Spotlight on Lean December 2010 Page 1 of 23

Lean in the Public Sectora Wired-GOV Special Report

Spotlight on...

Spotlight on Lean December 2010

Spotlight on Lean December 2010 Page 2 of 23

This is the first in a series of features we will berunning, the aim of which is to focus on asignificant part of public sector management, toexamine the philosophy behind it, the driverswhich underpin it and to assess the impact of itsimplementation across the public sector. Thisprovides an ideal opportunity for all parties to takestock of some of the most important policyinitiatives of the day, to delve deep into howdifferent approaches are being applied and toextract best practice examples from acrossgovernment. In this we will be inviting the leadingfigures and thinkers from government andacademia, as well as bringing the views andopinions of the best and most innovative mindsfrom the private sector.

The first Spotlight on... looks at Lean, a disciplinewhich has been mistakenly thought to be a thinlyveiled ruse to reduce headcount and cut spending.On the contrary, for those who understand its trueintentions and outcomes, Lean can deliver hugebenefits to the organisation, its staff andcustomers and can become the keystone in themanagement of the severe budget reductions allpublic bodies are now facing. We aim to explodethe myths surrounding Lean, to reveal the realvalue that its successful application can bring, and

to highlight how Lean is having dramatic effectswithin certain departments and agencies today.

And Lean is a subject to which government iscommitted to and, in the main, wholeheartedlyembracing. Its principles are endorsed within theOperational Efficiency Programme Final Report,stating that “public service organisations that areintroducing ongoing cycles of continuousimprovement, often based on the Lean approach,are improving cost effectiveness, quality ofservices, timeliness of services and are engagingmore successfully with their workforce.” (www.hm-treasury.gov.uk/oep_final_report_210409_pu728.pdf)

So what’s it all about? To pin down one cleardefinition of Lean is not easy but in essence Leanis a systemic approach to reducing costs andcutting waste whilst driving up quality andimproving services for the customer. From itsroots in the car manufacturing industry, Lean hasdeveloped through the analysis of operationaldata, with the use of business intelligencetechnologies, innovative workflow processes, theproductivity of the workforce is enhanced for thebenefit of all – the organisation, the staff and thecustomer. Achieving this in a public sector context

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will, almost certainly, soften the blow of thespending cuts.

The stresses now placed on departmental budgetsare clear. But, whilst putting these tight fiscalmeasures in place, the Government is looking forminimal impact on service delivery, with the focusbeing entirely on the value provided to thecustomer. Lean principles seek to addressoperational process inefficiencies at their source –very often at the frontline delivery of services – soissues such as organisational performancemeasures, culture, skills, technology and locationmust all be looked at from a Lean perspective.

In most organisations this means re-shapingpeople’s roles and the way they behave – twochange factors that are notoriously difficult tomanage and which require strong and astuteleadership, to inspire and support staff in doingthings differently – and doing things better. Tosuccessfully embed Lean into an organisationsometimes takes something of a leap of faith but,as the following articles and case studies reveal,with careful planning, strong leadership and adedicated and informed workforce, the long-termstrategic goals of the organisation can be reachedto the ultimate satisfaction of us all.

Philip Cunliffe & Christine Barnicoat01706 824518Philip.cunliffe@btinternet.comwww.cunliffeandbarnicoat.co.uk

Welcome to Wired-GOV’s Spotlight on Lean.

Specialist writers and editors for public sector efficiency | procurement | project management | ICT | finance | estates management

media services limitedcunliffe & barnicoat

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2 Introduction

3 Contents

4 Dr Zoe RadnorAssociate ProfessorWarwick Business School

Zoe Radnor is one of the UK’s leading academics focusing on Lean in the publicservices. She is currently advising on a number of government Lean projects and,in the lead article, will outline the principles of Lean, its historical background andhow it is delivering significant savings across the whole of the public sector.

6 David WhaleHead of Public Sector,Unipart

Unipart explains how the public and private sectors can work together, learn fromeach other and adopt Lean methods.

8 Daniel JonesChairmanLean Enterprise Academy

Daniel is a management thought leader and adviser on applying lean and processthinkingand is dedicated to pushing forward Lean thinking. Describing the work ofthe Lean Enterprise Academy, he will describe how it is pioneering certaintechniques and advising their application in the public sector, as well as settingout his views on how Lean can be further exploited by public organisations.

10 Mastercard MasterCard decribes how its third generation Government Procurement Card(GPCIII) can make a significant contribution to cutting public expenditure.

11 Alison McDonaldPerformance & Improvement Deputy DirectorHM Revenue & Customs

Case study profiling the PaceSetter project which has led the way for Lean to bedeveloped more widely within the department.

13 Mark Eaton FIOM Transformation for the Public Good.The problems of applying lean and how to overcome it within the new publicenvironment.

16 Brendan McCarronCIPFA Performance Improvement Network

Brendan is CIPFA’s lead adviser on performance, policy and quality issues. He willset the local government scene, how the value proposition has led localgovernment to adopt Lean methodology and techniques to cut waste and whatthe future holds for local government post-Spending Review.

17 James BradyValue for MoneyHome Office

Case study examining the groundbreaking QUEST project which is showingremarkable results in the Police service.

19 Simon EliasLean Enterprise Research CentreCardiff University

As the leading academic lean research centre in the world, the LERC and hasestablished an international reputation and strong presence in its role ofresearching, applying and communicating lean thinking. Simon will highlight theLERC’s recent research on Sustainable Lean (how lean thinking can beimplemented in a way that ensures lasting, organisational change. He will alsodescribe the work of the newly-established Public Sector Think Tank.

21 Lisa NotherHM Court Service Lean Programme ManagerMinistry of Justice

Case study of the Court Service Lean programme and the benefits this approachhas brought, together with the difference that the project has made to staff.

23 About wired-GOV

Spotlight on Lean December 2010 Page 4 of 23

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In 2006, HMRC began to roll out an organisation-wide programme across processing areas with thehelp of management consultants. In my study ofthis programme, it became clear that there was adirect correlation between how senior managementengaged in Lean and how their staff then perceivedit.

Where there was negative engagement or poorcommunication by senior management, staff wereless likely to link Lean with improved quality andproductivity, and customers were more likely tohave a mixed understanding of the potentialoutcomes.

Where senior managers showed positiveengagement, staff and customers were more likelyto perceive increased quality, a structuredapproach to problem solving, better teamworking,as well as a well-supported process for transferringcapabilities from the consultancy to HMRC.

Evaluation of the Lean Programme in HMCSRadnor and Bucci, 20102

The HMCS Lean three-year programme waslaunched in Autumn 2008 and will have carried outan ‘initial touch’ of all jurisdictions of courts inEngland and Wales by December 2011.The programme, designed to be consultant-free,is developing internal capability in the form ofchange agents; HMCS staff having undergonetraining through a Lean Academy.

Each court starts with a Lean event to introducethe revised processes and new practices through

“Is Lean just about cutting job and costs?” issomething I am frequently asked especially at themoment in the public sector. My answer is “No –the spending review and budget cuts direct whereand decide when cuts are made - not Lean.” Ifused properly, Lean can help public sectororganisations to maintain the high standard ofservices that they currently deliver, despite thecuts.

The call is to do ‘more with less’ – in other words,to be more efficient. But care must be taken toensure that the focus is not solely on taking themoney out – this to a degree is the easy bit. Thereare, in fact, two ways in which to increase value:one, by reducing waste and thus the cost of aproduct or service; the other, by increasingvalue-adding activities. The challenge for publicsector organisations is to reduce spend whilstretaining or even improving service delivery.Getting ‘the same or better for less’ is to beeffective as well as efficient!

I am an Advanced Institute of Management (AIM)Research Fellow considering the sustainability ofLean in Public Services. I have worked with theScottish Government, HM Revenue & Customs(HMRC) and health trusts and am aiming to developmy thinking through further work with HMRC as wellas HM Courts Services (HMCS), Department of Workand Pensions and local government. In this article,I want to share some highlights from my findings.

Evaluation of Pacesetter, Lean, SeniorLeadership and Operational Managementwithin HMRC Processing Radnor and Bucci, 20071

Now that the Spending Review has beenpublished, government departments areworking on the detail of how budgetcuts will be implemented. One keyelement to this must be a focus on Leanprocesses, according to Professor ZoeRadnor, a leading academic thinker onthe subject. She points to severalprojects she has worked on whichhighlight the myriad benefits that Leancan deliver for the public sector.

Standard Operating Procedures (SOPs). Like HMRCand DWP these practices include the introductionof Team Information or Performance Boards tomanage workload allocation, identify problemswithin the skills of team members and reportsuccesses. There are also daily team meetings.

My main findings show that the Lean programmeis having an exceptional impact – with break-evenwithin six months. The positive elements areimmediate or ‘quick win’ improvements inprocesses, with the use of performance boards andtrays highlighting the current state of work. Therole of the internal change agents is making a hugedifference at sites where they spend significantamounts of time. As a result of theseimprovements, many staff have stated that theydo not want to go back to the pre-programmeprocesses.

Pan-government perceptions

Across government Lean is being introduced toimprove service delivery by eliminating waste,simplifying processes and creating capacity to domore work with fewer resources. However, in myresearch into the effectiveness of Lean in the publicservices3, I found that there are a number ofrecurrent issues which could be better addressed:

1. Recognition of the importance of thecommitment and understanding of seniormanagers. In all cases there is a direct correlationbetween the enthusiasm and drive of seniormanagers and the positive experience of Leanacross the organisation.

