By Lawrence Rosier Principal Management Consultant December 2, 2013
Understanding Efficiency and Effectiveness
I seldom refer to efficiency without adding effectiveness, a system can be efficient and still not be effective in doing a job right. The approach of using Lean Six Sigma on high level systems and Enterprise Lean on subsystems will make both high level systems and subsystems effective. But to actually get the highest efficiency possible you must use the data developed by the Enterprise Lean Teams to Right-Size the supporting Agencies making sure all personnel have a full time job. The Lean Team data should also be used to develop bottoms-up budgets which identify the actual costs of a systems functions. This is also the data needed to manage an Agency’s work by balancing its work load.
I recommend that all State Governments put together a Lean Six Sigma team of trained managers to study and fix their high level systems. This is to be followed by the implementation of my General Reform Model which builds on the data developed by the implementation of Enterprise Lean in the first part of the Model. The result gets the highest efficiency with the most effective state government possible.
Implementation of the General Reform Model
Phase 1. Establish a State Enterprise Lean Commission
I recommend that a “State Enterprise Lean Commission” Be established in the State Auditor’s Office to have oversight of the implementation of Enterprise Lean and other reforms. The State Auditor will need to provide Budget Analysts on loan to the State Enterprise Lean Commission reporting to and trained by the Principal Consultant to implement Enterprise Lean and other reforms. The Budget Analysts will support Enterprise Lean until it has been implemented in its entirety throughout the State Government. When the implementation has been completed the Budget Analysts will maintain the new Bottoms-up Budget databases. Prior to this proposal the State Auditor was charged with only the auditing of funds now a new responsibility will be to monitor state activities for lost man hours. This is made possible through the development of the Lean data and the new Bottoms-up Budget databases.
States that have already implemented Enterprise Lean will need to assess the current management’s success and its polices in relation to staffing. Many state Enterprise Lean implementations are administered by the state’s bureaucracies and have policies of not reducing staff even to achieve greater efficiency.
Phase 2. The Training and Organization of Enterprise Lean Teams
The first act of the State Enterprise Lean Commission is to implement Enterprise Lean throughout the state government. Planning for Lean Training should done by the Commission meeting with the counsel of the Principal Consultant. I recommend that a Enterprise Lean Training specialist be brought in from a local University to Kick off the implementation with training seminars. Planning issues related to Lean training, Facilitators, Budget Analysts will need to be resolved. Lean training should begin immediately by the state’s training staff. I suggest that the normal training curriculum be suspended and an all out effort be made for Enterprise Lean Training. Training should be made first for staff members followed by management, Lean Facilitators and general employees.
Lean Facilitators organize and train each employee functional Lean Team work group which meets for one hour on a weekly basis. I suggest that the best Facilitators may be borrowed from HR staff but I have also had success with secretaries and even copy machine operators.
Management Lean Six Sigma Teams
There are two major Lean Team groups, high level Management Lean Teams and at-the-work-place Functional Lean Teams. Management Lean Teams are organized and lead by members of management who have attended Lean Six Sigma Classes at a local University. They are tasked to study individual high level systems within the Agency and those that interact with other Agencies mostly document flows. They may also be tasked to support the Consolidating Boards and Commissions Model. A third possible task is in the Consolidation of State Government Services Model. A key element of the High level Lean Teams is their role in management when converting from the bureaucratic organization to the Team Managed organization.
Implementation of the reforms can be done at minimum cost to the state using an Enterprise Lean professional trainer from a local University in a train-the-trainer project and a Principal Consultant familiar with the General Reform Model. All other implementation staff are borrowed and trained from the states existing personnel using the state’s own resources. This has significant advantages with trained personnel remaining in key jobs with the state when compared with implementations involving a high number of expensive Consultants who leave when the implementation is completed taking critical knowledge with them.
Phase 3. Review of Lean Team Results and Collection of Lean Data
After a period of about three months most Functional Lean Teams, those that were organized and trained by Facilitators, should have their Value Stream Analyses completed. I have had success with doing the flow of the current method on long white butcher or brown wrapping paper taped around a conference room on the walls. The steps of the current method is completed first followed by the proposed improved method done directly under it. This is done to highlight the differences between the two methods. I suggest that some Functional Lean Teams with significant savings present their improved method to management. After the presentation the rolled document is given to a Budget Analyst to document the savings from the proposal in a spreadsheet. Budget Analysts are trained by the Principal Consultant and are part of the implementation staff.
Phase 4. Activities of the Principal Consultant
The Principal Consultant will play a key role in being sure that the Lean teams are properly trained and in the selection and approach of the high level Lean Teams. The Principal Consultant will insure that the activities of Budget Analysts can determine the correct staffing level through Work Measurement and any expenses needed during the process. Some Budget Analysts may find the proper staffing for variable processes difficult to determine, the Principal Consultant will make this determination when necessary. This data combined with the number of occurrences of the function over time, obtained from a daily log kept by each Lean Team, provides the basis for an accurate functional budget. The data from the rolled document will be kept on a spreadsheet by the Budget Analysts and summarized in a database where all of the states functional data is stored. The activities of Budget Analysts are important and will be followed closely by the Principal Consultant.
