Lean principles for services

Unlike in factories, waste is usually hidden when it comes to services. The principles of lean production, if applied to service functions, can cut error rates and increase overall responsiveness and customer satisfaction

Why have companies been so slow to apply lean principles and techniques to service processes such as finance, human resources, accounting, healthcare, and customer service? One reason is that the waste and inefficiency that can interfere with services are rarely obvious.

Unlike in factories, where idle workers and stacks of inventory are clear signs of broken processes, waste is usually hidden when it comes to services. It tends to lurk between functions, departments or regions, so companies see only glimpses of the problem. Another obstacle lies with the white-collar workers themselves, who may be resistant to the idea that their work could be standardised.

This lack of standardisation and consistency in service processes is costly. Complex, inefficient processes are slower, have higher error rates and decrease overall responsiveness and customer satisfaction. They also increase risk and jeopardise compliance in regulated industries such as healthcare and financial services. There’s a human cost too: when people spend too much time on low-value tasks, they have less time for more rewarding, higher value work.

The principles of lean production and industrialisation can be applied to service functions as well as manufacturing lines, with one big difference: the costs to be tackled stem from labour, overhead, and low customer satisfaction, not physical inventory. By rethinking and streamlining service processes, most companies can cut expenses by 10 to 30 per cent and improve the satisfaction of internal and external customers.

Understanding the problems
Inconsistency is a problem for many service functions. As an experiment, a company we worked with sent identical customer-service tickets to 10 different operators in a call centre for technical support. We were surprised by the huge variation in processing times among the operators: the quickest one was about six times faster than the slowest. Further analysis revealed that some operators used simple computer shortcuts such as hot keys and macros to increase their speed. But the company had no training to improve performance, and no incentives to encourage operators to work more quickly.

Another typical observation with service processes is a variation of the “80-20” rule: a small percentage of work typically eats up a disproportionate amount of time. In one internal-support function, 75 per cent of the transactions took less than five minutes to process. But the remaining 25 per cent, the more complex transactions, accounted for 60 percent of the total time expended every day. Exceptions such as these can be a huge drain on productivity and are typical for many service processes.

In healthcare, banking, travel, and other service industries, the customer is the product moving through the process and experiencing first-hand the frustrations of inefficiency. Satisfaction is critical, whether the customer is internal or external. And a lack of satisfaction is costly as it may prompt customers to take their business elsewhere.

Many service functions lack the ability to analyse and manage the factors that affect workforce productivity, such as exceptions and rework. In a manufacturing plant, targets for output and capacity utilisation are set and tracked, but most service organisations are unable to measure performance in these areas. Intermittent cost reduction efforts tend to use high-level benchmarks, not process improvement, and sharing of best practices within companies is usually quite limited.

Getting it right: six success factors
Making service processes leaner presents a variety of challenges. It often requires creative thinking but old habits die hard. For instance, when paperwork moves online, the steps of a process may still be performed in a sequential order, even though they could now be done in parallel. Rethinking old ways of working can lead to fresh insights. Many companies also find that starting small, with a pilot in a key area, can be a way to build momentum and enthusiasm — especially among white-collar workers, who may be resistant to the idea that their work could be standardised in the first place. Our work with companies at the forefront of lean services reveals six factors that increase the odds of success.

Identify and map end-to-end processes: Because processes typically cross functions and departments, few people involved with them have a complete picture of the end-to-end workflow, and interdependencies and interfaces are often hidden. This can result in costly inefficiencies and high error rates. A detailed analysis of processes and sub-processes often reveals inefficiencies, work-arounds, and complexities as well as significant opportunities to improve performance. Look for hand-offs and steps that waste time or add no value, and analyse information flows to identify silos and roadblocks.

Reduce complexity: Eliminate any variations, disruptions, rework or exceptions that slow the workflow. Remove any exceptions from the general process and have specialists handle them. This allows employees to work more quickly and productively, with fewer interruptions.

Standardise discrete work modules: Break each process into discrete, repeatable pieces with distinct inputs and outputs. Each piece should be big enough to involve a meaningful amount of labour and transaction volume but small enough to address the core complexity of the process. Then standardise these repeatable steps.

Set and track performance metrics: Once process work has been broken down into discrete pieces, those pieces can be measured and set performance benchmarks. Then, managers can track the actual time spent on specific tasks, understand the drivers of productivity, and fine tune their operations for far greater efficiency and cost savings.

Detailed data on how much time employees spend each day working and how productive they are at their tasks provide managers with a true measure of work force productivity and utilisation.

Harness the power of big data: Advances in computing power and processing speed allow companies to gather vast amounts of data and perform complex analytics. The resulting insights can minimise waste, lower costs, and sharply improve process performance.

Cross-train to increase productivity: In some service functions, employees have uneven workloads at different times of the day, leading to periods of frenetic activity mixed with periods of downtime. Workers in the fast-food industry often share the workload by wearing different hats: taking customer orders, serving food, and so on. This sharing of duties to increase productivity and customer satisfaction is rarely seen in corporate service processes, but it can sharply improve overall productivity levels.

Creating a lean culture
Implementing lean services is really an exercise in change management. For instance, service workers are the best source of customer insight and suggestions for process improvements, so it’s important to involve them in any lean initiative. Employees are less likely to resist new ways of working if they’ve had a hand in the design and understand how they’ll add value.

In companies whose performance improvements are sustained over the long haul, lean is a mindset as well as a methodology. Make continuous improvement an integral part of the culture by encouraging participation at all levels and designing incentives to promote engagement. Individual and team incentives such as recognition or bonuses can further energise workers and ensure that performance improvements are ongoing.

Continuing commitment from the top also ensures ongoing success. By assigning knowledgeable and dedicated full-time employees to a lean services programme, company leaders send a clear message that lean is a priority. With committed resources, lean programmes gain traction more quickly and show results sooner, which helps build momentum and enthusiasm.

Although a team of experienced, dedicated specialists can help to kick off a lean initiative, the ultimate goal must be to build lean capabilities among employees. To this end, companies should aim to develop lean champions and trainers who can teach lean methodologies and tools to others within the organisation ensuring that results are sustained going forward.