Spotlight on Lean December 2010 Page 5 of 23

2. Many staff, whilst acknowledging that Lean has improvedtheir own working environment, could not quite see the impactit was having upon the delivery of the service to the customer.

3. Staff often used phrases such as “when Lean was here” or“after Lean had gone”, giving the impression that Lean issomething external to the organisation, carried out by thechange agents or management consultants. It is important torecognise that Lean is a long-term programme and not ashort-term fix; it is about both tools and behaviours.

4. Lean is not a ‘one-off’ process redesign, Lean event or a RapidImprovement Event (RIE). A series of RIEs does not Lean make!Although these events can result in a radical process redesignremoving ‘low hanging’ waste (eg, moving from 14 shift

patterns to three, reducing six forms to one, removing tons ofrubbish), if other Lean tools are not employed - particularlyvisual management and ongoing problem solving tools - theninefficiencies may slowly return.

The key elements of organisational readiness may well include:the engagement of staff through appropriate training anddevelopment; having an improvement strategy; having a processview; understanding customer requirements; strong, committedleadership; and understanding demand, capacity and variation.

Figure 1 below illustrates how these elements support theprinciples of Lean and the delivery of value. Together with a clearcommunication strategy and supported by a steering group andproject team, they are the bedrock and foundation of developingLean in Public Services.

Professor Zoe RadnorAIM Management Practice FellowEmail: Zoe.Radnor@wbs.ac.uk

References1Radnor Z. and Bucci G., (2010), Evaluation of the Lean Programme in HMCS,HMCS, London2Radnor Z. and Bucci, G., (2007), Evaluation of Pacesetter, Lean, SeniorLeadership and Operational Management within HMRC Processing, HMRC, London.3Radnor ZJ (2010) Review of Business Process Improvement Methodologies inthe Public Sector, AIM Report, London 2010 (May)

In Conclusion

There is enormous pressure on the public sector to reduce costsand to become more efficient and there is no doubt that Leancan contribute to this. But, importantly, this must not give thewrong message about the aims of Lean. It should be seeninstead as an approach which could turn a difficult situationinto an organisational opportunity, allowing the ways in whichpublic services are delivered to be re-structured.

The challenges outlined in the Spending Review can beaddressed by Lean programmes across government -systematically and effectively.

Success Factors

Five key success factors have consistently emerged during mywork on Lean in the Public Services. The most effectiveprogrammes are those where:

·   a culture of continuous improvement has been developed·   there is senior management commitment and leadership

throughout the organisation, in actions as well as words·   time and adequate, capable resources are committed·   a clear communication strategy has been developed and

implemented through appropriate channels to ensuremessages penetrate

·   (perhaps  the  most  significant)  ensuring  organisationalreadiness is in place to support the implementation.

Figure 1: House of Leanfor Public Services

Spotlight on Lean December 2010 Page 6 of 23

The impact of the Comprehensive SpendingReview on the public sector is now being playedout across the UK.

Government programmes, services and entirelevels of infrastructure are in danger of fastdisappearing as local authorities and publicsector organisations search for ways to reducepublic expenditure.

Some people suggest that a malaise exists inpublic service delivery; an accepted mind set thatBritain must pay more for public services as costsescalate.

An alternative view – often found at theoperational level - is that many people are awareof barriers that inhibit their performance, but arestill unable to address them.

Our work with central government, health trustsand local authorities has confirmed to us that thereis a commitment to delivering the most efficientservice at the lowest possible cost. However, thatcommitment is stifled by a lack of understandingof improvement tools and confidence in usingthem. Civil servants recognise the need to providebetter value for taxpayers, but they don’t alwayshave the knowledge and operational framework toachieve this.

Talking to public sector workers it is clear thatengagement has been poor, some are disillusionedand previous programmes have often beenunsustainable. But it is easy to teach those workingin the public services how to create their ownmodels of operational excellence including how toadopt a systematic process for solving problems,

how to implement a method for determining anddelivering precisely what the ‘customer’ requiresand how to eliminate activity that does not addvalue.

Parts of the Public Sector have already borrowedthese ideas from industry. HMRC’s PaceSetterprogramme, which sought to transform theefficiency of the department and bed down themerger between the Inland Revenue and Customsand Excise, used Lean techniques and practicesthat were based on our own architecture, TheUnipart Way.

With our support in building the architecture forchange and the capability of the PaceSetterpractitioners, PaceSetter has generated a returnof over £900m savings for the department. Onaverage, productivity has increased by at least30%, lead times for customers have reduced andthe quality of work through reduced errors hasvastly improved (from 49 to 99% in some cases).

This has led to increased debt recovery inmainstream taxes and work and error and fraudreturns in HMRC’s Benefits and Credits business.Productivity improvements have allowed for moreheadroom to be created to take in new work.

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Many will slice and dice ruthlessly for short termgoals or quick returns. Others, who might try to‘wait out the storm’ will be seen as complacentand unresponsive. In either case, it is most likelythat their ‘customers’ ultimately will lose out.

A number of UK private sector organisations havefound a solution to addressing cost pressures anddeliver more and better for less for theircustomers.

‘Lean thinking’ was, until recently, seen as theprovince of manufacturing companies that wereable to reduce costs and increase value byimproving the quality of their products and theefficiencies of their processes. But a fewcompanies have taken the lessons from the factoryfloor and applied them in sales, marketing, financeand other parts of the business.

The Lean process involves educating employeesabout how to implement improvements. It meansretraining employees in structured problem solvingto reduce waste. It means changing the style ofmanagement to give employees greaterindependence to make decisions. And it meansworking on small scale improvements thatgradually build confidence to really embed change.

Spotlight on Lean December 2010 Page 7 of 23

We also worked with the Department of Communitiesand Local Government to implement Lean. It wasfalling short of its Public Service agreement targets,but by working closely with civil servants over a 12week period, Lean techniques were used to both meetthe PSA targets and to save £146,000 per annum aswell.

There have been similar experiences in the NHS.South Central Strategic Health Authority used Leanmethods to meet the Government’s target that nopatient would wait longer than 18 weeks from GPreferral to hospital treatment. We helped the HealthAuthority engage clinical staff, build capacity in newways of working, standardise practices and ensurecost reduction. As a result, waiting times werereduced from 8 to 2 weeks and there was a 20%reduction in inappropriate referrals – saving time andmoney.

In addition, our work with the high performingCountess of Chester NHS Foundation Trust, isenabling the Trust to transform its culture.Organisational restructuring, reductions in absence,improved materials management and workforceredesign have resulted in cost savings of £2.5m. Byengaging employees, the Trust now has the highest

staff attendance rates in the North West and one ofthe best for an acute hospital in the country. InNovember, the Trust won the Lean HealthcareAcademy Project of the Year award 2010 for theCountess Way transformation programme, supportedby Unipart.

But the best way of implementing Lean in the publicsector can be through an industrial partnership. Inpractice, this means a commercial organisationco-operating, co-ordinating and collaborating with thepublic sector as Unipart is doing with a partnership ofgovernment departments, NHS organisations,universities, local authorities and not for profitorganisations in Thames Valley.

Together, the public and private sectors can worktogether and learn from one another. Adopting Leanmethods might just give government the chance toreform without the need for excessive cuts. And itcould just help the public sector make efficiencieswithout services being harmed.

A lean approach can help deliver public services thatBritain can sustain financially. And of which we canall be proud.

David WhaleHead of Public SectorUnipartUnipart Expert Practices(UEP) partner with a wide range ofpublic sector clients to help them achieve more and betterfor less.

Click here to receive a selection of our pan-government andpublic sector case studies.

Spotlight on Lean December 2010 Page 8 of 23

Wha

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k?Despite a number pioneering government departments being several years intotheir lean journeys, and seeing significant changes in staff engagement and stepchanges in performance, it is clear that there is still more to learn about lean thanwas originally thought.

Daniel Jones, Chairman of the influential Lean Enterprise Academy and author oftwo of the most influential books on lean, outlines his recipe for future success.

One of the most significant consequences of theUK government’s recent spending review maywell be the acceleration in the use of lean thinkingto improve both the quality and productivity ofthe delivery of public services.

Car manufacturer Toyota’s lasting contribution tothe practice of management is that it created aunique synthesis of three fundamentalapproaches to improvement: the analysis ofquality and the use of the scientific method learntfrom Walter Shewhart and Edwards Deming;process thinking about organising the flow of workinspired by the early Henry Ford and honedthrough Taiichi Ohno’s own experiments atToyota; and how people learn by doing, drawnfrom the Training Within Industry programmedeveloped by the US Government during WorldWar II.

Many organisations have experienced the powerof engaging employees in using lean tools toeliminate waste in their workplaces. Others havegone on to use the lean principles to streamlinethe flow of work. But in fact these are only part ofa very different way of managing and leadingchange. While a lot has been written recentlyabout Toyota’s management tools, such as A3thinking and strategy deployment, it is equallyimportant to understand the purpose (or the glue)that makes them effective.

The key is not the tools themselves but how youuse them. A good way of seeing this is by askingfour fundamental questions.

1. How can you focus everyone on the vitalfew improvements that will make thebiggest difference to the organisation?

The lean answer to this is to use the scientificmethod to understand the choices and to digdown beyond what are, in many cases, symptomsto the underlying causes, many of which are

common. Addressing these causes is much moreeffective than jumping to many different solutionsand launching hundreds of projects, in the hopethat some of them succeed.

