Lean Process Improvement – A Means for Service Companies to Increase Productivity and Responsiveness

Lean has brought about amazing changes on the factory floor. Many U.S. firms recognize that in today’s markets, the speed of response to customer demands is a key competitive advantage. These firms have worked continuously to reduce their manufacturing cycle times. By applying lean concepts, companies have transformed the factory and made considerable reductions in manufacturing throughput times; reductions in cycle time in excess of 50 percent are not uncommon.

The principles of Lean Process Improvement can be applied to service processes as well as manufacturing processes. By rethinking and streamlining service processes, some companies have cut expenses by 10 to 30 percent and made steep improvements in internal and external customer satisfaction.

With a few exceptions, companies have been slow to apply lean process improvement principles to service processes such as finance, human resources, accounting, health care and customer service. The problem stems from waste being invisible in service processes. Unlike on the factory floor, 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 lie in wait between functions and departments, so companies only see a small portion of the problem.

Service processes usually lack standardization. Every employee may have a different method for completing the same task. This lack of standardization and consistency is costly. Complex, inefficient processes are slower, have higher error rates and decrease overall responsiveness and customer satisfaction. There is also a human cost when employees are underutilized by spending their time on low value tasks, they have less time for more rewarding – higher value-added tasks.

Identifying the Problems

Service providers need to embrace the end-to-end process philosophy

Adopting this philosophy is critical to seeing and eliminating waste. Process waste in the form of excess steps, redundant activities, and non-value-added tasks cannot be pigeon-holed. Inefficiency in one part of the process spill over into other activities and other processes.

Inconsistency is a problem for many service processes

For example, during an assessment of a prospective client we observed that each customer service representative (CSR) in the same transaction center handled identical customer lab requests differently. The processing times for each CSR was highly variable as much as 50% difference between CSRs. Further analysis revealed that some CSRs were using short cut methods that decreased their cycle times. The company did not engage in cross-training or knowledge sharing that would improve the overall process and reduce the time in handling lab requests.

Another typical observation of service processes reveal the Pareto principle effect:

A small proportion of the work eats up a large percentage of the total time. A brief sampling of the transaction center processing time for lab requests indicated that approximately 80% of the transactions took about 40% of the total time, the remaining 20%, the more complex ones, accounted for about 60% of the total time. Exceptions like these are an enormous burden on productivity and are typical for most service processes.

Many service organizations are lack the ability or to analyze the workarounds, exceptions, and rework that effect productivity:

In the factory, targets for output and capacity utilization are established and measured, but most service businesses are unable to measure these performance metrics.

In manufacturing, the customer doesn’t see or care about the production process itself, if the product is of acceptable quality and delivered on time. But in health care, banking, insurance, and other service industries the customer is the product moving through the process-and experiencing first-hand the frustration of inefficiency, Satisfaction is crucial, whether the customer is internal or external. Poor satisfaction is costly when it prompts the customers to take their business to a competitor.

Overcoming the Challenges of Lean Service

Making services lean has its challenges. It requires creative thinking in adapting the lean methods to a service environment. To be successful implementing Lean Process Improvement in the service industry requires rethinking of how work is currently done. Being successful in your lean service initiative require the following six components.

Select and map your cross-functional processes

Most processes typically cross functions and departments, not many people involved with them have a complete picture of the end-to-end workflow, interdependencies, and the hidden interfaces. This usually result in costly inefficiencies and high error rates. Before a service process can be improved, its steps must be transparent. A detailed analysis of the process and its subprocesses often reveals inefficiencies, workarounds, and complexity, as well as major performance improvement opportunities. Look for non-valued added steps and analyze information flows to identify silos and constraints.

Reduce complexity whenever possible

Complexity is a major contributor to process inefficiency. Rethink and redesign the process to eliminate elements that sap efficiency. Establish a subroutine for handling exceptions. This allows employees to work more quickly and productively with fewer interruptions.

Define and standardize the work

Focus on reducing variation and increasing knowledge of the process by gathering the input of the people doing the work to arrive at the best-known way to do the work. Once the best-known way is determined, document the methods so that the process steps are repeatable.

Exploit the power of big data

Dramatic advances in computing power and processing speed allow companies to gather large amounts of data and perform data analytics to minimize waste, reduce costs, and improve overall process performance.

Establish and track performance metrics

Establish a set of measures. These measures will help continuously monitor how well the process is performing to customer requirements and provide data that will help you identify and solve process problems.

Cross-train to increase productivity

In some service processes the workload is uneven at different times of the day leading to periods of high activity mixed with periods of downtime. Cross training employees to step in to assist in areas with high workloads can increase productivity and customer satisfaction while reducing these periods of uncontrolled activity.

