Redux: Rethinking Lean (Six Sigma) Service

I have identified myself as a "reformed" Lean Six Sigma Master Black Belt. Some will see this as an affront to Lean and/or Six Sigma. I want to assure you that there are many things to like about Lean and Six Sigma. The issue at hand is that a better solution is available that can help organizations achieve more robust performance improvement.

Some Issues with Lean Six Sigma

A couple of issues to address are the tools-based approach and the lack of change in thinking in the management and design of work found in Lean Six Sigma. Lean and/or Six Sigma programs tend to be tools-based where the aim seems to be for vendors to make money on lean six sigma training that is built on tools and not focusing on the change in thinking that must accompany it. This is a missed opportunity to have sustainable and profound change.

When I first listened to W. Edwards Deming during one of his seminars, he talked to the audience about a way of thinking to manage a business (originally, his "14 Points and 7 Deadly Diseases" and later his "System of Profound Knowledge"). He would never reference TQM or any other label for his thinking. Along came Taiichi Ohno and the industrial tourists that labeled this thinking "Lean"—again, not a label that Mr.Ohno would reference. TQM, Lean and Six Sigma all came with a ready made tool box that could teach your manufacturing company to be just as effective as the manufacturing companies of the Japanese.

The second issue was that the thinking about the design and management of work that Dr. Deming and Mr. Ohno wanted us to understand never "took" in most organizations. The tools-based approaches of Lean Six Sigma and TQM pushed-out much of the change in thinking needed. And executives pushed-down these approaches to projects, processes and the front-line so that even when improvements occurred, they were soon undone by management thinking that had never changed. Or the efforts were to "save money" and became too narrowly focused and sub-optimized the system, generating either negative or no real savings in the service industry.

Better Thinking

About five years ago, I ran across the work of John Seddon. His book, Freedom from Command and Control, really started to put the pieces together for me. Four items stood out in his thinking:

1. Demand provides the greatest leverage for improvement (instead of the belief that all demand is work to be done).
2. That cost is in the flow (and not in the scale or activity).
3. Failure demand is created by the design of work.
4. Standardization creates waste in service.

Let’s discuss why these are important distinctions.

1. Demand provides the greatest leverage for improvement. Whenever an organization looks for performance improvement, management is wrongly focused. For example, in a call center everything is prescribed from management by how many phone calls, how long to handle a phone call and what type of service level an organization wants to achieve. Conversely, Seddon discovered that customers calling had two types of demand: value demand (calls customers want to make) and failure demand (calls caused by a failure to do something or do something right for a customer). He has found that failure demand in service organizations runs between 25 percent to 75 percent for the private service sector and as high as 90 percent in the public sector. Failure demand presented a huge opportunity to reduce costs and improve service to customers.

2. That costs are in the flow. Most service organizations measure cost and productivity because almost all managers have learned that management means managing activity and that activity = costs. The management paradox is that costs are in flow—the number of transactions it takes a customer to get the service they request. The move to call center outsourcing to lower transaction costs can be countered by bringing call centers back in-house to satisfy customer demands (value or failure) at the first point of contact.

3. Failure demand is created by the design of work. The functional separation of work into specialties has been around for a long time (100 years). Each function is forced to optimize its piece. However, optimizing the function (piece) does not mean optimizing the whole system. The truth is that waste and sub-optimization in duplication, hand-offs, delays, etc. manifests itself in failure demand. Failure demand is caused by the design of the work that has been designed into service organizations.

4. Standardization and technology create waste in service. Best practice, standardization, written procedures, scripts, technology and automation are creating waste in service. The problem is that the variety of demand in service can not be absorbed by these things. We standardize our work and then entrap it with technology. Workers receiving customer demands that don’t fit into their computer system are left looking stupid to the customer.

Systems Thinking: A Better Way

The concept of failure demand has gotten attention world-wide. The appeal is obvious—if we can get rid of failure demand, costs will decrease and service will improve. The problem presented as "reducing costs" is central (but wrong) to the command and control thinker. These people will set new targets for reducing failure demand in their organizations. My concern is that the appeal of failure demand will lead managers to miss real opportunities to improve. Already, copy cat consultants and IT providers are finding ways to eliminate failure demand through wrong thinking. This will lead to more bureaucracy and more inappropriate management behavior. So beware the snake-oil salespeople!

The reality is that failure demand is only one of many things you need to understand to change to systems thinking or design. To rid an organization of failure demand you have to change the system, and to change the system you have to change the management thinking—there is no other way. The first step is difficult. But once taken, the benefits are deep. If or when managers understand that managing costs increases them, they will be open to understanding that managing to value is a better way. Pursuit of value allows managers to begin to learn about designing and managing their companies against customer demands…and costs will fall on their own.

Note from the editor: Listen to a podcast with author John Seddon here.