Key #2 ImproveYour Processes

Overview

Once you understand your customers, the next step is figuring out a way to get better at delivering what they want. The answer lies in improving the processes your company uses to generate the services and products you sell.

Dr. W. Edwards Deming, an American statistician who led the quality movement in Japan (and later in America), spent much of his time trying to convince people that most quality problems are “in the process, not the person.” For most of his 60+ year career, he promoted his 85/15 rule, based on his experience that 85% of problems were built into the way work was done (and hence under the control of management). Only 15% of the problems, he said, were really the fault of individual employees.

Most frontline employees had no trouble accepting Dr. Deming’s assertions. After all, they were the people who paid the price for a lack of training, poor equipment, little communication, and unrealistic goals. In short, they worked under conditions that guaranteed poor quality. It was often managers who resisted Dr. Deming, because they were trained to find “who to blame” when something went wrong.

In the last few years of his life, Dr. Deming admitted his 85/15 ratio was probably wrong. More than likely, he said, it’s 96% of problems that are built into the work system. Individual employees, he concluded, could only control perhaps 4%!

Why does it matter if most problems are “in the system”? Because it means that if you want to improve quality, you have to change the way work is done. That’s why Lean Six Sigma focuses on process improvement. In fact, the purpose of most improvement efforts is to use data to find out what’s wrong in the system that allows the problems to happen in the first place. Removing these problems will allow your company to provide better products and services to customers.

What does it take to improve processes?

You and everyone else reading this book has some process knowledge, simply as a result of performing your job day in and day out. But more than likely, you’ve never been asked to document that knowledge, or discuss it with others doing the same kind of work. Perhaps no one has ever used the term “process” before in regards to your work. When something goes wrong, people have only their experience and trial-and-error to come up with a solution.

All of that changes with Lean Six Sigma. There is a great deal of emphasis on:

• Documenting how work gets done (the steps that comprise the process)
• Examining the flow of work between people or workstations
• Giving people the knowledge and methods they need to constantly improve that work

There are a lot of different process improvement methods, some of which are covered later in this book. But almost all of them serve one of two purposes:

• To eliminate variation in quality and speed (a major source of defects)
• To improve process flow and speed

The majority of process improvement work you’ll ever do falls into one of those two categories, so we’ll spend a little time explaining what each of them means.

Eliminate variation

We all know at a gut level that nothing is exactly the same day in and day out. Some days it takes you longer to get to work than others. Some restaurant customers get served in 10 minutes, other take twice that or more.

Everything varies. What’s important is that the way in which something varies—the patterns in the variation—can expose the cause of problems and point the way towards solutions.

The language around variation is what gave rise to the term “six sigma.” Those of you new to improvement may not have heard that term before. The Greek word “sigma” is used in statistics to stand for the amount of variation seen in a process, a set of data, or anything you can measure.

To illustrate the concept, look at the two charts in Figure 3.1. Each point represents a single measurement taken on a process.

Figure 3.1: Variation in process outputs

For our purposes here, it doesn’t really matter what the measurements are—they could be delivery times, weights, lengths, customer satisfaction scores, etc. What’s important is that the top chart shows a process with a lot of variation or spread. The bottom chart shows a process with much less variation.

Variation defines the sigma level

Why is variation important? We’ve taken the same charts and added lines to indicate what the customer wants (their ideal target), and what they will find acceptable. (See Figure 3.2.) For example, a customer expecting delivery “by noon” (the target) might actually be happy if the package arrives anywhere from 11 a.m. to 1 p.m. A manufacturer that is purchasing 1000 gallons of paint (the target), might be satisfied if the delivery is 995 to 1005 gallons. (In manufacturing, the range of acceptable values is usually called specifications.)