Implementing lean process improvement in service processes requires continued commitment from the top, but lean is driven from the bottom-up. In other words, service workers are the best source of customer insight and process improvement, so it is important to involve them at the outset of the lean initiative.

For the last 50 years manufacturers have used lean tools to improve productivity, eliminate waste and improve efficiency. The same lean tools can be applied to the service industry, where inconsistency and a lack of standardization increases errors, slow response times and hurt customer satisfaction. By embracing the six components described above, service companies can increase productivity and customer responsiveness.

Sales Process Productivity: 5 Best Practices & 20 Key Questions

While many businesses make efforts to improve production, distribution, and various administrative work processes, it is less common to find organizations that focus on applying the fundamentals of Continuous Improvement to the sales process.

However, our research and experience indicate the selling process is more complex than many people realize. In addition, we have consistently found that the largest waste in most commercial and industrial organizations is lost gross margin that results from sales not made, sub-optimal pricing, and excessive costs in sales-related processes.

So, leaving aside the “selling skills” or “charisma” associated with those perceived as the most successful sellers, when you consider the day-to-day activities required of field-based or outside sales professionals, there are some proven best practices that can help boost field-day efficiency, which include the following five:

  1. Pre-call planning: by planning each sales call in advance, in writing, sales people can position themselves to accomplish more in less time, thus increasing personal productivity as well as accelerating overall cycle-time. Not only will running more comprehensive sales calls increase efficiency, but the habit will also make a stronger, more positive impact on customers. Many who have embraced this best-practice report that their customers recognize the difference and, over time, become more willing to schedule meetings or sales calls, thus enabling them to more easily make more calls each day, an important part of the job as noted in the next bullet.
  2. Set a daily call volume goal. This may sound like an unnecessary step, but a surprising number of sales people are unable to quantify the actual average number of sales calls they make each day. As author Jack Falvey has said, “Want more sales? Make more calls.” By setting a personal goal, which will vary depending on the nature of each territory, sellers are often able to self-motivate more effectively and make more calls per day.
  3. Geo-plan: by creating a strategic geographic or travel plan for each day, outside sales people can minimize drive time and optimize “face” time. The best plans will begin by creating territory quadrants and then mapping the locations of customers and key prospects. The rule-of-thumb is to avoid traveling beyond two quadrants in any given day, so when an appointment is set in one area, try to schedule meetings or plan to visit others in the same general region to enable a maximum number of interactions in a minimum amount of time.
  4. Bookend each day by scheduling an appointment early in the morning and another late in the afternoon. This will promote “staying the course” as opposed to deciding to drive back to the office early to do administrative work. This best-practice might also help to achieve item #2 above.
  5. Try to schedule next steps (i.e., follow-up meetings, conference calls, etc.) “on the spot” before the conclusion of each sales call. This simple best practice can significantly boost efficiency for two reasons. First, it helps sales people more easily populate their calendars for future selling days in the field; and second, it can help shorten selling cycles by securing time with buyers sooner than could be done otherwise.

But the sales process extends well-beyond a day in the field, as it encompasses everything from identifying a lead to delivering a solution.

Considering this broad spectrum, it is really not surprising that the largest waste within most businesses can be found in the sales area.

The first step toward improvement – that is, moving from “where we are now to where we’d like to be if everything were right” – is to identify specific areas of sales process waste, and a good way to start might be to answer the following 20 questions:

  1. What is our current market share?
  2. What are our customers’ requirements?
  3. How well are we meeting these requirements?
  4. What would it take to truly delight our customers?
  5. How long does the sales process take from lead to sale?
  6. What is our lead conversion ratio?
  7. What were the top 3 reasons for lost sales over the past quarter?
  8. How many calls do our sales people make, on average, each day?
  9. How much time do we spend talking with uninterested or unqualified leads?
  10. How do we continually improve our sales team’s skills and habits?
  11. What percentage of prospects contact us first?
  12. How does this percentage (#11) compare with industry data?
  13. Does the sales process take less time to complete for inbound leads? If so, how much less?
  14. What is our response time to customer or prospect inquiries?
  15. How many customer complaints do we receive?
  16. How much time do our sales people spend interceding or responding to complaints?
  17. What is done with the information associated with customer complaints?
  18. How do customer complaints or how does customer dissatisfaction impact our ability to make sales?
  19. How often are discounts extended, and what is the average discount?
  20. Are discounts offered due to competition or in response to dissatisfaction?

Clearly there are many ways to analyze and improve the productivity of an organization’s sales process, but these five best practices and twenty questions are good starting points.