It is no accident that the first things given to anew manager by their superior when they joinToyota are a problem and an A3 form. (Seeover-page)

The A3 frames the dialogue between the managerand the superior, and ensures that no step ismissed in finding a solution to the problem. Thisbegins by defining the problem, gathering facts(rather than just relying on past data),establishing a target condition or the gap to beclosed, understanding the root causes of aproblem, proposing a series of countermeasures(not just one), checking whether these workedand reflecting on the lessons learnt. Throughoutthis process the superior is asking questionsrather than telling the subordinate the answers.

Defining the problem, understanding the rootcauses and coming up with alternative ways ofaddressing the problem isn’t always easy, yet canbe a truly formative experience which can lay thebasis for a deeper understanding of morecomplicated problems as managers rise throughthe ranks of the organisation.

This experience greatly facilitates the toughdiscussions about which of the vital few issuesthat need to be focused on when drawing up thestrategy. It also helps to frame the deploymentdiscussions with each level down the organisationin order to translate these vital few ‘goals’ into thevital few ‘actions’ that will close the importantperformance gaps.

The significant point of using this scientificmethod to focus on the vital few is that everyonelearns to think in the right way about theright things.

2. How can you close the performance gapswhich are critical for the organisation?

The lean answer to this is to remove the obstaclesto the flow of work that creates the value forwhich customers are paying, which lean thinkerscall a ‘value stream’. This involves combiningactivities which were once separately managedinto an integrated value stream, eliminating thesources of unnecessary variation, optimising thewhole rather than the parts, removing queues,bottlenecks and handoffs as they cross from onedepartment to another, and aligning the flow ofwork with the rate of demand.

In most organisations, no one sees or isresponsible for these horizontal, end-to-end valuestreams. There is now a wealth of experience inusing the right lean principles and tools in theright sequence to redesign all kinds of valuestreams.

However, exactly the same principles are neededto streamline and synchronise all the supportactivities that enable the primary value streamsto flow, such as delivering the right drawings andparts to assemble an aircraft or delivering theright test results, take-home drugs and therapiesto be able to discharge a patient from hospital.

The third critical dimension to enable valuestreams to flow is aligning the managementdecision-making processes with the heart-beat ofthe value stream, so problems are escalated andresponded to quickly and projects are not held upwaiting for infrequently held review meetings.

Quite simply, this means seeing and managingthe organisation as a collection of inter-connectedprocesses or value streams as well as thetraditional, vertical organisation chart.

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them resolve the most important hindrancesto doing so.

This is equally true in a project environment.Toyota’s Oobeya (visual project room) is aneffective way to gain agreement from differentdepartments on common actions and to agreethe few common metrics on which the projectwill be measured. Breaking the work into dailyor weekly increments and reviewing progressdaily means that slippages and issues thatarise can be dealt with quickly, rather thanwaiting for the next gate review meeting.

Capturing these issues also provides a richsource of learning for future projects. Makingeverything visual is vitally important inlearning to work together to optimise thewhole system.

4. How can you sustain the gains?

The lean answer is to build new knowledgethrough learning and by doing. We havealready described the power of organisationalmentoring using A3s but, in a complicatedsocial environment where causality is notalways clear, real learning comes from doing anumber of controlled experiments to see whatworks and what does not. Very often problemsdo not occur where people think they do andthe root causes are also not always obvious.Establishing a common language for all kindsof problem-solving makes it possible tocapture and share not only what works butalso how problems can be solved, so otherscan learn from them.

By taking a value stream perspective one islearning to see the whole and where toact to close the critical performance gaps.

3. How can you change behaviour inorder to work together more effectivelyalong these value streams?

The lean answer is to plan not only whatshould happen to every product or patient asthey progress through the value stream butexactly when this should happen - and tomake any progress and/or deviations fromthis plan as visible as possible. Reviewingprogress on an hourly or daily basis enablesteams to respond quickly so as to get back onplan and also ensures that recurrent problemsare tracked to their root causes.

Making progress and problems visible in ano-blame environment is much moreproductive than hiding them from view or in acomputer system. It is also essential to beable to manage a much more interdependentprocess to ensure that any interruptions haveless impact on the overall systemperformance.

Anyone who has been part of a value streammapping exercise will have witnessed thedramatic change in behaviour as participantsstand in front of the map and see for the firsttime how to fix their broken process ratherthan blaming each other. Managers also beginto recognise that their role is to supportfrontline staff in doing their work and to help

Learning by doing is also the basis for a verydifferent approach to lean transformation.Instead of spending a lot of time planning andthen deploying a centrally designed trainingprogramme across the organisation, that isquickly forgotten when the experts move on,a lean transformation begins with a series ofcontrolled experiments in key activities tobuild an experience base as quickly aspossible.

This then forms the basis of furtherexperiments and for building communities ofpractice to share results and experiences.These may also be consolidated on an intranetaccessible to everyone in the organisation andreinforced by competitions and recognitionceremonies for the winning projects. Thisexperimental, evidence-based approachensures that everyone learns how to learnby doing and reflecting.

The Government’s recent Spending Review notonly focused on ‘out-of-the-box’ thinkingabout where cuts could be made, but it alsochallenged the assumption that improvementsin public services can only come about byspending more. Increased spending over thelast decade on the NHS, for instance, has notlead to vastly improved productivity.

The Lean Enterprise Academy’s work inseveral NHS hospitals has shown that it ispossible to reduce a patient’s length of stay byover 50% within 50 days if frontline staff areshown how to redesign and manage the end-to-end patient journey from admission todischarge. But we have also learned that thiscan only be sustained if management isliberated from the blizzard of policy initiatives,

and to focus on the vital few improvementsthat would make the biggest difference to theirhospital.

Lean thinking is the way the public sector canfollow private sector service deliveryorganisations in steadily improving the servicesthey deliver without any additional resources.Given this change in mindset, and the similarityof much of the work being done, there is nointrinsic reason why productivity growth shouldbe any different in the public sector than it isin the private sector. Indeed, the opportunitiesare probably greater in the public sector overthe next few years.

Daniel T Jones is the author of The Machinethat Changed the World and Lean Thinking andthe Chairman of the Lean Enterprise Academy– www.leanuk.org.

Daniel T JonesChairmanLean Enterprise AcademyThe Old VicarageGoodrichRoss-on-WyeHerefordshireHR9 6JE

Phone: 01600 890590Fax: 01600 890540Email: dan@leanuk.org

Spotlight on Lean December 2010 Page 10 of 23

Taking a lean approach to cost reduction isthe only way to make a real difference andMasterCard believes that the third generationGovernment Procurement Card (GPC III) canmake a really significant contribution.

The message is clear. With the current deficit thePublic Sector must reduce cost if it is to continueto provide effective services with limited budgets.And it is also clear that progress is being made atan, unusually, fast pace. The ERG is certainlymaking a mark and is quite right to be puttingconsiderable emphasis on governmentexpenditure, which, of course, is huge.

Re-negotiating contracts with major suppliers andmoving towards centralised category procurementmakes perfect sense but, to make a realdifference, the Public Sector will, probably, betaking a lean approach to cost reduction acrossthe whole of their supply chains. In this they willbe looking at the demand for and specification ofthe services they provide and the way that theyare delivered or commissioned; they will belooking at the optimisation of processes to deliverthese front-office services; and they will be lookingalso at how they can make back-office processesmore effective. They will be looking at procurementin terms of specifications and demand, pricing andtotal cost and supplier development – for long-term, sustainable cost management. Or willthey? Surely, beating up the big suppliers andcentralising strategic sourcing is not where it willstop!

The target operating model for centralisingcategory procurement requires the rightmanagement information, effective enablingtechnology and efficient payment processing if itis to deliver and it is to be expected that GPC IIIwill play a major role in both the effectiveness ofthe operating model and lean procurement.

GPC III is not simply a set of tools for processinglow value orders. Deployed strategically in a totallean approach it can make a contribution toimproving procurement processes and in suppliermanagement and development.

There is no doubt that the GPC improves paymentprocessing but it can be used to achieve muchmore. There is scope to use GPC functionality notonly for low value transactions but also for muchhigher proportions of expenditure, notably withembedded, lodged and prepaid cards, and achievemuch higher levels of process efficiency andheadcount reduction or redeployment. PositionGPC functionality within an overall settlement oreProcurement strategy, potentially through aneSettlement hub, and the benefits will be evengreater.

GPC III embedded within the new categorycontracts will ensure that suppliers are paid withinfour days, reduce their own internal costs bydecreasing the costs of invoice errors and debtcollection and, in turn, drive compliance with thenegotiated contracts. Suppliers will always preferthe hassle-free route to the maverick route.Reducing total cost in this way will have a positiveeffect on price especially if new contracts aregoing to be volume-bound. And, of course, thebigger the volume through the GPC the bigger theissuer rebate.

This also contributes to Government’s promptpayment and support to SME initiatives. This cango even further if linked to Supply Chain Finance.

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If you would like further information onMasterCard’s approach to GPC and strategiceSettlements please visit the website:www.mastercard.co.uk/publicsector

or e-mail us at:ukpublicsector@mastercard.com.

We look forward to hearing from you.

Taking a strategic approach to settlements willimprove management information and control. Thethird generation of GPC includes ancillary productssuch as MasterCard’s Smart Data and InControlwhich are being deployed to provide bettermanagement information and greater visibility andcontrol in transactions. The old obstacles ofpotential lack of control and visibility have beentaken away.

To make maximum use of the managementinformation it will be beneficial if groups of like-minded bodies adopt a collaborative approach to GPCIII, also avoiding the cost of multiple re-tenderingexercises. Putting groups of organisations on thesame GPC III platform will have provideconsolidated information as well as contractcompliance and through-put rebate.

