture of customer value, we risk losing sight of the other causes that define what it is to be, and stay, in business.

Step back and connect customer value to the enterprise as a whole and we must recognise the parallel importance of operational excellence – because it is through operations that value is made manifest and delivered.

Designing a product or service for true customer value is one side of the equation, flawlessly executing that design for the least cost is the other side.

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Instead of isolating the two, I prefer to think of customer value and the delivery of that value as a single continuous event. The value content of your product or service is shaped, fitted, and formed through the production process – whether that process is located in a bank, hospital, engineering office, military depot or factory. Without doubt a company must become adept at naming and capturing customer value.

But it must also gain skill at turning that perceived value into received value – and with minimal cost.

This means that we must create and learn to manipulate a system of operational flows with a straight gravity-feed pull, humming along an exquisitely defined path – a path of least complexity, least entanglements, least stoppages, least

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risk, least mistakes, least resources. The Japanese call it the ‘least cost means.’ It is worth our study and our mastery.

Do not hesitate to discuss the importance of designing products and services to exact, well-researched customer requirements.

Equally, do not underestimate the importance of building them with the same commitment to precision. Which is the greater victory: achieving the exactitude of design or the exactitude of execution?

Wrong question. The greatest victory is achieving both.

The value of customer value is not the end of the story. As I see it there is a parallel journey with operational excellence on which we meet our other customers – customers we might forget to include if we search exclusively for external customer value.

There is a chain of customers within the company’s walls. We may not be able to value too highly the people who buy our product or service but we are also not immune from neglecting the ones that make it.

In the customer-driven enterprise, the needed balance is struck when we strive for operational excellence as a means for better serving our external customers. Without that, the discussion of customer value can become theoretical, academic, even dangerous.

Operational excellence is a big part of what keeps business in business. E N D Gwendolyn Galsworth is author of several successful books on the subject of workplace visuality. Her most recent work Work That Makes Sense (Visual lean Enterprise Press 2010) supports operator led visual inventiveness.

Gwendolyn will be delivering an exclusive workshop for LMJ in April. For more details on this event please contact Jon Tudor at j.tudor@sayonemedia.com.

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Contact Benn Walsh (b.walsh@sayonemedia.com) on 0207 401 6033 for more information or simply subscribe online at www.leanmj.com.

B OO K R E V IE W J o h n b i ch e n o

John Bicheno reviews Far from the Factory: Lean for the Information Age,

by George Gonzalez-Rivas and Linus Larsson, CRC Productivity Press, 2011

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ow! What a book! Welcome to the new age of lean! This is the long overdue book addressing the impact of web 2 on lean thinking.

This book is packed with new ideas, and breaks new ground in so many directions for a ‘traditional’ lean thinker like me. I was continually surprised, amazed, and delighted at the new insights. It truly pioneers lean thinking in areas such as IT, knowledge management, project management, office lean, and more subjects that have previously been very much ignored the transfer of lean thinking from the factory to the office.

I had the pleasure of meeting Linus about a year ago.

We began to talk around my 2x2 service typology – transactional, interactive, custom, and idealised, as proposed in The Lean Toolbox for Service Systems. But I quickly realised that Linus had explored the unsatisfactory nature of many lean office implementations far more deeply than I had.

His comments were not only intriguing but also witty. Here was fresh thinking that had the potential to bring lean into a new dimension. For too long lean has attempted to transfer ideas from the factory to the office while tending to ignore developments in IT, web 2, and information age thinking. Just take a look through the publications on so-called office lean. You will see many concepts – value stream mapping, the eight wastes, 5S, kaizen events, standard work, hoshin, and many more, simply moved from factory to office with minimal adjustment. That works (somewhat) if you have a transactional non-multitasking paper factory, or where paper flow goes along with products.

But here’s the thing – very many offices and service systems are just not like that. This is hardly big news, but why then do so many lean implementations in diverse situations try to force-fit factory concepts? It’s as if we are ignoring the way that employees have changed, customers have changed, service and product complexity has changed, and are imagining that IT is still in the era of the stand-alone PC.

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John Seddon has, sometimes abrasively, pointed out the fallacies of simply using factory concepts in the office. Maybe his shock tactics are the best way to bring out the issues but here is a powerful addition. I suspect that John Seddon would not be happy with aspects of George and Linus’ book but to me, combining the systems and intervention concepts of Seddon, with the web 2 and IT concepts of Far from the Factory, both built on the foundations of Ohno, Deming, and Spear, offers the potential to re-launch lean into the service economy.

Whether you are a lean skeptic or a ‘traditional’ lean thinker you will enjoy the many entertaining observations and sideline comments to be found here. Undoubtedly my lean book of the year! E N D

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EVENTS Forthcoming events to be hosted by LMJ for the readership community include:

Lean Connect

The LMJ Annual Conference

Putting service and manufacturing organisations in touch with a range of consultancy and training organisations to help them fast-track the selection of any external resource they need to facilitate lean progress. Sponsors will be drawn from academic institutions, training and IT providers and more. Added value will be available in a parallel conference event populated with broad ranging case-study insights.

The second annual conference will celebrate the growing LMJ community and provide another chance for knowledge sharing, access to research and clarification of lean thought leadership. Speakers will include Dr Zoe Radcliffe. Book the date in your diary now.

March 24, Ansty Hall, Warwickshire

Visual-lean masterclass April, London

Acclaimed author Gwendolyn Galsworth will deliver an intensive day long masterclass on how to approach visual lean enterprise. This exclusive session, hosted by LMJ will include a copy of Galsworth’s newest work Work That Makes Sense.

June 16, Warwickshire

For more information or to book your place at any of the forthcoming events hosted by LMJ please contact Benn Walsh on:

0207 401 6033 or email:

b.walsh@sayonemedia.com

Other forthcoming events from LMJs partners include:

WBS Forum

Lean and operational excellence

This is part of a series of forum events led by Warwick Business School to lend insight into the key business processes from industry leaders.

This forum event will focus on finance and will be delivered by Antonio Horta-Osorio, CEO Lloyds TSB and former CEO Santander UK. Details are available at: www.wbs.ac.uk/events

Dr Zoe Radnor and Paul Welley give an overview of what these methodologies mean for operations management and organisational improvement. This event, part of an executive education open programme, is designed to give delegates confidence in handling lean initiatives at both a strategic and tactical level. Details are available at: www.wbs.ac.uk/events

The Lean Office 2011

Lean and Green

IQPC offer the chance to further explore the potential of lean thinking for office processes and spreading the use of continuous improvement for value creation and greater bottom-line savings. Addressing issues from organisational realignment through to identifying stumbling blocks and value-add measurements this event will encourage discussion and provide varied case-study investigations. LMJ subscribers will receive a 20% discount on this event: www.the-lean-office.com/Event.aspx?id=406266

Shedding light on the business case for the latest improvement paradigm this event, hosted by SA Partners and aimed at lean practitioners in food production and retail, will bring together thought leaders and industrialists to consider ideas around how to exploit a lean and green approach to competitive advantage. The keynote address will be delivered

by Hunter Lovins, president of Natural Capitalism Solutions. For more information please contact Claire Munro at: cliare.munro@sapartners.co.uk.

March 21-23, London

February 7, Warwick

March 3, London

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January 24, Warwick

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