Focused Lean: Transforming Public Services

Linking lean initiatives to overall strategy

Public sector budgets are under intense scrutiny and many government organizations are looking to the proven concepts of lean to help improve operations. Yet while lean benefits are evident across the world, in many instances a lasting step change in performance has yet to be achieved. The reason is simple: Organizations apply lean to solve the small problems rather than the bigger, more strategic issues. Success in the public sector demands a strategic focus.

The use of lean principles in the public sector has been growing steadily, with several successful initiatives. But projects are typically focused on specific, limited parts of a process and rarely reach a level of breakthrough performance for the entire organization. More often than not, lean efforts are neither transformative nor prioritized in line with an overall strategy, and resources are misdirected. With the pressure to reduce costs, the public sector can no longer accept such laxity.

Why the Public Sector Doesn't "Get" Lean

One reason efforts are failing in the public sector is the way improvement ideas are generated. In the traditional lean approach, staff members (with help from internal and external customers) diagnose issues and propose improvement ideas; engaging the workforce is rooted in public sector culture. However, staff members are not empowered to make big, sweeping changes. That's why, when you review a portfolio of lean projects, you rarely see mention of headcount reduction. Yet workers' salaries are typically the biggest cost in the public sector.

Further, if organizations launch too many initiatives at once, the investments can rapidly outweigh the benefits—too many people are working on producing more opportunities, or progress is demanded so quickly that the benefits are poorly calculated, or leaders lose sight of the overall picture and initiatives are misaligned with the overall strategy. In many lean programs energy is also wasted on ideas that only marginally align with the overall strategy.

Achieving breakthrough performance requires unleashing the powers of lean within a strategic framework.

Focused Lean Efforts

The first step is to establish the strategic context before commencing with a frenzy of activity, prioritizing potential lean initiatives based on the extent to which they contribute to broader strategic goals. This is not always a straightforward task. For example, in the United Kingdom, the vision of Her Majesty's Revenue and Customs (HMRC) is:

"We will close the tax gap, our customers will feel that the tax system is simple for them and even-handed, and we will be seen as a highly professional and efficient organization."

In focusing its lean efforts, does HMRC now give top priority to increasing capacity or reducing waste? Clearly, matching capacity with demand would be seen as highly professional and efficient but if it were to produce less waste it would free up the time and resources it needs to help close the tax gap. Obviously, this is a judgment for the department's senior management, and it is used here to demonstrate the importance of linking lean to strategy.

Figure: A four-pronged approach to getting lean

To help bring a strategic focus to public sector lean programs we suggest the following four-pronged process (see figure).

Establish breakthrough objectives. Senior leaders face a host of challenges as they try to connect day-to-day activities with the overall strategy through setting the right objectives, balancing capacity with demand and pushing the organization to make the right cost and service trade-offs. Specifically, ensuring the largely bottom-up lean activities are connected to what the organization wants to achieve requires a clear articulation of the strategy and future vision; this is done by outlining several objectives that need to be accomplished in a two- to three-year time frame. There is nothing unique to the public sector about this requirement. In fact, the private sector is just as guilty of not making this connection.

Now is not the time to shy away from challenging objectives or forcing teams to think about "breakthrough change." The public sector is open to radical solutions and bold objectives. The level of challenge, and the overall prowess of the organization in lean, will drive the answer to the crucial question: What breakthrough objectives do we want to achieve?

As an example, we used this approach in our work with a client whose 10-year vision was to become one of the premier hospitals in Europe. A component goal was to move toward a more efficient and cost-effective delivery model. To this end, its breakthrough objective was to improve the quality of service systematically for patients while drastically reducing recurrent costs by £100 million within three years—a level of change that could not have come bottom up.

The senior team creates annual goals that, when linked to the breakthrough objectives, leads the organization to achieve its overall future vision and strategy. The process helps break down big, bold objectives into digestible, more achievable chunks.

Generate ideas, identify initiatives and prioritize them. The next step is to come up with the transformative ideas to achieve the objectives, and to do so in a way that is acceptable to the prevailing culture, while pushing the boundaries.

When it comes to ideas, there is no evidence to suggest that the private sector's workforce is any more creative than the public sector's, though clearly the former has more resources to stimulate ideas and is more familiar with ways to do so. However, the key necessity—imagination—costs nothing and is available in all sectors.