Figure 3.2: Variation affects our ability to meet customer needs

Recall from the last chapter that anything that doesn’t meet customer needs is a “defect.” When you compare the process performance against what customers want, you can see that the process with a lot of variation, like the one in the top chart, is going to produce a lot of defects—and disappoint a lot of people! If your processes are like this chart, your customers will view them as unpredictable. Sometimes they’ll get what they want, but a lot of times they won’t.

In contrast, the bottom chart shows a process that operates with very little variation. As you can see, all the data points are clustered tightly around the center. Such a process rarely misses when it comes to meeting customer needs! Customers will view it as very reliable.

So where does the “sigma” term fit in? The table at the top of the next page shows the link between process yields (the number of goods or services that are good enough to be sold to customers) and sigma numbers.

Table 3.1: Sigma Numbers and Yields

Yield	Sigma Level
30.85%	1
69.15%	2
93.32%	3
99.38%	4
99.977%	5
99.99966%	6

As you can see, low sigma numbers mean low yield, and high numbers mean a high yield. Note also that the differences in yield get smaller and smaller as you increase the sigma level. It takes a jump of over 30% in yield to go from sigma 2 (=69%) to sigma 3 (=93%). But all the sigma levels over 4 are up in the 99% yield range. Why the difference? Because it gets harder and harder to make improvements in yield the better a process operates. In other words, it’s relatively easy to make improvements in a bad process—one with a sigma of 1 or 2—but very difficult to improve a process that is already working fairly well.

Fixing the process is what improves sigma levels

Now here’s one of the secrets of Lean Six Sigma: in order to have an outcome with very little variation (like the bottom chart in Figure 3.2), everything leading up to that point has to work well, too. This explains why Lean Six Sigma focuses so much on process improvement. You need to make the work in your area more reliable, more predictable to reach high levels of quality—which means eliminating variation.

For a real example of how businesses can capitalize on reduced variation, just think about FedEx. It created a new industry because of its ability to reliably meet promised delivery dates. If their “guarantee” of 10:00 a.m. delivery had really meant “any- time tomorrow,” how long do you think they would have stayed in business? People keep coming back because they can count on having their packages delivered by the guaranteed time. FedEx’s experience also shows that reducing variation is something that both service and manufacturing businesses should focus on.

Improve process flow and speed

Variation is one of the most common sources of problems in a process. But another source is how the work flows through the process—the hand-offs from one person or workstation to another, the physical path that the work follows in an office or on the factory floor. Here’s just one example…

Bank One uses what they call their “wholesale lock- box” process to handle business-to-business payments (where one company is paying another company). These payments often arrive at Bank One in overnight express packages. The deposits can be as large as several million dollars, so obviously the customers want fast service!

Originally, an overnight pack had to travel one-and-a- half miles inside the Bank One office just to make it through every step of the process! It would go to one office, then down the hall to another, then up the elevator to a third, then down to yet another office, and so on.

Don’t believe it? Neither did the Lockbox staff at first. But then as they traced the process—following the flow of the work—everyone was floored. “Well, I guess maybe it could travel that far!”

What was even more astonishing was just how much that distance could be shortened. The team applied Lean Six Sigma methods they’d just learned to document how the process currently worked, then used structured creativity techniques to think of a better way to lay out the process. They looked at process changes (altering the process steps) as well as redesigning the physical flow by moving offices and workspaces.

Soon, they ended up with a workspace design that required just 386 walking steps to complete the entire process (an 80% reduction in “travel”).

This lockbox service at Bank One had a promised turnaround time of 4 hours. (Deposits in by 8 a.m. would be credited by noon; in by 11 a.m., credited by 3 p.m., etc.) Since some of these deposits could be worth a million dollars or more, the short turnaround time was considered essential from the customers’ viewpoint. If you were Bank One, would you feel more confident about delivering within the timeframe if the deposit only has to travel 386 steps, or if it has to travel more than 1.4 miles?

This case from Bank One illustrates the importance of paying attention to process flow, both the physical path that work travels and the process steps required. One of the best ways to speed up a process is to eliminate process steps that aren’t really necessary—meaning they don’t meet a customer need. Another way is to redesign how work flows in the workspace.

