An article written for Sector’s CityWatch newsletter to our clients…
Ben Taylor, Sector Projects’ expert in Lean Transformations, BPR, Organisational Development and TLAs (Three Letter Acronyms) provides a guide to the latest transformation and cost reduction trends – without any Japanese words. It seems that the current hot topic in local government, along with continued, and growing, pressures on budgets, is ‘Lean Six Sigma’. This process improvement approach, which has been described as ‘TQM on steroids’ (do you remember Total Quality Management?) is in fact a fusion of both Japanese and American approaches to process improvement. There are good reasons why it is so popular, and important opportunities – and risks – for local government in general, and finance in particular.
What is Six Sigma?
Lean Six Sigma is actually a cross-Pacific merger of several insights into how organisations work and can be improved, two of which, according to some, represent conflicting ways of thinking about management.
1) Mass production; command and control. This is the mentality behind performance management, performance-related pay, BVPIs, shared services, and ‘economies of scale’. Many would say that Western management as a profession has developed based upon the lessons drawn from attempts to replicate Ford’s success. Management accounting, too, is based on the division of responsibility and creation of accoutantability by results; 2) The business process as a system. The principle here is that anything which generates value to an organisation is the result of a business process; a series of inter-dependent activities. This is of course fundamental to the whole range of process improvement initiatives (BPR, BPI etc);
3) Statistical analysis of processes. This is the study of the results of a process or an activity in order to gain insight into what interventions will be most effective. Statistical Process Control (SPC) was one of the first of the recognised business improvement approaches; because of its focus on generating the ‘right’ result (usually defined as meeting a specification), SPC is most often encountered in the context of quality.
4) The organisation as a system. ‘Systems thinking’ is the understanding of a system as a whole, and the inter-relationship between different parts. It’s the approach behind the Children’s Trusts agenda (‘prevention rather than cure’), and when applied to organisations, can explain why the behaviour of individuals tends to be influenced more by their role in the system than by anything else.
Toyota
The phrase ‘Lean’ was coined by Massachusetts Institute of Technology researchers James Womack and Daniel Jones in ‘The Machine That Changed the World’, their analysis of the way in which Toyota had built an incredibly efficient, effective, and high quality manufacturing capability. This ‘Toyota Production System’ (TPS) is largely credited to Taiichi Ohno, who was inspired both by a visit to a Ford factory in the US, and the American statistical process control and systems thinking specialists who were let loose in Japan to help with reconstruction after the Second World War. The original ‘Lean’ in the TPS really demonstrates an alternative to ‘command and control’, with a strong focus on the business process as a system, but also elements of the other two insights. It was also, by the way, the origins of that other famous 80’s initiative ‘Just In Time’ (JIT), and a host of other approaches.
Quality and Six Sigma
Meanwhile, Total Quality Management developed, with an emphasis on systems thinking and some statistical analysis. When this was ‘beefed up’ with some stronger statistical analysis, and positioned to be more acceptable to command and control management approaches (with most of the systems thinking removed), it effectively became Six Sigma. This created a large business impact (and an even greater impact on stock market valuations) for the first companies that embraced it, particularly GE and Motorola.
The name, by the way, refers to statistical analysis of the variation of a set of results from a desired result; the goal is to move the average result closer to the desired result and/or reduce the amount of variation. ‘Six sigma quality’ means that fewer than 3.4 results of a process per million are of unacceptable quality – though the mathematical and statistical validity of this is disputed.
The merger of the two
Both Lean and Six Sigma have been used to good and bad effect in production and in services. They now form highly codified sets of tools, often taught and used without any of the original insights that made them useful. They form something of a religion for their adherents, who insist that there is ‘one true way’ to efficient organisations.
‘Lean Six Sigma’ is the logical end result of this progression. Bolting together the tools of both approaches, it purports to offer the big impact and processing speed of Lean with the fine tuning, high quality, and efficiency of Six Sigma.
What it means for us
What does this mean for local government, and what does it mean for you? Well, there are proponents of various flavours of Lean, Six Sigma and Lean Six Sigma competing for the right to reduce your costs and improve your processes. Many of them have achieved excellent results and they will all claim to have done so. The ODPM, as was, even carried out a study which showed real, tangible results (‘A systematic approach to service improvement’, September 2005 at http://www.communities.gov.uk/index.asp?id=1165574)
Those consultants who completely embrace ‘command and control’ management tend to get most of the work. They will take a tightly scoped area and reduce the costs significantly, though they might upset a few staff in the process. They are the type of consultants who are all tools and no insight, dogmatic clones who will turn up in your office, parachute in fifty men in suits, set up a ‘PMO’ (programme management office), and say ‘here’s the solution, now what was your problem?’ Those who completely reject command and control and embrace systems thinking are less likely to be around. The cliché here is a guy with a beard and sandals rolls up and sits around for a month, ‘absorbing the vibes’, then says ‘that’s what you think your problem is… but maybe it’s something deeper?’ Either way, trying to absorb these approaches and apply them sensibly to local government can feel a bit like being taught to drive by Nigel Mansell – potentially very rewarding, if only it wasn’t so dangerous and you had the time to focus completely on it and ignore everything else.
Opportunities and risks
It seems that both elements of Lean Six Sigma, whichever code name they are operating under, are destined to spread widely across local government. The opportunity is huge. It really is possible to reduce running costs significantly when this stuff is done well. If you are willing to embrace some changes in management thinking (and the rest of the management team is too), you can develop an organisation which learns and improves as it goes along, with frontline staff empowered to do sensible things, and managers working to support them by constantly improving the system. Most importantly, you can show that the quality of services you deliver, and the results they generate, can be improved at the same time as costs are reduced.
The risks are significant as well. You can alienate staff from the organisation and from the very approaches they need to improve their job satisfaction and the services they are delivering. You can waste money on improvement initiatives which don’t deliver, and then have to revert to the old, unpopular cuts approach. To avoid the risks, it is important to get some expertise on the inside, to experiment with applying the approaches, to be clear as to the extent to which you just want tools, sensibly applied, and the extent to which you want to change your management systems, and your thinking… and of course, not to be blinded by the science of these constantly proliferating approaches. So, as time goes on and these venerable but worthwhile initiatives continue pupping and whelping, what is the next initiative or piece of jargon to look out for? Well, my money is on ‘BPM’, business process management. BPM can encompass ‘all of the above’, but is primarily concerned with selling you software – automating the processes, or at least the management of them, and therefore has a strong connection with current approaches to performance management. It’s big in the States and in multi-nationals, usually a sure sign that some enterprising business development manager will try to make it the next ‘must-have’ for local government in the near future. We may also see ‘SPC’, or statistical process control, make a resurgence, free of its current Six Sigma home, and already there are signs that ‘DMAIC’ (the core Six Sigma improvement methodology), is being touted as an ‘alternative’ to Six Sigma. It will never end!
For a free jargon consultation – or alternatively, a jargon-free chat how we can help with efficiency programmes – please contact Ben Taylor at Sector Projects, on 079 3131 7230 or btaylor@sector-group.com
You can also connect with Ben (he’s very modern) at www.linkedin.com/in/antlerboy