The difficulty in both sectors is how to encourage genuinely radical ideas rather than small-scale solutions to irritant problems. The following will help steer idea generation:

• Conduct strategy challenge sessions. Work with senior management to generate ideas in a top-down fashion and link ideas with corporate objectives.
• Generate ideas from the bottom up. Work with internal and external customers to identify problem areas that cross over multiple work streams. Established lean techniques and workshop methodologies such as Voice of the Customer and Kano are ideal for this purpose.
• Continue traditional activities. Suggestion boxes, town hall meetings and walking the floor are all useful ways to air issues and encourage a range of ideas.

Now determine which are aligned with the overall objectives, and highlight both those required to achieve the annual objectives and the critical processes needed. This exercise often reveals two things. First, even after adding up the expected results of the initiatives that align with the breakthrough objectives, there's still a significant gap between the results and the targeted "breakthrough." Second, many of the initiatives do not align with the overall objectives and are better off eliminated, with resources re-deployed to close the gap with the targeted breakthrough.

These findings often lead to heated debate—particularly if senior leaders are already committed or, even worse, if work is already under way. In the public sector, a decision to cease activity often raises the question of whether taxpayers' money has been squandered—and such decisions are often deferred for expediency. But what is worse for the public purse? Identifying a poor project and redirecting resources, or letting it suck up resources to no good end?

Different parts of the organization will have different views on the initiatives and processes that should be halted. For example, public sector operations will often be happy to support anything that reduces or stabilizes demand, yet this is at odds with public policy objectives to serve all those in need when they need it most. Having an organization regroup around breakthrough objectives helps reduce emotion, and frees everyone to view the bigger picture and identify the right processes and opportunity areas.

In our work helping an inland revenue department for a European government to improve its performance of debt collection, we mapped initiatives against the breakthrough objective of a step change in collected monies. We found that only a small number of bottom-up generated initiatives would make a significant impact.

Allocate resources. When lean initiatives are not aligned, many ultimately do not meet their potential. Typical reasons include:

• Resistance. Opposition occurs when it becomes clear that the organization isn't unified and different stakeholders take different views on what's needed.
• Shortcuts. The team has to take shortcuts because resources are scattered across a large number of misaligned initiatives and, as a result, achieves only a portion of the total prize to be had.
• Inability to deliver. The delivery requirements have not been properly considered, and needs far outweigh the capacity and capability available for deployment.

To prevent such scenarios, a thorough review of these initiatives by a (now much more focused) team of experts in the organization is in order. This team should comprise people with deep lean expertise—subject matter experts who can advise on their areas and senior executives with a holistic view of the organization and how it fits into the larger public sector landscape—and its job is to review the list of initiatives and determine resource requirements.

A review of the new and improved list of initiatives will allow the expert team to develop scenarios around how aggressive they can be in pursuing each of them, while continuing to ensure that customer expectations are met. For almost every initiative there will be a point of diminishing returns after which the extra value created from spending more time and effort begins to decline relative to the additional cost. An appropriate cost model will find the point of diminishing returns—with the right data presented in an accessible form, it becomes much easier to identify, and reach a thoughtful decision on, where to apply lean resources.

Apply lean techniques. Finally, lean project management tools and skills take over, and project life cycles should follow a structured problem-solving methodology such as define, measure, analyze, improve and control (DMAIC). The control stage of this methodology should not be underestimated—particularly the creation of a robust process to set key metrics and monitor the results. Too often we see projects struggling to prove their worth because of lack of thinking in this area. The right metrics, identified in the course of the life cycle, will demonstrate how well the initiatives are being executed and the breakthrough objectives being met.

Leadership and Engaging Stakeholders

It is imperative that leadership and stakeholders are managed appropriately. Failure to manage properly will create significant issues that prevent a lean program from achieving its full potential. We see this issue arise in all sectors, particularly where people do not believe they "own" the change but are pressured to acquiesce. When this happens they can come to resent the program and may hinder the implementation effort.

Getting in Step with the Strategy

The public sector can create needed performance step changes and genuine breakthroughs by linking all transformation efforts to overall strategy. Focused lean public services provides the means—a framework that ensures lean initiatives are aligned with the organizational strategy. The approach breaks down objectives into manageable initiatives and guarantees a successful transformation.

Authors

Charles Davis is a partner in the London office.

Wayne Brown is a consultant in the London office.