The Technical Reform Process
The technical reform process begins after the decision to implement Enterprise Lean and after the functional Lean teams have completed their Value Stream Mapping studies. The important data that is necessary for reform is the functional cost data developed by the Functional Lean Teams from their individual functions.
The data will be collected in electronic tablets including or Google Chromebooks using a spreadsheet program specifically designed for this process. All tablet spread sheets will be continuously updated using a special Google App (application). The Principal Management consultant will provide on the job training of Budget Analysts in the collection of this data and all subsequent reform steps.
Lean Team Data that is collected and allowed to accumulate
The following steps show how the Lean Team Data is collected and allowed to accumulate in the spreadsheet program and how the summarized data is used.
1. The VSM for each function will be documented in the spreadsheet.
2. All labor and expense cost data will be documented and allowed to accumulate as functions are added to the spreadsheet until all functions have been accounted for.
3. The names of the employees working on the function will be documented with any special expertise they are using in performing the function. Each employee’s labor hours expended in doing the function will be documented and allowed to accumulate. This data will be used during the Right-Sizing process.
4. Where there is interaction between several employees during the performance of the function as a part of the VSM a work load balancing chart will be a part of the documentation. This work load chart can be used later to balance the function’s work load.
5. When all of an Agencies Functions have been logged into the spread sheet the final labor hours and expense numbers will have been automatically tallied in the spread sheet along with the total hours worked by each employee in the particular function.
6. A key question asked of employees is the estimate for the number of times that the function is done per week and recorded in the spread sheet. This number is authenticated by history and other knowledgeable personnel including the enumeration of purchased goods consumed by the function.
7. The total annual accumulated functional hours is at 100% productivity and must be converted to provide a realistic number at 75% productivity. To make this conversion you will add 25% more time to the total or multiply the total time by 125%. This becomes the labor hours for staffing and budgeting and is what is referred to as a Gross Load among consultants. When all of the Agency’s functional labor hours have been accumulated at 125% and we add in the total annual expenses we have what I call a Bottoms-up Functional Budget.
8. Next we want to compare the Bottoms-up Budget with the current Top-Down Agency Budget. To do this we remove all management and overhead expenditures from the Agency’s Top-Down Budget to obtain an equal expenditure. Then we compare the Bottoms-up Budget with the Top-Down Budget. The Bottoms-up Budget should be 20% or more less than the Top-Down Budget. If this is not the case then we have introduced an error more than likely in the number of times that a Function is being performed annually. This should be resolved by reviewing the Lean data in the Agency’s spreadsheet.
9. We can now do Right-Sizing using the employee accumulated Lean data from the spreadsheet. As a rule of thumb the employee accumulated hours is separated between those who have accumulated more than 20 hours per week average and those who have accumulated less than 20 hours per week. Those who have accumulated less than 20 hours per week are considered to be redundant and slated for layoff. Their accumulated hours are spread among those with more than 20 hours per week increasing their hours to at least 37 hours per week. This involves reviewing each function and reassigning tasks to employees according to their capability and availability.
10. We now need to review the spreadsheet for those jobs noted as occurring on a random basis. These special jobs need to be separated form those jobs that occur on a continuing basis. An individual employee is specially trained to do the job of Work Planning, forecasting scheduling these jobs on a weekly basis.
11. The spreadsheets are stored on thumb drives for each Agency and protected. The labor data for each function is stored in a Database at 100% to be used for calculating productivity where required. The Database also includes the staffing and bottoms-up budgeting data. I recommend that the data be protected by an independent organization such as the State Auditor. This allows availability of the data for all who want to review the actual labor and expense cost of an Agency function including the Agency’s Bottoms-up Budget.
Phase 5. Organization Reform
In the final step of the General Reform Model the Principal Consultant will begin the process of organizational reform by replacing the Bureaucratic organization with a Team Management organization with top management managing the state’s activities through Group Teams with each managing several Functional Teams. The Lean Teams at the Functional level will become self managed Functional Teams with each of their elected leaders reporting directly to a Group Managed team. Group Managed Teams will assume their management role from the pre-organized high level Lean Six Sigma Teams. There is some flexibility in how this process actually occurs but it is necessary in order to eliminate the problems caused by the Bureaucratic organization. The important advantage in changing from a Bureaucratic organization to a Team Managed organization is that the savings continues annually for years. But if the bureaucracy is allowed to stay in place after only a few years of mismanagement the level of staffing could grow to where it originally was. This is also the period of time for the reduction of redundant state government staff. Once it is known where staffing can be reduced layoffs or temporary reassignments should be completed within a month.
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