That’s why teams often spend the early part of an improvement project drawing a map of the process, either a drawing of the physical layout or a “flowchart” that shows the process steps. The teams have to examine every step and ask “Is this step necessary? What value does it add to our customers?”

Here’s an example: The engineering department at one company was criticized for taking too long to implement design changes in their products. When they studied the process, the team discovered that approvals were needed from seven different managers. So the change notice would go to one manager, sit in the in-box for a few days, eventually get reviewed, then passed on to the next manager… where it would sit in another in-box for days, and so on. No wonder it took weeks to get approved!

When the team looked more closely at the purposes of having all seven signatures, they realized that five of the managers had no particular expertise they could contribute to the process. The team therefore changed the process so that only two approvals were needed. (The other five managers were sent copies of the design change notices because knowing something was in the works was helpful to them, but their signature was not required to approve the change.) Now it takes less than a week for the two remaining managers to review the form, resolve any issues, and set the rest of the process in motion. The product re-design process goes much more quickly, and customers can get improved products much faster than they used to.

Later in this book (Chapter 7), we’ll show examples of the concepts and improvement tools that can help expose process flow problems.

Get rid of the waste in processes

It is standard in medicine for every surgeon to specify his or her own surgical tray of instruments and supplies for any procedure. In the cardiac surgical unit at Stanford Hospital & Clinics, that meant there were six different surgical trays for each type of case, one for each surgeon.

A central theme of Lean Six Sigma, however, is that unnecessary complexity adds cost, time, and enormous waste. So Stanford got all the surgeons together and asked “can’t we get rid of some of these options?” Naturally the surgeons were skeptical at first: “We each need our own surgical tray.”

But was that really true? When pushed to examine the issue more closely, the surgeons realized that having six different trays had little impact on the quality of care provided to patients. Within the space of a few meetings, they were able to agree on a standard surgical tray. That meant the purchasing department had to buy fewer types of instruments, and could make better deals by buying the larger quantities of the instruments they still used.

Stanford went on to apply this simplicity principle and other Lean Six Sigma concepts throughout the hospital. The result? Annual material costs dropped by $25 million. Care costs dropped as well: for example, the average total cost of Coronary Artery Bypass Graft surgery fell by 40%, and mortality rates dropped from 7.1% to 3.7% in the cardiac surgical unit.

Put yourself in Stanford’s shoes, and it’s likely you would have approached the problem much more traditionally, trying to prepare the surgical trays faster or better rather than asking whether all those trays were necessary in the first place.

But under Lean Six Sigma, much of what is now accepted as “just the way work happens” is recognized for what it really is—waste. All organizations need to develop Stanford’s willingness to challenge themselves: “Which of these costs improve patient outcomes, and which don’t?” And it’s that type of critical thinking that’s key to seeing big gains.

Conclusion

Process improvement is the only way to improve the results that your company wants to improve. You have to examine how work flows from one person or workstation to the next. You have to look at variation and how it affects the process.

And above all, you need to become a “process thinker”— someone who frames problems and issues in terms of what may be happening in the process. Making this mental leap has a much more profound effect than it may sound at first.

Suppose, for example, that some item of work in your area—a report, an order, a part assembly—was completed late or done incorrectly. The natural tendency for all of us is to look for who to blame, to find the person who is at fault.

It’s true that all of us mess up from time to time. But a process thinker assumes, rightly so, that most of the time the problem arose because of the process. He or she will ask questions like, “Was there clear communication to the person about what was expected? Did that person have all the information, materials, equipment, etc., needed to perform the job correctly? Was that person trained properly in how to do that work? What are the critical factors that allowed the goof-up and how can we prevent it from ever happening again?”

You’ll know that you’ve become a process thinker the first time a problem arises and you think first “what’s going on in the process” rather than “that person really screwed up again!”