How did Australia Post reduce unit costs by 30%?

Interview by Alex Holderness for PEX Network

How have you reduced unit costs by 30% - that's the question I put to Michael Fromberg, Head of Shared Services at Australia Post recently. He explained the results go beyond cost figures: "We’ve also seen our service levels and the quality of our service improve quite dramatically as a result of the work we’ve done."

Michael’s going to share a presentation during Australia's Process Excellence 2013 around what’s been done within shared services, as part of the Lean Six Sigma programme to achieve these results. Here’s a preview of how he’s been driving improvement at every level:

Alex Holderness, PEX Network: How have you embedded a culture of change across the organisation that supports improvement and embraces shared services?

Michael Fromberg: To start with, what we’re trying to do is get an appropriate level of process improvement capability and targets within each level within shared services, in that individual team members sphere of control. We have an expectation that they contribute to process improvement, come up with ideas and participate in the root
cause analysis and the solution design of new processes. This is done by working with their team mates, or their team members, under the guidance of their team leader.

For the Sigma, the process they actually control, when you go the team leader or team manager who will have multiple team members reporting to them, the team manager’s role is to execute process improvement across multiple teams. Where a process span’s got multiple teams in there, their role is to improve more holistically.

Given that their sphere of influence and sphere of control is larger, they’re expected to take a bigger remit and deliver larger targets as a result; their work will probably take longer than the more rapid stuff that happens within the team.

As you go further up the chain, the executives that lead the managers, their remit becomes even bigger on the same scale. It also recognises that their influence then goes into technology, policy, change and legal. Given their role and level of seniority, they take a lead in those more significant projects with built in teams under them.

When you get to my level in the business, I have that extended responsibility to take projects that span across the various departments or that have a common theme across the departments. For example, we might see a common issue with call centre technology or something that spans multiple departments, then that becomes my responsibility to rectify.

Alex Holderness, PEX Network: How you can secure support from the top over a sustained amount of time?

Michael Fromberg: Within the business we have tenure of people that may be used to a previous culture where you’re part of a process and you just run to it and you’re not really encouraged to do more than that.

The way we’ve gone about changing that is through reward, not consequence using a scorecard measure looking at how people are performing against that. The view we have is that we’ve provided the objective which is to generate capacity to bring new business into the business. Our role as shared services is to do as much of the administrative work from the business within the wall of shared services and free the business up to concentrate on styles and logistics and the things that it needs to do.

To encourage that, each of the team leaders, management and executives have targets in their scorecards of levels of improvement and we supplement that with training. They’re trained on Lean predominantly. That’s the stick side so we measure how you’re going with it. On the support side we have mechanisms like team of the month; we measure the things that we’re looking for, the behavioural traits that we want within the teams.

We want them to work together to solve problems, we want to adhere to the standard processes that they’ve built and set themselves, we want them to achieve their targets and their KPIs, we want them to be open and honest and constructive and work together as a team to get the job done. We measure all of that, we want them to capacity plan and adjust when the volumes and things don’t come in according to plan.

We have measurements and assessments on that and then the teams that achieve the best outcomes of those input measures are rewarded each month. It aligns very much with the culture that was here already; it’s a culture that likes to recognise the team.

Alex Holderness,PEX Network: What have been some of your successes in terms of the results that you’ve achieved?

Michael Fromberg: We started July 2011, since then the teams have executed just a little over 150 process improvements themselves. At a team leader and manager level, we’ve run over 30 boot camp style improvement projects which are centred around value strength – there were some fairly significant wins out of that. At that senior level, we’ve run six major automation or transformational change programmes that have been pretty successful. We have a dedicated project team that, in it’s own right, has executed about 60 projects in the last 18 months or so.

As a result we’re approaching a 30% unit cost reduction from where we started. We’ve seen our service levels and the quality of our service improve quite dramatically. We now have about half of the internal areas that we used to have at the start of the programme, that’s significant because we run about 1,500 individual processes or tasks, so to reduce it by that amount over such a, over that complexity is quite an achievement.

Alex Holderness, PEX Network: What will people be able to take away from your presentation during the Process Excellence Summit?

Michael Fromberg: It’s going to be different, it’s not really going to talk about an individual process or a technique around process improvement, but what are the roles in relation to improvement at every level and how do you set that up to make it successful? How do you effectively skill a workforce to work, to improve, against everybody’s influence and control? So within the sphere of what people influence and control at the various levels, how do you change that to an organisation where, everyone has the opportunity to input within the parameters defined by their role? And then how do you coordinate that to achieve a common outcome?

[inlinead]