MasterCard have recently produced a paperin collaboration with Cap Gemini Consultingon how, in the current economicenvironment, an efficient procurementprocess can be instrumental in drivingefficiency improvements and reducing cost.

Click here to find out more and receive thepaper in full.

Spotlight on Lean December 2010

Spotlight on Lean December 2010 Page 11 of 23

Groundbreaking PaceSetter, HMRC’sinnovative Lean project, continues toprovide the department with significantsavings and efficiencies and this is onlyset to increase as 95 percent of theworkforce plan to use PaceSetter intheir work by 2013. But it’s not all beenplain sailing, according to AlisonMcDonald, Deputy Director forPaceSetter, who highlights someimportant lessons that HMRC haslearned.

For some time now, continuous improvementtechniques, such as Lean, have been seen as keydriving forces for transforming public services forcustomers. Its particular attraction now, in thisclimate of austerity, is that while years may beneeded to fully embed a high performanceculture, high initial returns can be achieved in arelatively short space of time.

This is certainly the case for HMRC which beganimplementing Lean in 2005 to drive efficiencies inits volume-processing work. Early successes intax-form handling reported a 50 percent reductionin processing time and a reported uplift from 55percent to 98 percent in quality, reducing the needfor re-work. However, it soon became clear thatintroducing Lean was not enough by itself tomaintain momentum. As a result, the PaceSetterbrand was created to ensure futureimplementations focused on developing leadershipcapability alongside system change.

With nearly 50 percent of HMRC now operating ina PaceSetter way, the business has reported over£600m in additional tax yield and an average 30percent increase in productivity, leading toreported gross salary savings of well over £300m.And this success is only set to continue, withHMRC’s ambition of 95 percent of its workforceusing PaceSetter by 2013.

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But it has not been an easy ride for HMRC inimplementing PaceSetter. The department haslearned, and continues to learn, valuable lessonsabout how to embed and sustain its tools,techniques and behaviours – and to be flexible inadapting these to the needs of different businessareas.

We’ll now focus on some of the key lessons learnedand the steps that HMRC is taking to continuallyimprove PaceSetter for its staff and customers.

Leaders are the most critical success factor,along with disciplined adoption of tools andtechniques

Back in 2005, HMRC’s attention was focused ondriving efficiency in the frontline, with minimalsenior leadership engagement. This balance wassoon readdressed, and PaceSetter started toengage leaders at all levels with continuousimprovement tools and techniques.

A series of ‘Top Layer Programmes’ continue tohelp leaders to understand the pivotal role theyplay in making PaceSetter a success. Today,upwards of 1,000 leaders across HMRC have takenpart in these programmes - including theExecutive Committee, DGs and Directors - withmany using PaceSetter to aid their decision

making. They now view PaceSetter as one of thekey ways that HMRC can achieve its Vision anddeliver better outcomes for its customers.

Develop a strong internal cadre ofpractitioners, reducing the reliance onconsultants

Although reliant on consultants for specialistknowledge in the early days of the project, HMRCsoon developed a structured academy andcoaching programme to help staff becomePaceSetter Practitioners. It recognised that a keyrisk was putting too much stock in consultancysupport for too long, with insufficient skills transferto HMRC staff, particularly for delivering leadershipdevelopment programmes and challengingmanagement teams.

Now accredited by Cardiff University’s LeanEnterprise Resource Centre (LERC), the PaceSetterAcademy Programme has helped over 300 staffbecome Practitioners so far, helping HMRC to belargely independent of external consultancyresource.

Performance improvements need to betranslated into clear benefits and be visibleto everyone

After the Capability Review in November 2007,HMRC began to develop a robust PerformanceManagement Framework, consolidating over 70performance frameworks into one set of KeyPerformance Indicators. These have streamlineddata collection, reporting and decision making. AsPaceSetter became recognised as one of the keymechanisms to improve performance, HMRC beganto develop a Benefits Realisation Framework toboth measure and report the effect PaceSetter washaving on these metrics.

This Framework continues to help those businessareas which are implementing PaceSetter tounderstand the effect on productivity, quality,customer experience, staff engagement andleadership. Importantly, this creates the evidenceneeded for future resourcing and staff buy-in.

Performance Hubs and Boards, implemented atmanagement and team levels, are also helpingeveryone to visualise performance and benefits,with a clear line of sight from the ExecutiveCommittee to the frontline.

“PaceSetter has transformed the way that DGs and ExCom manage performance. They are nowpassionate about releasing the talents of those who do the work, enabling them to continuouslyimprove what they do every day as part of their everyday activities.”

Steve Lamey, DG Benefits and Credits HMRC

Spotlight on Lean December 2010 Page 12 of 23

‘One size does not fit all’

As PaceSetter began to be implemented in lesstransactional areas, HMRC recognised thatthere were certain business areas that neededto adapt rather than simply adopt the existingstandards and tools of PaceSetter.

Working closely with the policy teams inPersonal Tax and Business Tax revealed thatalmost 80 percent of the existing PaceSettertools were applicable to these environments.The remaining 20 percent were either adaptedor new tools developed which could be usedagain in other areas of its business.

Tackling these ‘considerative’ areas from thestart helps avoid the prejudice that continuousimprovement only works in ‘processing’ areas.

Greater accountability in the business

As the organisation matures, individualbusiness areas should be given greateraccountability for translating performanceimprovements into benefits realised. However,they should be supported by a commonoperating model, from front-line practitionerthrough to senior teams.

Assure the benefits

Change control and assurance are required tomaintain the integrity of implementations,along with a strong, consistent brand image.

Substantial benefits can be derived bylooking at the end-to-end enterprise level

To reach a ‘tipping point’ of credibility andunderstanding, HMRC initially focused onre-engineering sub-processes in organisationalpockets. This generated ‘quick wins’ and clearlydemonstrated the value of PaceSetter to theorganisation.

However, HMRC recognised early on thatsubstantial benefits would come fromidentifying ‘hot spots’ of waste at enterpriselevel, focusing on end-to end processes andcustomer journeys.

Work closely with enabling functions andinitiatives

A key priority for PaceSetter has been theintegration of its work with other keyprogrammes of activity. This includes theHMRC Strategy (for which it is a key enabler),Leadership Behaviours and Corporate andSocial Responsibility.

Give your staff a Voice

Whatever method of continuous improvementis used, it is critical that staff feel that theyhave the opportunity to have a voice in theirwork. By actively engaging them inperformance meetings around the hub -problem solving and creating new standards -HMRC has seen overall improvements in staffengagement in PaceSetter areas.

Alison McDonald OBEDeputy Director, Central PaceSetter

With 25 years’ operational and managementexperience gained in the civil service, AlisonMcDonald leads the implementation ofPaceSetter across HMRC.

Joining the Inland Revenue in 1985, Alisonworked in a variety of technical andmanagement roles in Sussex local offices,whilst completing her BSc (Hons) degree andTax Inspector training.

In 2003, Alison became the senior manager inPortsmouth - one of the largest processingoffices in HMRC. Introducing Lean tools andtechniques to redesign their processes, Alisonand her team developed pioneering techniquesfor wider application and became the firstPaceSetter model office for HMRC.

Her strong advocacy of Lean tools andtechniques, coupled with her wealth ofoperational experience, proved invaluable inMay 2008, when she became the DeputyDirector of Central PaceSetter in HMRC.

Now with nearly half of the department workingin a PaceSetter way and over £900m savings,it is widely recognised as one of HMRC’s keyenablers for continually improving outcomesfor customers and delivering its SpendingReview challenge.

PaceSetter combines lean tools and techniqueswith active leadership engagement - helping tocreate a culture that is genuinely open tochange and continuous improvement.

Alison McDonaldDeputy Director Central PaceSetterHMRC100 Parliament StreetLondonSW1A 2BQPhone: 020 7147 2675Email: Alison.mcdonald@hmrc.gsi.gov.uk

Of PaceSetter, HMRC staff say:

“We are now able to put our points acrossin an open environment.”

“It’s a natural part of our working life andculture.”

HMRC Managers say:

“Our people are now seeing the big pictureand getting actively involved incontinuously improving what they do.”

“The success of PaceSetter is reallyattributable to the management teams andfrontline staff. Of course, there is a way togo yet, but staff are really taking theinitiative to continually look at ways toimprove what they do.”

In the Leadership space, PaceSetter hasaligned and integrated its core managementbehaviours, with the newly launched HMRC-wide Leadership Behaviours. This avoids anyconflicting messages and (perceived)competing management training or rewardsystems across the department.

But it’s not only HR initiatives to whichPaceSetter is aligned. It continues to workclosely with other enabling functions, such asFinance for performance management, IT forinformation management and our customerstrategy work.

Greater cross-government working

Reduced funding, as well as pressure toimprove efficiency across government, mustlead to greater cross-department working,sharing experiences, best practice andmethodologies.

This is exactly what is being encouraged withPaceSetter Practitioners and specialist staffwithin HMRC. Over 600 internal staff are nowaccessing a workspace portal, sharingknowledge, experience and new approaches.This is something that could be replicatedacross government, to share knowledge andexpertise.

HMRC still has a way to go to achieve its aimof the majority of its workforce to be usingPaceSetter by 2013, but it continues to nurturea culture that is open to change, realising thatcontinuous improvement is not just amanagement fad – it is here to stay.

