Improving administrative processes using Lean Six Sigma methods

HR professionals can be star performers when they uncover waste in a company or help improve inefficient company practices based on simple moderation and measurement methods. In the workshop with Milan Bobek and Tomas Mark Improving company processes with the assistance of the HR department, an interesting example of the effect of using improvement tools is presented, showing how immensely beneficial it is when a company uses standard improvement methodologies and does not just stick to generic workshops. And also how relatively easy it is for HR to understand these tools, to start using them to some extent or at least to suggest them to the management and thus bring huge measurable savings to the company not only in money, but also in time and nerves. The methods and tools used are highlighted in bold. The example comes from the environment of a financial institution providing services to retail clients and will show you how such an improvement project can look like, what HR specialists can participate in similar projects and what effects it can bring. It seemed to the sales manager of the mentioned company that the sales staff was not sufficiently dedicated to the customers, because too much of their time was taken up by administrative activities. In a collaboration between this manager, the HR manager and an external consultant, this case was solved using the DMAIC (Define, Measure, Analyse, Improve, Control) method.

Specification and refinement of project objectives – DEFINE

The HR staff at XYZ Bank contacted an external consultant and together they negotiated an assignment with the manager that they wished to reduce the time spent on administrative activities at the merchants by 30%. It was agreed that the improvement project would focus in the first phase on those activities that required collaboration with other departments in the firm, were common to all traders and took up most of their time. The contract process (including all product components, proposal processing, risk treatment, internal approval, client sign-off and entry into the system) proved to meet this criterion well. Therefore, a definition workshop was held with selected staff across both business units and branches to describe the contracting process and the various activities involved. As a method of displaying the findings, writing on multicoloured Post-It notes was used to further structure the information (see Figure 1). Individual activities are marked in yellow, documents emerging from a given phase in blue, and measurable indicators that will enable analysis in the next phase in orange. Participants then marked in the diagram what errors, problems or non-standardities most frequently occur in each area. The result is shown in Figure 2 in the form of red tickets.

If necessary, this form of moderation of the definition and mapping workshop will be handled by the HR specialist himself next time and his added value for the company will be increased. However, in companies where they do not use standard improvement methodologies, they would feel that they have done what they could in terms of analysis for the cause and this initial phase would only be followed by the intuitive suggestion of some measures that would seem to correspond to the obstacles identified and the concrete outcome of the project would not be convincing. Usually, companies lack a real analysis based on measurements that would shed light on specific problems and allow specific solutions to be found. And therein lies the magic of standardised methodologies – in our case, DMAIC. Thus, an even more simplified process flowchart (Figure 3) was further elaborated by linking the different activities, sub-processes and handover parameters and marking on it the places where delays most often occur.

Problem detection – MEASURE

Based on this preparation, parameters were then formulated that could be used to specifically measure the actual contract processing situation across the firm. Lead time (LT) was chosen as the primary metric on which the entire project was to focus as its main objective – that is, the total time taken to process a contract from the first customer request to the signing of the contract and the entry of its parameters into the system. Parameters were chosen as secondary metrics:

• Processing cycle time (CT) – the laboriousness of individual process steps.
• Quality of individual steps (in %)
• First Pass Yield (FPY) – the percentage of processing units that pass correctly through the entire process the first time without error and having to be corrected or returned.

The HR specialists then asked individual staff involved in the contract process to self-measure the length of each operation over a one-week period, how long it took them to do what (including the number of mouse clicks by each operator to process the same task), and also to record what problems they encountered in doing so. It was found that the overall net average time to process one contract across all downstream process steps was 225 minutes. And if a task was given to reduce the share of administrative activities by 30%, this resulted in a task to reduce the average time to process a contract to 157 minutes. However, there was a shock when the First Pass Yield parameter was evaluated. It turned out that only 0.8% of the contracts pass correctly through the internal processes the first time!!! for all the others there were various delays, blockages, they had to go back, fill in data or correct errors. It immediately became apparent how huge the inefficiency of this process was in the company. Worker efficiency was only 26%! These metrics are certainly of interest not only to human resource managers, but also to the company’s top management. Process inefficiency, not employee laziness, is the reason that only ¼ of the paycheck is going to people for productive, value-adding activities. If HR managers show such numbers, found by simple measurement, at that point everyone in the company gets real motivation to improve. We may have never realized how powerful a motivational tool a simple measurement can be.

Map of the current state – ANALYSE

An analysis of the problems recorded showed that the greatest losses were incurred in the preparation of the contract documents. At the same time, there were large variations in the length of time required for this operation by the branches, which ranged from 6 to 120 minutes (Figure 5).

Proposed state after improvement – IMPROVE

Here the remedy was directly offered – it was enough to copy the processes from the best branch and train the employees in the other branches to perform them in the same way. Of course, this was already an easy task for the HR department. In some branches, the error rate in the preparation of contractual documentation was found to be as low as 35 %, while in others, some error was found in up to 90 % of cases. Again, cross-training was sufficient. A slightly more complex task was the design of the target state in specific measurable parameters using VSA, i.e. value stream analysis, where the assistance of external consultants was already needed. This analysis revealed the potential to reduce the time spent by vendors on administrative activities in the first phase without much effort, up to by 54%, which is much more than the contract sales manager had requested. 4 From these analyses and measurements, a set of potential actions emerged. These measures were further subjected to a two-criteria analysis of potential savings or benefits and the difficulty of implementation (Figure 6).

Governance, control and sustainability – CONTROL

The output was a set of 68 implemented measures with rapid impact. In the first phase of the project, these simple measures increased the first order handover rate from 0.8% to 10%, increased work output from 26% to 48%, and saved 54% of sales staff time on non-value-added activities (compared to the required 30%). The direct financial savings achieved by these small measures were estimated at €2.8 million in the first year of implementation. CZK. Not to mention the benefits resulting from the fact that the time saved could be used for more productive activities. If HR managers have this knowledge and some of the skills mentioned above (e.g. they will at least be familiar with the methods highlighted in bold in the article), the company managers’ view of the HR department may change and they may start to see it not only as a cost item but also as a concrete financial benefit. And that, in my opinion, is where the future of HR lies.

Ďalšie prípadové štúdie metodikou Six Sigma