28 July 2006
What has a philosophy designed to revolutionise car production got to do with the public sector? Well, quite a lot, it turns out. Zoe Radnor and Paul Walley explain how 'lean thinking' is crossing the boundaries and helping public bodies become more efficient
As many of us are painfully aware, public sector productivity does not appear to be growing as fast as that of manufacturing industry. In the NHS, for example, real-terms spending has grown by 30% since 1996, while the recorded increase in output is just 2%. This has put greater pressure on public services to focus on productivity and waste reduction.
In turn, this has led to calls for the transfer of industrial practices into the public sector. In particular, 'lean thinking' has been proposed as one way to achieve substantial savings and quality improvement. In a short space of time, 'lean' has become the word on everyone's lips in the public sector. But this has not been caused by government exhortation it seems to have gained its own momentum as a means of achieving the Gershon efficiency savings. And now, of course, numerous management consultancies have entered the arena claiming to have a 'lean' solution.
At the Local Government Association's improvement conference in February 2006, at least six of the exhibitors were selling 'lean' virtues. However, when questioned, only one or two had any real experience of its application in the public sector. So is this model appropriate to public services and is there any evidence that it achieves the outputs and outcomes promised?
Most people recognise that the roots of 'lean' thinking come from car manufacturer Toyota's production system, developed in the 1950s as an alternative to mass production techniques. It led to raised productivity and quality levels by allowing the flexibility of 'skilled' production with the volume efficiencies of mass manufacturing, and is still used by Toyota today.
However, the concept has developed considerably over time. The term 'lean' itself was first promoted by James Womack and Dan Jones in the 1980s. It hit the headlines in their influential 1990 book, co-written with Daniel Roos, The machine that changed the world. They claimed that the implementation of lean practices in manufacturing resulted in less use of raw materials, labour and time compared with mass production.
There is some evidence that this concept has transferred to the service sector, with supermarkets in particular adopting the techniques for improving the flow of customers. The term is now used in many contexts, whether it focuses on the organisation (as in 'lean manufacturing' or 'lean service'), the supplier ('lean supply') or the customer ('lean consumption').
Arguably all notions of lean thinking are rooted in the work and principles of Womack and Jones, who later developed five core principles:
- Specify the value desired by the customer
- Identify the 'value stream' for each product providing that value, and challenge all of the wasted steps
- Make the product flow continuously
- Introduce 'pull' between all steps where continuous flow is impossible
- Manage toward perfection, so that the number of steps and the amount of time and information needed to serve the customer continually falls.
In the UK, there are plenty of examples of public sector organisations that have developed and introduced these principles. Many of the pioneers are in the health service, where the biggest example is the Emergency Services Collaborative. This started in 2004 and initially involved 200 hospitals in England with 24-hour accident and emergency departments, including well-known names such as the Royal Devon and Exeter and the Derbyshire Royal Infirmary. One of the main overall changes was the introduction of 'see and treat' minor-injury clinics. NHS trusts that have continued with these have eliminated the lengthy waits traditionally associated with A&E.
A study of lean thinking in social housing, commissioned by the former Office of the Deputy Prime Minister, revealed that it has cut by 80% the time taken to process repairs, by 40% the time taken to collect first rental payments, by 50% the number of steps needed to rehouse and by 50% void time. This was all achieved with both significant cost reduction and improvement of the customer experience.
However, other researchers have raised serious criticisms of the philosophy, especially in service settings. These include a lack of contingency plans, difficulties coping with variability of customer demand and an absence of strategic perspective. It is also widely agreed that because there have been so few examples in the public sector, it is not possible to state which, if any, aspects of it would work there.
In 2005, the Scottish Executive decided to address the question of whether it should formally promote the adoption of lean thinking in Scotland. It commissioned the Warwick Business School to carry out a detailed study of public sector organisations using the concept, including eight case studies. Our study illustrated that, as in manufacturing, lean thinking has been used in the public sector to reduce waste, improve flow, place more focus on the needs of customers and take a process view. However, public services use a much narrower range of improvement tools and techniques.
We found there were two different uses of the philosophy in the public sector: full implementation and rapid improvement events (known in the jargon as Kaizen Blitz). The full implementation model involved the embedding of lean thinking principles, broad use of its tools and alignment of improvement to strategy. However, the majority of case studies favoured 'rapid improvement events', which use workshops to identify improvement actions ranging from small, incremental quick wins to longer-term policy or strategy changes.