Spotlight on Lean December 2010 Page 13 of 23

An impending storm: the new public sector environment

A review of public expenditure over the period 1900–2010 shows that it hasincreased from less than 15% of the UK gross domestic product (GDP) to over48% in 2009–10. Much of the increase over this period has been driven bytremendous changes in the scale and type of publicly funded servicesavailable, including the introduction of the NHS, social care reforms andexpansion of investment in education.

Public sector expenditure 2010Major Categories

Total budget: £661 billion

Pensions £117 billionWelfare £105 billionHealth £104 billionEducation £86 billionDefence £44 billionGeneral Government £25 billion

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However, the current public sector spend as apercentage of GDP is among the highest over thisperiod, only being exceeded by the peaks duringthe First and Second World Wars and during thesocial and economic disruption of the mid-1970s.More worrying is that public sector spend hasbeen increasing at a rate not matched at anypoint in the recent past, increasing from less than40% of GDP in 2004 to the 2010 level of 48%.

The interest that the country needs to pay toservice the debt that underpins this spend isalready £43 billion a year, and this is before wefactor in the additional liabilities for public sectorpensions and any costs that arise from the formerGovernment’s commitment to underwritemortgages.

It is against this backdrop that the CoalitionGovernment announced the emergency budget inMay 2010 and with it an initial £6.25 billion worthof efficiency savings. However, this figure wasdwarfed by the Institute of Fiscal Studies’statement that the UK public sector needs to findan initial £35 billion of efficiency savings in thenext 18 months, adding that all of the initiativesundertaken so far have only delivered £8.5 billionto date.

The fact that there is also around an 11% gapbetween the Government’s income andexpenditure means that without significantefficiency savings the UK will need to borrow evenmore, adding to our current £930 billion worth ofpublic debt – approximately £14,000 for everyman, woman and child in the UK.

It is against this backdrop that theComprehensive Spending Review was publishedin October 2010, with the aim of bringing thedeficit under control and cut the gap in fundingfrom its current 11% to 1.1% by 2014–15, as wellas setting it on a downward trend beyond 2015.

This equates to an average cut in spending acrossall departments of 19%, although this variessignificantly from areas such as the NHS andinternational development that will actually seean increase to cuts of up to 33% for otherdepartments, with HM Treasury, localgovernment and the Home Office being hit bycuts of greater than the average.

This reform of public sector finances is not justrestricted to administrative costs but also affectsthe public sector capital budgets, which will see anet reduction of 29% between 2010 and 2015across all areas.

Collectively, this means we face the need for analmost unprecedented level of transformationalchange within the public sector, bringing radicalchanges to the way services are commissionedand managed and the disappearance or merger ofnon-core and inefficient services.

If you think this is just a problem for the publicsector, then think again. As the public sector isthe largest purchaser of products and services in

the UK, the impending storm will also impact ontens of thousands of private sector businesses,from suppliers of pharmaceuticals to outsourcedservices providers.

The need for a completely different approach totransformation in the public sector can besummed up in the words of one public sector ChiefExecutive: ‘We are not going to achieve this levelof saving by buying paperclips more cheaply orbanning the purchase of Post-It notes.’

Spotlight on Lean December 2010

Spotlight on Lean December 2010 Page 14 of 23

Lean: at the heart of public sectorefficiency improvements for a decade

The need for massive efficiency improvementsin the public sector does not mean thatservices can just be cut unilaterally. Mostpeople want to see improving performance inpublic services, whether this means fasteraccess to a GP, a faster turnaround on theirpassport application or improving standardswithin education. Lean has found its way intoa wide range of public sector programmes tohelp deliver the improvements people havewanted with their public service operationsfrom local and central government to publichealthcare and the armed forces. Reportedachievements have often been impressive,with improvements in the performance ofspecific services being accompanied byfinancial savings that exceed the currentlyrequired 15% as can be seen in theaccompanying three short case studies.

Whilst there are many more case studies ofthe successful application of lean in the publicsector of all different sizes and scales, it canbe seen that lean has mostly been applied onsmall to medium-scale projects with easilystandardised processes that experiencerelatively low levels of variability. Many of theexamples of lean in the public sector have alsobeen internal and have avoided cutting acrossorganisational borders.

In the public sector, many of the mostimportant and highest cost processes arecomplex and have high levels of variability.These strategic and complex processes oftenalso cut across the borders of departmentsand external organisations. The maximumvalue of lean will only come when it is appliedstrategically to these more complex pathways.

This can be a problem because public sectororganisations are frequently structured like amultinational conglomerate, with manyseparate corporations engaged in differentactivities under a single managementstructure, making co-ordination much harderto achieve.

the new public sector environment will be anacceptance that it will not be possible for everyorganisation to win every time.

Real efficiencies will come by ensuring thatservices are delivered by the most efficientorganisation and that will mean changes to theway that money flows in the public sector. Thiswill be complicated by organisationsattempting to retain budgets when the bestvalue approach would be achieved bytransferring the funds to a differentorganisation.

Another core lean concept that needs to beunderstood for any project to be successful inthe public sector is the customer’s perspectiveon which activities are value-adding. Whereasin the private sector this will include allactivities that a customer is prepared to payfor we need to take a wider view of value-addin the public sector. For one thing, manycustomers do not pay directly for the publicservices they receive, and for another someservices do not benefit any individual person,instead benefiting society as a whole. It is thiswider concept of public value that means wecannot just consider the direct impact ofservices delivered.

This can be complicated further when multipleorganisations are involved in the delivery of asingle value stream as each organisation canbe funded from a different pot and hasdifferent corporate objectives.This leads to the first requirement of anysuccessful lean programme in the publicsector being the need for all parties to decidewhat they are trying to deliver for the benefitof the customer, whether that is a member ofthe public, the wider society or anotheragency. One maxim that will be important in

Summary case studies

1. Housing associationEffective management of gas servicing ofproperties is essential to ensure the safety ofproperties and also to control costs. A short,high-impact programme reduced the associ-ated costs by more than 25% and reducedthe number of properties that were not beingserviced within a 12-month period by justunder 75%.

2. Local councilSwift processing of Disabled FacilitiesGrants, which are provided to help peopleadapt their home to enable them to continueto live there, impacts directly on the qualityof lives of many people. Focusing lean on theend-to-end process helped to reduce theoverall lead-time from application to grantby 85%, whilst reducing the associated ad-ministration costs by 38%.

3. Community healthcareIn the absence of a safe and effective choice,ambulance crews will often convey a vulner-able patient to hospital rather than leave himor her at risk at home. This leads to manyunnecessary admissions and excessive cost.Working with an NHS Community Healthcareorganisation to provide an out of hours rapidresponse service has given ambulance crewsthe options they need and reduced the over-all costs associated with these patients by45% whilst enabling more patients to remainin their own home.

Value-adding activities in the publicsector

An activity is value-adding if you can answeryes to the following three questions:Does the customer experience it?Does the customer want it to happen?Would the customer or the wider society if itwere significantly changed or dropped?

The lack of a financial crisis and a generalincrease in the level of funding within thepublic sector as a whole over the last 10 yearshas meant that there has often been a lack ofwill to apply lean to efficiency improvementsthat cut across whole systems. The lack of aperceived financial crisis in the public sector,despite such things as the 2004 GershonReport and other, more localised efficiency

reports has meant that most of the leanprojects undertaken to date have tackled pointissues without the strategic will being presentto look at whole systems.

In the new public sector environment, we willneed to see a greater focus on whole-systemtransformation, where organisations look atthe core services they deliver as a wholerather than using lean to address small-scaleprojects in isolation. To achieve this willrequire a change in the way that senior teamsthink and work within the public sector, with areduction in the amount of time spentmanaging the status quo and the need toallocate more time to transformational changeand to dealing with the people, political andfunding issues that will inevitably arise.

The problems that will arise with the widerapplication of lean across the public sector willnot be in the use of the tools and concepts thatare as applicable in the public sector asanywhere else, but in creating and managingthe right environment for lean to be appliedand embedded, and this needs to tackle manyof the limiting beliefs that prevent publicsector organisations doing anything other thandelivering the services the way they havedone it previously. Therefore, a key skill forpeople looking to lead lean programmes in thepublic sector will be their ability to overcomesome of the limiting factors that arepreventing the widespread adoption of lean totackle whole-system transformation.

Lean limiting factors in the public sector

Without the profit motive that drives efficiencywithin the private sector, it is not surprisingthat there is not the same sense of urgency fortransformation programmes in the publicsector. For nearly all public sector employees,there is not the same risk that their salarieswill not be paid at the end of the month thatthere is in an under-performing private sectororganisation. Another limiting factor is thedifferent attitude to perceived risk in thepublic sector and in particular what might endup on the front page of local and national

Spotlight on Lean December 2010

Spotlight on Lean December 2010 Page 15 of 23

Mark Eaton FIOM is an active Fellow of TheInstitute of Operations Management.

He has been leading transformational changeprogrammes in and for the public sector forover 10 years and has led flagship publiclyfunded programmes and worked with majorpublic sector organisations across the UK. Inaddition, his experience of working within themanufacturing and service sectors has led tohim being asked to write a number of publicsector strategies focused on supporting anddeveloping UK industry, for which he wasawarded the Viscount Nuffield Medal in 2004.

