Interesting article in the MIT Sloan Review on “Where Process-Improvement Projects Go Wrong“.  It compares process improvement projects to the behavior of a metal spring, by dividing into three phases:

1. Stretching – at the beginning, a small team is motivated to succeed, and has support of executives.  A six sigma or process improvement coach helps them navigate some of the harder issues to make sure they stay on target and achieve early success, which causes additional initiatives to be kicked off.
2. Yielding – As the process improvement coach is removed, teams begin to revert back to prior behavior, or lose the ability to get the team objectively past some of the harder sticking points.  Executive attention, and perhaps some of the best team members, has moved to other projects.  Performance starts to retreat, though not necessarily to pre-improvement levels.
3. Failing – the vicious cycle begins “With the improvement expert long gone and no additional training in Six Sigma or other improvement strategies provided by the aerospace company, team members became increasingly discouraged by their failure to build on earlier success. They eventually stopped caring about the improvement project, partly because it wasn’t tied to their performance reviews.”

Well, I feel motivated, how about you? Luckily we are not springs, we’re people, and we can be a bit more creative about avoiding this inglorious “failing” phase than the author imagines.

The article author proposes 4 lessons learned from the many companies they studied for this report:

1. Keep the improvement expert around longer – or share this expert among more than one team to spread the cost – but the recommended term was 2 years, augmented by training managers to pick up these responsibilities.
2. Performance appraisals tied to improvement.
3. Keep teams small (less than 10).
4. Executives need to directly participate in the projects, not just receive reports from someone who has incentive to focus on only the good news.

This isn’t bad advice, it is good advice to start.  But it is insufficient and unlikely to cause organizations to suddenly get higher success rates with process improvement.

What did they miss?  Well, they missed BPM, is what they missed.  One of the reasons BPM is a “killer app” for process improvement is that when you discover the most effective changes to make for your process, you can put them into software, not just into a book of Standard Operating Procedures that your team will quickly forget about.  And your improvements aren’t just things that people on the team learn and practice, nor just things that they pass on to others on adjacent teams – they are things that get encoded into your process.  The software gives you:

• Some resistance to the “yielding” phenomenon described in the study results.
• Accurate measurement over time – no dependence on manual measurement techniques that may degrade as team members lose interest in the stop watch and other manual measurement techniques.
• The ability to “bake in” an improvement and move on to the next thing, rather than get stuck in a high-cost maintenance of the first improvement.
• A “control” baked into the software.  (Six Sigma has standard approach called DMAIC – define, measure, analyze, improve, control… and BPM software directly addresses D, M, and C, and supports the A and I activities…)  So often the “failing” phase is because the organization loses focus.  Software doesn’t lose focus – it just keeps running.

Too often, the proponents of Lean and Six Sigma ignore technology because they view it as an impediment, failing to understand that there is more to technology than MiniTab or SAS/SPSS or Excel.  And if technology allows you to do something at lower cost, such as a process improvement project, or maintaining an improvement over time, then it shouldn’t be dismissed out of hand.  But it is easy to understand why they sometimes see tech as an impediment – deploying software takes time – and during the initial phases of improvement the improvement guys just want to move fast.  My take is – don’t let the tech get in the way, but don’t pretend it can’t dramatically improve the efficiency of your business – in fact, technology, and specifically BPM software, is likely the key to locking in the gains you seek to establish a “new normal” that is a more efficient and effective process.

All too often I see conclusions based on observable data, where the conclusion does not necessarily follow the data presented.  This doesn’t mean that the conclusion is wrong on the face of it, but that it can’t be made based on the facts presented thus far.  Sometimes the conclusion is presented as causal when it is only correlated, sometimes it is extrapolating from a really small sample to describe the whole population (over generalizing).