A rapid improvement event typically has three phases: a two to three week preparation period; a five-day event to identify the changes required; and a three or four week follow-up implementation period. Public sector managers reported that the event appealed because its style of delivery could overcome slow responses by staff to change initiatives and provide some return for effort relatively quickly. However, a disadvantage is that 'quick wins' can be difficult to sustain because they are not easily integrated into the overall strategic objectives of the organisation.
One of our most high-profile case studies was the Royal Bolton Hospital, where chief executive David Fillingham, the former head of the Modernisation Agency, is leading a large-scale, long-term implementation of lean thinking. The Royal Bolton is taking patient pathways in turn, and eliminating waste.
We observed the first pilot, which tackled unscheduled orthopaedic work, that is patients coming into A&E with problems such as broken hips. The results were dramatic, with almost 80% of the steps in the process potentially being eliminated and the number of times a patient was transferred from one carer to another almost halved. The amount of contact time needed to treat patients was also halved. This was achieved during a one-week rapid improvement event.
As one senior nurse admitted: 'This event has enabled me to spot waste in every process and question why we are doing things in a particular way.' Even the orthopaedic surgeons, a group not normally noted for readiness to change established practice, have joined in. As one consultant put it: 'There is so much waste in the system, and reducing it will help us serve our patients in a better way.'
Our study highlighted several organisational and cultural factors that influence the adoption of the concept across the public sector. Organisations that integrated the idea into their improvement or capacity-building strategy and had strong management involvement were more ready to embrace it. Similarly, organisations with a history of managing change, which had previously tackled process change and were able to build effective, multi-disciplinary teams across traditional organisational barriers, had the greatest capacity for lean improvement.
In contrast, several factors inhibited progress. These included: lack of resources to implement changes; resistance to change from staff and management; lack of ownership of the activity after a rapid improvement event; lack of commitment to the change process; and the slow pace of change in the public sector.
We found that lean thinking can successfully focus attention on waste reduction. At the same time, the methodology asks questions about what customers consider to be value-adding activities, increasing the understanding of their needs. Organisations split into isolated departments are encouraged to think about joining up processes. Lean thinking gives frontline staff an opportunity to tackle problems, which increases morale and motivation.
However, the evidence also suggests that the concept should be used as a means to achieve greater and higher quality output faster, using the same resources, rather than as a method of rapid cost reduction to release cash or to reduce head counts. This point was brought home to us by one of our other case studies, a council that trebled its activity to a higher service standard without increasing costs.
The council had a problem with abandoned cars, but this was not given a priority until its lean programme improved customer care. People with cars that need to be recycled are now seen as customers, not potential criminals, and the service specification has been overhauled. Residents have been given a number to call if they have a vehicle they no longer require, and these are now collected in three days, compared with the original 28 days. The trebling of activity involved has been done at no additional cost to the council. Managers don't have a problem with doing more for the same, as one explained: 'Good service is cheaper than poor service, because waste is removed from the process.'
Our research shows that lean methods can work in the public sector. In some cases, the achievements have been dramatic and, in all cases, have been critical in developing an improvement culture. This would indicate that the majority of public sector organisations could benefit from the concept. However, the public sector must not blindly adopt the manufacturing model; they need to adapt the approach to suit their needs. There are risks of failure if it is simply seen as a tactical toolkit developed from manufacturing.
It has the potential to generate some outstanding savings and changes in mind-sets within public services and the rapid adoption of the term reflects this potential. One quote in our study from a management consultant described the opportunity of process-based improvement in the public sector as 'not low-hanging fruit but apples on the floor', suggesting that it could be readily used to identify efficiency gains.
If lean thinking is implemented correctly, it can become more than just the next management fad. However, public sector managers must not attempt it naively. It should involve whole-system change that must be implemented carefully, with realistic expectations about its impact and ease of adaptation.
Zoe Radnor is senior lecturer in operations management and Paul Walley is a lecturer in operations management at Warwick Business School. Their report, Evaluation of the lean approach to business management and its use in the public sector, written with Andrew Stephens and Giovanni Bucci, was published last month. [email protected]
Glossary of main 'lean' terms
Flow: The progressive completion of tasks along the value stream, so that a product or service proceeds from design to launch, order to delivery, and raw materials into the hands of the customer with no stoppages, scrap or backflows.Kaizen: Continuous, incremental improvement of an activity to create more value with less waste.Pull: A system of cascading a product or service by which nothing is produced by the supplier until the customer signals a need.Value/Valuable: A capability provided to the customer at the right time at an appropriate price, as defined in each case by the customer. Value stream: The specific activities required to design, order and provide a specific product (or service) from concept launch to order to delivery into the hands of the customer.Value stream mapping: The identification of all the specific activities occurring along a value stream for a product or product family (or service).Waste: Anything that does not add value to the final product or service.
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