Email: markeaton@amnis.uk.com

The Institute of Operations Management(IOM) is the principal UK professional societyfor operations management inmanufacturing, service industries and thepublic sector. IOM is a membership bodywithin The Chartered Institute of Logisticsand Transport (UK) – CILT(UK); andInternational Associate for APICS in GreatBritain. IOM is a not for profit organisation,run as an educational charity to help developits members. IOM provides learning andcareer opportunities in four key ways:

Networking: Events, connections andindustry insights

Knowledge: Access to exclusive industryintelligence

Career: Personal advice, support andinformation

Development: Workshops, training andqualifications

media if mistakes are made. This is one of thereasons why there is often a committeeapproach to decision-making that means thatdecisions can take a long time to reach andare then difficult to change if, for example, thesituation changes rapidly.

This need for group consensus in decision-making is one of the reasons that public sectormanagers can spend up to twice as long inmeetings each week as their private sectorcounterparts. The consensus approach todecision-making also manifests itself inanother limiting factor, namely the need forreports and analysis. Many transformationprogrammes have either been thwarted ordelayed by an extended period of datagathering and analysis followed by periods ofstrategising and further planning. This needfor analysis is not aided by the difficulties ofaccessing reliable information on historicperformance and potential future demandwithin most public sector organisations and isalso complicated by competing budgetsbetween different organisations and a legacyof poor working relationships, all of whichneed to be overcome to enable lean to besuccessful.

I would like to emphasise the limitingenvironment that exists in most public sectororganisations by adapting a statement madeby Jim Easton when he was CEO of an NHSStrategic Health Authority – he is now the NHSNational Director for Efficiency &Improvement – to enable it to apply to thewhole public sector:

The lack of a ‘burning platform’ in the publicsector can be traced back to three limitingbeliefs:1. An aspiration to mediocrity2. The desire to blame others for failings in thesystem3. A belief in a normative level of performance

It will take a different approach to leading leanprogrammes in the public sector iforganisations are to be able to rise to thechallenge in the new environment andovercome these limiting beliefs.

Lean transformation in the new publicsector environment

Lean has already been shown to work withinthe public sector in small and medium-scaletransformation projects, whether it is reducingthe costs associated with managing vacantproperties, reducing the time from referral totreatment in the NHS or improving theprocesses associated with home fire riskassessments.

Delivering the whole-system transformationalchange that will be required by the currentfinancial crisis will only be possible if limitingbeliefs are tackled head on, mostly through achange in the behaviour of senior leaders inthe public sector through five distinct actions:

1. Put transformation as a core businessfunction

The first step will be to allocate as much airtime in management meetings to thetransformational change process as isallocated to managing day to day operations.This will need to be preceded by the creationof a transformation map that looks at thewhole system and puts together a roadmap ofthe steps that will be taken over a one tothree-year period. In addition, it may benecessary to invest in establishing atransformation management office to rivalcurrent project management offices.

2. Cut through the politics

Some of the drive for this will need to comefrom the very highest parts of Government,but at a local level this is about buildingeffective relationships between organisationsand getting to grips with the tough decisions,especially those that are likely to lead tosignificant financial cuts and even staff losses.It will not be acceptable to repeat the words ofone Chief Operating Officer entering astrategic planning meeting who said:

‘If we are going to talk about any cuts,I’m leaving right now.’

3. Manage perceptions of stakeholders

Staff will need to understand the scale andscope of the changes that are required andalso how important the need fortransformational change is. This requireseffective, regular and high-impactcommunications. The perceptions ofcustomers and other stakeholders also need tobe managed in a more proactive way if you areto avoid significant levels of adverse feedbackwhen changes do start to happen on a largescale.

4. Share information to reduce variation

Looking for transformation partners who youcan learn from and educate, as well as beingprepared to share information more openly onhow you have achieved what you have – or theproblems you have encountered – will speedup the learning process.

5. Focus end-to-end

Focusing on the end-to-end process andinvolving all the various parties in the redesignof services or changes to the commissioningprocesses is the key to avoiding the creationof islands of excellence that are swamped byproblems and issues created by organisationsupstream or downstream of your organisation.

Perhaps the biggest challenge for senior teamswill be to encourage staff and managers at alllevels within the public sector to develop threekey lean behaviours:

� Be obsessive about finding better and moreefficient ways of doing things

� Constantly search for the hidden part of theorganisation that is adding no value andeliminate it

� Tackle limiting beliefs that prevent theorganisation from becoming more efficient.

Organisations that can successfully get staff toadopt these three behaviours will be thewinners in the new public sector environment.

Why not find out more about lean in the publicsector through the Institute’s new lean forpublic sector workshop programme? IoM’sforthcoming lean programme is dedicated tolocal authorities and the public sector.

Click here to find out more and to register.

Spotlight on Lean December 2010

Spotlight on Lean December 2010 Page 16 of 23

Apart from the public sector, my professional lifeincludes working in the aerospace and high-techmanufacturing industries. Systems ideas havebeen thoroughly internalised by these industries,in which manufacturers are lucky in that they dealin tangible products which can be easilyunderstood and measured. They have riddensuccessive waves of innovative approaches toimproving manufacturing operations to arrive atstate-of-the-art facilities that are well thought-through to maximise long-term profitability.

As the social sciences are the source of manysystems ideas, it is not surprising that public sectororganisations have also been using systems ideasfor many years. But they are saddled with theproblem of producing services which are lessintangible than products which makesunderstanding and measuring these services moredifficult. In addition, there is no public sectorequivalent of long-term profitability as an aim oras a measure in the public sector. Instead, we arefaced with a confused not-quite-consensus aboutwhat public sector organisations exist to provideand lots of possible ways of measuring how wellthe services are provided.

What is ‘value’?

Lean is based on a relentless focus on optimisingprofitability by systematically improving the wayvalue is created for customers with the minimumof wasted effort. Central to this approach is theidea of value. In the commercial world, wherecustomers pay for products, value is fairly easy todetermine. In the public sector, the ‘not-quite-consensus’ and payment through taxes and grantsmakes determining value harder.In the public services, lean and systems ideas havebeen used by assuming that the user of a serviceis the ‘customer’ and that whatever benefits themmust therefore add ‘value’. I have just startedworking with a group of services for localLe

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authorities, in which staff are making thisassumption. This works because they are drawingthe boundaries of the systems they are workingon very tightly. For example, consider a planningfunction of a local authority as a system. If youinclude in the ‘planning system’ everything frompolitical policy through planning applicationprocessing to enforcement, then there will bemany potential customers who value differentthings. By reducing the scope of the system it ispossible to be fairly clear about customers andwhat they value. The danger of breaking a servicefunction into a series of smaller systems is thatyou risk sub-optimising the whole system.

The Choice of Systems Ideas

The complexity of the system and the level ofagreement about its purpose can be used toidentify where various systems ideas can be used.Lean systems ideas are useful in situations wherethe work systems are fairly straightforward, wherethere is a clear customer and where there is aconsensus about the purpose of the system.Where services are complex and there is littleagreement about the purpose or even who thecustomer is, then other systems approaches suchas Soft Systems Methodology (SSM) may providemore insight.

The limitations on the type of system where leansystems ideas can be used are not an issue in mostmanufacturing, and indeed most of theprofitability-focused private sector organisations,because their purpose, to make money, is clear.But this is a serious issue in the public sectorbecause, as Henry Mintzberg continually pointsout, many services are in the public sector becauseof measurement problems and these arethemselves caused by the intangibility anddisagreement about the desired outcome.

Lean post-Spending Review

At the moment, in the wake of the SpendingReview, the public sector is concerned with how tomake significant cuts to spending while, at thesame time, it is under pressure to maintain or evenexpand services. A local authority using lean ideasto improve the processing of planning applicationsis not going to solve this political dilemma. The bigsavings will only come from profound changes tolarge systems. The Government’s proposals onchanging the housing benefit cap and other taxchanges are examples of decisions that profoundlyalter the system; whether for better or worse wewill see.

Thinking differently about what we want the stateto do, and the goals we set for public services, hasa large impact throughout the machinery ofgovernment. Higher political goals shape theobjectives for public sector organisations which, inturn, determine the type and volume of servicesrequired. These requirements determine thespecifications of services which are straightforwardenough in terms of the number of competingrequirements users and stakeholders place onthem and in terms of their complexity, that it ispossible to use lean systems ideas to help design,manage and improve them.

I am not setting out a manifesto for inaction; I justwant to recommend some care before applyingany systems idea - not just lean systems thinkingto the public sector. The purpose of the largersystem (and there always is a larger system) needsthinking-through before embarking on reducingthe system scope, so that hard systems ideas likelean can be applied to a manageable area of work.Knowing what the overall purpose is will be a usefulcheck on any changes made to the manageablearea to ensure improvements are really made.

Brendan McCarron is a Senior Associate with CIPFA Training and Development where he runs CIPFA’sopen courses on lean systems approaches in public services as well as courses on performancemanagement and the application of the balanced scorecard. He also consults, writes and teaches widelyin the areas of performance management, leadership and improvement.

Brendan.mccarron@cipfa.org.uk or mccarronb@gmail.com and on 01249 783489.Cato the Younger Blog: www.localgov.co.uk

Systems ideas are a crucial part of determining how public services – especially thoseprovided by local authorities – are delivered. But, as Brendan McCarron, an associate withCIPFA Training and Development examines here, the tricky issues of value measurement andthe choice of system approaches need careful consideration by all public sector organisations.

Spotlight on Lean December 2010 Page 17 of 23

While spending cuts dominate theheadlines and police chiefscontemplate how to equip themselvesfor the future, it is tempting anddangerous to forget the importance ofimproving services. Operation QUESThas helped seventeen police forces andlaw enforcement organisations overthe last 3 years to generate more than£100m per annum of operationalefficiency savings, whilstsimultaneously transforming theperformance of frontline services.James Brady, who has been involvedthe development of QUEST since itsinception, explains how this ongoingprogramme is having a dramatic effecton staff and the delivery of servicesalike.