I recently read Theo Priestley’s post on why Six Sigma doesn’t work in the real world.  In it, he relates a LinkedIn posting from someone attempting to do six sigma analysis on a call center process.  From reading the LinkedIn posting, it is clear that the person posting is not experienced in Six Sigma or other  related process improvement technologies that would be helpful to the cause.  This person is trying to figure out how to get a bell curve from a formula related to rate of defects in the call center process, where a defect is defined as a call response being over 60 seconds.  Theo extrapolates from this that it is an example of why Six Sigma doesn’t work in the real world, and why black belts are not needed (all that is really needed, he says, is a pragmatic approach).  And he quotes a response he advocates:

“…at the end of the day if you produce a bell curve telling me the USL and LSL for my call centre, along with the number of defects per million and a sigma value of 1.727, is this really a useful measure? More to the point, what can I – as a business person – do with it?”

Well, look. The response (quoted) asks the right question – is this a really useful measure, and what can I, as a business person, do with it?  In other words, are you wasting our time trying to figure this out in the first place?

But here’s the rub.  A good Six Sigma practitioner would not need to post to linkedIn (hardly the font of six sigma knowledge in the first place) to ask how to plot a bell curve to show USL and LSL.  So the poster hardly represents the “failure of Six Sigma in the real world”.  And a good six sigma practitioner could tell the respondent quite nicely:

If we can plot the response times of your call center, we can understand whether the process is “in control” or not – by which we mean, is it predictable and does it vary in a “normal” way from the median behavior.  If it *is* in control, then we can endeavor to improve the process by decreasing overall response time if too great a percentage of responses are exceeding your 60s window.  However, if your process is *not* under control, then this means that there are one or more special cause conditions causing the process to be more volatile. Therefore your first effort has to be on stabilization before you effectively focus on ratcheting down the long-term variation (i.e. drop the average of the process down as a whole).

Not that Six Sigma is the only tool available.  Lean has several tools that are well suited for call-center style efficiencies, and so does 5s (the Japanese concepts of organizing the workplace to keep things consistent and orderly in order to keep the process consistent as well) and keep in mind just like BPM, Six Sigma is continuously evolving with new tools and techniques and while the statistics is certainly an important part it’s not the alpha-omega that many who haven’t learned Six Sigma believe it to be; certainly not the Six Sigma of the 1980’s.

My problem with the post:  using one example of someone struggling with the concept of Six Sigma, to challenge the whole notion of using Six Sigma – a bit like challenging the concept of a 100-meter dash after watching me run it, instead of Carl Lewis – at least look at how experts apply the techniques!  Six Sigma is not a religion (or at least it doesn’t have to be!)- it is simply a set of tools that can be used to pragmatically improve your process by focusing on unemotional data rather than exposition based on anecdotes.  Not all the tools are even statistical, which was a surprise to me when I first studied material at the green belt level -but even those tools are very practical process improvement tools.  The biggest problem with Six Sigma in the past has been the C in the DMAIC moniker (Define, Measure, Analyze, Improve, Control).  BPM really helps address C by putting the controls in software (call center software can help with this as well), and it helps with the M by helping measure the process even when no Six Sigma blackbelts are paying attention.  This makes it a lot easier for them to drop in, interpret the data, and devise new improvements based on the data, rather than spending so much time collecting hand measurements.

Here’s a great post by Jason Cohen (of Smart Bear software) that illustrates that humans are terrible at making gut decisions that can be disproved with statistics, and how to help yourself avoid sample size errors at least when dealing with A/B tests (as in, which is better, A or B?).  Better yet, it has a cute video of Hammy the Hamster to assist.  It cuts to the point about how much data you need to get a reasonable sample size to draw conclusions, and I think it makes clear why data sets of less than 10 are just generally problematic.  Um, also, there are formulas involved, so if you don’t put much faith in mathematics, Mr. Cohen’s article may not be much comfort to you, but I promise the math required to evaluate your sample size will be easy to do!

In my view, the real problem with applying Six Sigma is usually people.  Turns out it takes skill and  judgment to apply Six Sigma tools in a way that helps the business answer questions the business cares about.  This isn’t that much different than the kind of challenge one confronts getting a business to adopt BPM, or a software package.  Let’s not condemn a whole professional practice with proven successes just because we have one example of someone who doesn’t understand how to apply it (or even 10 examples of such people).

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As you can see from these modules, this course aims to provide not only the education content but also various activities where you will put this knowledge to use and be able to go home to immediately begin receiving value from the week spent in the training.

