I like what people have been doing in business over recent (and not so recent) years – considering how business can be conducted more effectively and efficiently. Two areas of development are Six Sigma* and Lean**. Working in professional advisory businesses these are concepts you are likely to encounter sooner or later, and both have value. They are often applied together as they are not considered inconsistent, although they have distinct identities. I thought it worth sharing some personal thoughts about them.
It is important to say that Six Sigma developed in the manufacturing sector, and although Six Sigma practitioners will protest that it is equally relevant to the services sector, I have come to conclude that this requires a heavy caveat. In its purest form Six Sigma is a method for eradicating errors from a process by, amongst other things, applying statistical tests to elements of the process which, necessarily, require;
a) sample sizes that are statistically significant, and
b) processes which are largely replicable/similar. This may be true in areas such as banking, or the operation of volume processing centres. In my view it is never true of the kind of ‘full service’ practices that make up much of the professional advisory business market. That is not to say Six Sigma is of no value in these businesses; there are some elements of Six Sigma that can nevertheless be extremely useful in such businesses;
• The concept of mapping a process in order to understand, challenge and adapt the way things are done in some of the more standardised areas of work. This can extend to more sophisticated measures of ‘who does what’ in a process, and ’how much does each step cost/what value does it add’. Any serious process improvement project in a professional advisory firm will cover these elements.
• The twin concepts of ‘voice of the customer’ (VoC) and ‘voice of the business’ (VoB). The former is invaluable in informing the supplier what the customer needs and expects. The latter is the – sometimes challengingly different – view of what is good for the business, including with regard to profitability, and the people who work in it. Many professional advisers have structured (albeit poorly structured!) processes in place for the former. They very seldom deal with the voice of the business in anywhere near so systematic a way.
‘Lean’ is, in my view, a hugely valuable approach in professional advisory firms, and sits well with the elements of Six Sigma highlighted above, and does not require the detailed Six Sigma statistical analysis that I have dismissed for most professional advisory businesses. I set out below some of the key concepts of Lean, with some explanation which will hopefully show a self-evident relevance to the process improvement effort in an individual business;
• Muda (or waste); this must be eradicated and can arise by virtue of (amongst other things) correcting errors leading to re-work, inefficient processes, inappropriate transmission of work from one person to another, or poor control of the end-to-end process, which can lead to inefficient waiting time.
• Kaizen; a process of continual improvement, such that every process can and should be continually evaluated for improvements in time taken, quality and consistency of output, resources used, etc.
• Poke-yoke (or mistake proofing); simply put, identify what can go wrong with a process and put in place steps that will prevent it from occurring.
If a project starts with detailed mapping of the processes currently used in the business, and applies the concepts above, conclusions drawn may be;
1 there are steps that can be excluded as adding no value
2 there is work that can be done by another (cheaper or specialist) resource
3 there is poor end-to-end management of the process, leading to inefficiencies
4 there is too much retrospective (rather than real-time) checking and rework, causing delay and additional costs
5 there is a lack of standardisation of the repetitive elements of work
6 there is no process in place to ensure continuous improvement.
Putting these things in place needn’t take long and needn’t be expensive. Many people set out on process improvement projects however without a clear understanding of the processes in use in the business. They also start out with an assumption that the only things they need to address are resourcing and technology issues (“what is flavour of the month at the moment?”), and that will do. The problem with this approach is that they may be basing changes to the business on false assumptions, and their selected solutions are the most expensive and hardest to implement (and have the longest pay-back period in my view).
A project which is mindful of the ‘helpful’ aspects of Six Sigma and Lean, as above, can deliver real benefits to the business without the pain and cost of extensive IT implementations and resource reallocations…
*Six Sigma “..is a disciplined, data-driven approach and methodology for eliminating defects (driving toward six standard deviations between the mean and the nearest specification limit) in any process – from manufacturing to transactional and from product to service.” [Source isixsimga.com]
**Lean “..means creating more value for customers with fewer resources. A lean organization understands customer value and focuses its key processes to continuously increase it. The ultimate goal is to provide perfect value to the customer through a perfect value creation process that has zero waste.” [Source lean.org]. Note: much source material here arises from Japanese manufacturing, and is known by Japanese phrases.