Operation QUEST was first introduced by the HomeOffice in 3 police forces during 2006, once theconcept that business process re-engineeringtechniques could be successfully applied tofrontline operational policing had been proven.Since then some 15 forces have been involved inthe QUEST programme and it is anticipated thatothers will also become involved in the monthsand years to come.

The Home Office‘s pioneering work with OperationQUEST drew its inspiration from some of the mostsuccessful organisations in the UK and overseas,in which those bodies had set out to achieve aprogramme of continuous improvement based onsystematic reform of ‘nuts-and-bolts’ processes.QUEST’s strong focus on internal co-operation,with its implied reversal of traditional hierarchyand unremitting focus on quantified analysis andimplementation of what works, is fairlyuncharacteristic in large UK organisationsgenerally, including in the public sector and in thePolice Service.

By allowing officers and staff to work out (throughthe rigour of the best in process and changemethodology) how they can best use their time,

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and that of their colleagues, to make the biggestimpact, QUEST has harnessed the power of thefrontline to deliver public sector reform. The ChiefConstable of a large force says:

“One of the most profound outcomes…has beenthe personal and professional development of thestaff from the Force in delivering QUEST. …[Theteam has] been careful to understand and fit withour values and have been mentors to therepresentatives of the customer. I expect QUESTto make a significant difference to our businessprocesses but the real legacy is in the learning ofthe people who have been involved.”

QUEST incorporates a rapid upfront diagnostic toquickly identify priority areas in terms ofperformance and cost to focus on the largerorganisational opportunities. The approach usesdetailed cost modelling and frontline demandanalysis to develop robust business cases thatclearly articulate the scale of benefit, both in termsof cost saving and productivity. Robert Arnott,sponsor of the work, and Head of Value for Moneyat the Home Office, comments:

“QUEST takes the simple concepts of rigour andvigour and applies them to the management ofday-to-day tasks. We have seen profound resultswhere a focus on what matters and deliverspositive outcome is understood and prioritised”.

Programme performance is managed at force levelas that is where ownership lies. During the courseof a force engagement with QUEST, theprogramme works to develop the benefitsmanagement frameworks and supportinginfrastructure. Forces report performance andbenefits to the Home Office, while the department,in turn, provides benefits management oversightand post-implementation assurance to help securesustainability.

QUEST Around the UK

Operation QUEST is a national programme.However, each project demonstrates a localpriority or focus linking into the strategicobjectives of the organisation. The thread thatjoins them is sustainable improvements in

capability and performance. Suffolk Constabularyhas now sustained substantially better customerservice for over two years. Sussex police officers,who joined the work in 2007, have acquired theskills and applied it to a range of policing activities,so that the QUEST-way is impactingsimultaneously on custody waiting times, the timein attending scenes and the quality of victim care.

West Yorkshire police have significantly reducedthe time in investigating a crime, reinvesting thatcapacity into problem-solving neighbourhoodpolicing and serving the needs of the vulnerable,while also reducing predictable demand on theservice. These solutions centred on improving thestandard of initial investigation with frontlineofficers and on simplifying and managing theinvestigation process more effectively, focusingprecious investigative time on productiveinvestigative tasks and on crimes with clear‘solvability’. The project has resulted in reducingthe average time to investigate low-level crime by85%.

Greater Manchester Police (GMP) has initiated itsvulnerable people workstream, introducing abroad-ranging training package for staff andrigorous performance management. The Force hasalso worked to implement incident and crimemanagement changes that can be rolled out across12 divisions. Kevin Mulligan, a ChiefSuperintendent in GMP, says:

“QUEST…has lifted the mist around a whole rangeof previously intractable management andresourcing decisions. The bottom line is that,thanks to the work of Salford Division and QUEST,the service we provide to our community hasgreatly improved”.

Quiet revolutions

QUEST takes officers and staff with a variety ofdifferent skills and experiences and shows themhow to effect ‘quiet revolutions’. Officers learn howto draw on ‘canteen culture’ – the idea that casualconversations can be used to spread the word - topersuade and influence. They sell the benefits ofproductivity, value for money and culture changeto their peers and then feel honour and obligationto deliver a better service for their colleagues and

Spotlight on Lean December 2010 Page 18 of 23

This element of the work is supported by arelentless focus on building skills. Long-termsustainability rests on an organisation’s abilityto replicate improvement itself. To help buildthis capacity QUEST incorporates:

(i) individual coaching and skills developmentthrough supported, hands-on learning;(ii) the establishment of robust benefitsmanagement regimes,(iii) development of the supportingmechanisms and processes required toimplement and manage new projects.

QUEST Moving Forward

The success of QUEST points the way for otherpublic sector organisations to follow and we aredeveloping the programme further to supportforces in a flexible manner.

service users. QUEST also re-ignites the roleof leaders as listeners and facilitators. Seniormanagement must take responsibility forfostering the adoption of an organisationalculture in which working level staff areexpected constantly to identify new ideas forimprovement, while line managers areexpected to embrace and progress those ideasand realise measurable benefits.

This is the keystone to QUEST’s success; it isbuilt on the premise that frontline staff knowwhat stands in the way of their doing the bestpossible job. Katherine Govier, Assistant ChiefConstable in Bedfordshire was struck by theempowering nature of the work:

“I am delighted with the response ofofficers…it’s allowing them to use theirdiscretion to resolve issues and will increasevictim satisfaction and public confidence”.

James Brady joined the Home Office in 2004and has worked predominantly on improvingpolicing efficiency. For the last three years hehas worked to embed QUEST across thePolice Service and has also worked withcolleagues in the Treasury and Cabinet Officeto deliver a cross-public sector strategy oncontinuous improvement.

James BradyValue for Money, Home OfficePhone: 020 7035 1747Mobile: 07801802448

or

Steve HassallCh. Supt. Head of Continuous Improvement,NPIAPhone: 07595 010386Email: Steve.Hassall@npia.pnn.police.uk

The emphasis, however, will remain on localownership and not national mandation.

The revolutionary programme challengestraditional practices and this is somethingDavid Crompton, ACPO lead for ContinuousImprovement and a Deputy Chief Constable,believes can have dramatic effects on theorganisation.

He concludes by describing the culture thatsweeps through the organisation:

“when the force first used QUEST, there wasmystery amongst divisional commanders.Positive results filtered back. A demand wascreated. Eventually there was a bidding war.Everyone wanted to be the next to implementit”.

Spotlight on Lean December 2010 Page 19 of 23

With its wealth of experience and internalknowledge the Lean Enterprise Research Centre(LERC) is perfectly placed to comment on thewhys and wherefores on lean thinking and how thevarious approaches can be applied in the publicsector. Simon Elias, a director of LERC, promotesthe idea of Sustainable Lean, plus the work of theLERC’s innovative Public Sector Think Tank.

Position on Lean

LERC generally promotes a holistic, ‘systems’approach to lean improvement, acknowledgingthat lean is much more than simply improvingprocesses through the application of tools andprescriptive principles. Lean is primarily positionedas a means for organisations to create capacity,enhance value-adding activities and improve theflow of productive activities. Successful leanorganisations employ lean strategies, leanleadership and understand the need for anengaged, empowered workforce. LERC’s strengthstems from an understanding of the many different‘lean’ methodologies and an appreciation thatdifferent organisations require their own, bespokesolutions for sustained implementation - in otherwords, they need to adopt a contingent approachto lean.

As lean thinking has rapidly spread in recent yearsinto both consumer services and the public sector,it has become evident that while the underlyingprinciples are highly relevant in a service context,there have been several examples ofimplementation failures, highlighting a lack of

About LERC

Formed in 1994 by The Machine that Changed theWorld and Lean Thinking co-author Dan Jones, theLean Enterprise Research Centre (LERC) It is thelargest dedicated academic lean research centrein the world and has established an internationalreputation and strong presence in its role ofresearching, applying and communicating leanthinking.

LERC’s strategy has evolved over the past 16years, and its activities now encompassesmaster’s degree education (for executives) and arange of engagement activities, which includeknowledge transfer activities, short courses, leannetworks, conferences, workshops and elearning.Such activities are channels through whichresearch outputs and new lean knowledge aredisseminated to the practitioner communities.They also play an important role in feeding backkey issues and trends which inform LERC’sevolving research agenda and degreeprogramme syllabus. The linkage among thesethree activities is important and provides LERCwith a unique perspective and offering.

understanding of the unique nature of servicescompared to manufacturing – and the implicationsof these for ‘going lean’. Furthermore, in the publicsector notions of ‘value’ and ‘the customer’ candiffer significantly from the private world and thisfurther complicates the application of ‘traditional’lean thinking in this area and reinforces the needfor this contingent approach.

LERC’s recent research has focused on SustainableLean - that is, how lean thinking can beimplemented in a way that ensures lasting,organisational change. The findings of this workhave been published in Staying Lean (which canbe downloaded as a PDF from LERC’s website).

The Public Sector

LERC’s projects and activities have followed lean’sexpansion in many different sectors, starting withautomotive and manufacturing sectors and then,since the turn of the 21st century, in consumerservices and the public sector - the latter includingdefence, healthcare, government agencies, highereducation, local government and centralgovernment. From a research perspective, thechallenge is to understand how to successfullytranslate and apply the lean philosophy withincomplex public organisations.