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A friend and colleague at Lombardi, Kalvin Stollznow wrote a post at Lombardi’s blog on Monday articulating the need to view the business and associated wastes and defects through the lens of a “process prism”. I certainly agree with Kalvin on this point. Especially where it concerns the insurance business, for at BP3 we have had a lot of experience in this area.

Kalvin discussed the power of Lean Six Sigma as a method to deal with the very thing that causes great angst in companies and that is the waste (aka Muda) and defects mentioned above. He moves on to bring light to the fact that these particular approaches may have been born from the world of manufacturing but absolutely are applicable and more importantly effective in transactional or service based businesses. This is a fact, and expanded or integrated into a company who views business process management as a true discipline then you have a truly remarkable organization who can retain and grow customers as if they were born to do it.  However, it does require “translating” some of the standard Lean Six examples out of the manufacturing world and understanding their analogs in the transactional and services world.

I will take what Kalvin was alluding to in his post and give an example from a financial services perspective of the things we do everyday that create waste and defects in our processes – and the key here is to be able to identify these things so that they can be managed. Let’s do this from ”The 7 Deadly Wastes” from Lean Six Sigma to examine this closer, in no particular order (although ‘Overproduction’ is considered the worst waste in Lean). I will go ahead and make it 8 and add rework as I believe it is very insidious but not officially declared in the initial 7 wastes-

1. Rework: Anytime you see a loop in a process, that is probably rework. Think of touching the same thing over and over again. For example, an invoice is sent to a member or group customer and the bill is wrong. Requests are made to change coverages, drop dependents, etc. The clock starts ticking for that request to be fulfilled. If the request cannot be fulfilled in time, the next bill will generate and it will be wrong again. rinse. repeat.  Customer satisfaction declines, and administrative costs go up.

2. Defects: An enrollment form with missing information or incorrect information; a bad requirement for that new claims handling system; a bad or “dirty” invoice from the rework example above, forms or applications with unclear instructions or usability. Defects are pretty easy to understand although I have heard businesses tell me “we don’t have defects, we have exceptions”. Whatever you want to call it is ok by me, but exceptions and defects both cost the business money.

3. Inventory: A backlog of policy change requests, a queue of contracts, or claims unprocessed, callers on hold, piles of forms and the like. Financial Services companies have a ton of “inventory”, just not in the way people normally think of it.  But it can have the same negative effects: clogging a process and creating or exposing bottlenecks in a hurry.

4. Waiting: Waiting for an approval on a claim, an expense reimbursement, an underwriting decision, 1/24 hour batching of data. Waiting promotes the clogging of processes, can create defects and cause rework.  When expensive specialists are waiting for a response or for work to hit their queue, the company is letting money walk out the door.

5. Processing: Or Overprocessing more specifically, such as an inordinate amount of approval steps to pay a claim or making sure a document is imaged and re-imaged over and over again. Basically doing more work than is absolutely necessary to delight the customer.

6. Motion: Constantly switching between screens and applications to get the policy change made, having to go out and find an archived image/document in the DMS or on a network share, keystrokes and clumsy navigation of systems. Running over to the printer constantly to get those TPS reports (couldn’t resist the last example, Office Space fans).

7. Transportation: Similar to rework and examples could be having to get physical signatures from across the campus, delivering and picking up paperwork from all over the place, delivering reports, etc.

8. Overproduction: Lean considers this the worst waste because it can often be the root cause of many other wastes listed and if you think about it we see this all the time. 100 reports when really 3-5 would do the trick, constant emailing, a requirements specification 300+ pages deep for a small to medium software project, print-outs of everything going to everyone, flooding queues with tasks just spit out from that batch processing which in turn causes the backlog to grow or at a minimum not shrink.

It all comes down to delivering goods and services to customers how they want it, when they want it, and at a price they want to pay. If any company, not just financial services, are not managing their business via a process view then it will be those companies who will not keep customers. Applying Lean Six can identify the causes of waste and defects, and then can help remedy the waste/defects with prescriptive solutions (perhaps more on the prescriptive side in a future post!). This comes down to pure physics and physics cannot be wished away. Manage the processes or they will manage you as the saying goes.