It is clear that despite some problems, lean ishaving a significant impact in many parts of thepublic sector, and there are several documentedsuccess stories (for example, see Leaner and Fitter- Boosting Productivity in Public Services, CBI,2010). However, it can be argued that success doesvary considerably. For instance, many parts of thearmed forces have been implementing lean formuch of the past decade, though the focus haslargely been ‘cost down’ which, while leading toundoubted financial savings, has not endeared theapproach to service personnel and has meant that

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Spotlight on Lean December 2010 Page 20 of 23

sustainability of change has been questionable.Healthcare has seen many highly successfulexamples of lean-related implementations,while the local authority sector is a recentconvert to lean, though again driven largely bya cost saving agenda.

Some of the biggest lean implementations inthe public sector have been the largegovernment departments, such as HerMajesty’s Revenue & Customs and theDepartment of Work & Pensions, which haveimplemented highly structured programmes,focusing on improving transactionaleffectiveness.

Having observed lean’s impact on the publicsector, researchers in LERC have concludedthat there is still a degree of confusion amongpublic sector managers on not only what leanis, but how it should be applied in theirparticular environments. There have also beenseveral challenges to the traditional leanorthodoxy, which has complicated the situationfurther.

LERC’s research project ‘Systems Thinking inthe Public Sector’, commissioned by the WalesAudit Office (available from:www.leanenterprise.org.uk), is a recentattempt to demonstrate how a particular

Those interested in joining the Public Sector network should contactSarah Lethbridge(lethbridgesl@cardiff.ac.uk)

Simon Elias, Director, LERCCardiff Business SchoolCardiff UniversityCardiff Business Technology CentreSenghennydd Road, Cardiff CF24 4AY

Phone: (029) 2064 7027Mobile: 07767 371012Email: eliass@cardiff.ac.ukWebsite: www.leanenterprise.org.uk

improvement approach can be highly effectivein achieving real and tangible change forcitizens, though it is clear more researchevidence is required to help understanding andclarify many of the issues.

The idea for LERC’s Public Sector Think Tankemerged out of this apparent lack of clarity andthe desire from public sector managers for anindependent network to debate and discusslean related issues, where they could learnfrom each others’ experiences and share adialogue about lean in their environments.

An initial meeting took place to scope out thenetwork’s modus operandi, which will becharacterised by events hosted at members’organisations, which will provide anopportunity to witness first hand the results ofa range of business improvement approaches.The first of these was hosted by the Ministryof Justice’s Court Services (HMCS), at LiverpoolCounty Court, which provided an opportunityto learn more about how HMCS delivered itsimprovement programme, to discover whatresults it has achieved and to talk to staff aboutthe experience.

Membership of the network is free and open toany public sector manager interested orinvolved improvement activities.

Spotlight on Lean December 2010 Page 21 of 23

HM Courts Service has been at the forefront of Lean inthe public sector, developing a robust Lean programmethroughout the organisation. When it was introduced itwas estimated that it would take over three years tobreak even between the investment made and thebenefits returned – in fact it took just a year. LisaNother, HMCS’ Lean Programme Manager, explains howthis has been achieved and looks at how the Programmehas brought other benefits to the agency too.

Visual Management and Standardisation ofProcedures

Two important tools used by change agents arevisual management and standardisation of workprocesses.

Team Information Boards (TIBs) visually displayinformation about team workload, performanceand plans for improvement. They highlight anyissues and so are excellent management tools.TIBs are also a good means of communicationwithin a team – and courts use them to hold dailyteam meetings to discuss handling of work.

The Lean programme has introduced StandardOperating Procedures (SOPs), which documentadministrative processes, taking best practicefrom across the business and sharing it to reducewasteful activity. This has raised standards to acommon platform, upon which improvement canbe based. SOPs are mandatory. Resulting casesin the magistrates’ courts has improved so thatwithin a month of implementing the SOP, theaverage time-saving for courts per month isaround eighty hours of staff time. This is a hugeimprovement for HMCS, and for court users.

As well as introducing Lean tools, change agentshave played an important role in engaging staffand encouraging problem solving. Developing aculture of continuous improvement and increasingthe quality of the service delivered to court usersis crucial for the sustainability of Lean withinHMCS.

Lean is being introduced in all 500 courts overthree years. Covering such a large number of sitesover such a short space of time (more than 320courts in the 21 months so far) has been achallenge and a steep learning curve for allinvolved.

Once courts have begun using Lean, progress ismonitored. The ‘tipping point’ measure has beendevised to show when courts are at a stage in theirjourney where they no longer require intensivesupport.

Courts that reach the tipping point can begin torefer to the Shingo* Model for OperationalExcellence to define their next steps for ongoingimprovement.

As the agency’s financial position has become morestringent, it has been essential to demonstrate theimpact of Lean. At the outset, it was estimatedthat it would take over three years to break evenbetween the investment made and the benefitsreturned. In actuality, the programme broke evenafter a year.

While Lean has undoubtedly brought financialbenefits, it has also yielded a range of qualitativebenefits. Standardising work has improvedproductivity and helped focus more on activitiesthat add value, while staff feel more engaged andempowered by having the chance to shapedecisions about the way they work.

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*Shingo is a prestigious Lean award seenas an international ‘gold standard’.

For more information, visit:http://www.shingoprize.org/

HMCS first became acquainted with Lean in early2007 when the South East region began triallingshort Lean improvement (kaizen) events as ameans of enabling courts to manage their businessbetter in spite of financial limitations. Thisachieved quick results and a small number of otherparts of the agency also adopted the approach.

There was an increasing need for the Ministry ofJustice (HMCS’s parent organisation) to reduceoperating costs and to preserve service standards.avoid falling service standards. HMCS needed tofind out if Lean could benefit the wider business.To this end, a three-month pilot study wasundertaken in May 2008 – led by consultants – atthree large court centres, covering administrativefunctions in the civil, magistrates’ and Crown courtjurisdictions. The study identified substantialopportunity for improvement, resulting in anHMCS-wide Lean programme being set up inAutumn 2008.

HMCS Change Agents

To avoid spending excessive amounts of moneyon Lean consultancy, it was decided that HMCSwould build its own Lean capability. Each regionhas trained a number of staff as Lean changeagents using the Ministry of Justice’s LeanAcademy. This has been a significant achievement,ensuring that we have the know-how to keepimproving in the longer term.

Change agents have driven Lean change in thebusiness. Their role is to lead Lean implementationevents in courts lasting from two to eight weeks,depending on the court’s size. They work with asmall team of staff within each court, using a setof Lean tools to identify waste in processes, andto work towards improving the quality of theservice the court delivers.

Spotlight on Lean December 2010 Page 22 of 23

Lean Innovation

There are countless examples of local Leaninnovation.

In the South West region, staff and changeagents brought together a range of problem-solving tools to create a space for staff to taketime out to focus on improvement. This is nowused across HMCS.

A magistrates’ court in the Midlandsdocumented its own approach to processinglegal aid means-testing applications, whichformed the basis of what is now a SOP.

A South East magistrates’ court removedduplicate checking from one process andstopped using auto-generated letters with aresultant saving of £4,000.

All courts have revised the way files arearchived following the initiative of one courtwith large savings in space and financial terms.

A model Lean court has been developed,offering a powerful ‘go and see’ opportunity.Every team in the court uses a TIB, problemsolving is a routine part of the approach toworking, standard processes are in place andthe entire office is structured to improve theway that work flows in order to maximiseproductivity and the service provided to courtusers.

In 2009, HMCS began working with a smallnumber of Local Criminal Justice Boards toassess the potential for Lean improvementacross the Criminal Justice System. Thisshowed huge scope to improve system capacityand further work has been done since towardsdeveloping a ‘toolkit’ for other LCJBs wishingto do the same.

Staff Commitment Key to Success

It has not all been plain sailing, however. Therewas early concern that Lean meant reducingstaff numbers, but clear messages and positiveexperiences helped staff to understand thatLean is about improving the way we work andhelping the courts to live within reducedmeans.More recently, a challenge has been to matchresources to demand for events and new SOPs.This has been handled by offering moreguidance and materials for courts to use beforetheir official Lean implementation event,refining the SOP development process.

Lean is a powerful methodology, but thecommitment of staff has been key to itssuccess within HMCS, and is viewed as vital toenabling HMCS to meet financial andoperational challenges by both the past ChiefExecutive, Chris Mayer, and her successor,Peter Handcock. Also invaluable has been thesponsorship of Keith Budgen, Regional Directorfor the South East, who has championed Leanfrom the start. The central programme teamand change agents - who have devotedworking and personal time to implementingand learning about Lean – have driven theprogramme “relentlessly” forward, as ZoeRadnor observed in her evaluation of ourapproach to implementing Lean.

Our greatest future challenges are makingLean sustainable, and embedding it in ourculture. We will do this by ensuring staff at alllevels have a proper understanding of Leanprinciples and how to manage Lean systems.We also need to ensure Lean permeates allparts of the organisation – not just thefrontline, as the focus has been hereto. Leanmust become part of our organisationalstrategy for the future.

Lisa has been a part of HMCS’s LeanProgramme since 2008, playing a key role inthe development of Standard OperatingProcedures, and she has been ProgrammeManager since August 2010. Prior to this, Lisawas an operational court manager in the SouthWest of England.

Lisa NotherHMCS Lean Programme Manager7th Floor102 Petty FranceLondonSW1H 9AJ

Phone: 020 3334 6679lisa.nother@hmcourts-service.gsi.gov.uk

Spotlight on Lean December 2010 Page 23 of 23

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