Transactional Lean

If you haven’t worked in operations or quality, Lean Six Sigma can be a daunting prospect.  How does a manufacturing style apply to HR?  What’s it all about?  What does it mean for you and your job?

The good news is that LSS can be applied in the transactional world with great results.  As part of a new effort to focus on education and tool sharing, I’d like to open with an overview of value and waste, the two primary components of any process.

What is Value?

We start with looking to separate “valuable” activities from waste.  How do we define value?  We don’t.  The customer does.  But an easy way to think about it is to imagine your customer’s reaction if your activity appeared on an invoice.  For example, your customer, a hiring manager, says “find me a great mechanical engineer!”  Let’s break down some of the activities in that process…

Value Added Activities:

  • define the right parameters for the job search
  • reviewing resumes
  • presenting well qualified candidates

These are important things that the manager wants to have take place.  The two days that passed prior to starting the search while waiting for an approval by my manager on a form that outlines HR’s responsibility in this task is not.  And no customer would willingly pay for that time.

Seeking Waste

When we start looking for improvement opportunities, we start with the classical definitions of waste.  You can find these in all workplaces, all work types, and all parts of the organization.  There are traditionally seven wastes:

Overprocessing – Working on a task or product beyond the customer’s specifications

Waiting – idle hands

Motion – having to turn, twist, lean or stand in order to complete your task

Inventory – as Taiichi Ohno famously said, inventory is death.  Any time you have inventory, your money is tied up sitting on a shelf.

Transportation – walking from place to place or, more common, moving work-in-progress from place to place so it can be completed

Defects – mistakes, rework, or unusable final products

Overproduction – making more units than needed to satisfy customer needs

And, a special bonus eighth waste:

Underused people – whether it be idle time, lack of work or just not realizing the potential of your team members

Once you understand your process and have identified the waste, the next step is to understand which activities are truly not “value added” and work to streamline the activity, integrate or automate the process, or eliminate the waste wherever possible.  As an example, here is a typical transactional event from everyday life, fast food pickup.  This is, of course, an example of a process gone wrong.

  1. Arrive at restaurant (Elapsed time – 0:00)
  2. Wait 5 minutes in drive-through line (Elapsed time – 5:00)
  3. Wait on cashier to be ready for order while cashier accepts payment from another customer (Elapsed time – 5:30)
  4. Place order (Elapsed time – 6:00)
  5. Cashier reads order back (Elapsed time – 6:30)
  6. Wait in line to reach drive through window (Elapsed time – 8:00)
  7. Pay for order (Elapsed time – 8:30)
  8. Receive change (Elapsed time – 9:00)
  9. Wait for food (Elapsed time – 11:00)
  10. Receive food (Elapsed time – 11:30)
  11. Check order; If mistake found, park, return order, wait for correction (Elapsed time – 12:00, more if mistake is found)

Now, here’s an example of a revised process with a few minor changes and the impact:

  1. Arrive at restaurant (Elapsed time – 0:00)
  2. Wait 3 minutes in drive-through line (Elapsed time – 3:00)
  3. Place order (Elapsed time – 3:30)
  4. Wait in line to reach drive through window (Elapsed time – 4:30)
  5. Pay for order (Elapsed time – 5:00)
  6. Receive change (Elapsed time – 5:15)
  7. Move to second window (Elapsed time – 6:00)
  8. Receive food (Elapsed time – 6:30)
  9. Check order; If mistake found, park, return order, wait for correction (Elapsed time – 7:00, with fewer mistakes overall )

Notice the overall time has been reduced from twelve minutes to seven, an improvement of more than 40%.

What is that improvement worth to the business?

Intuitively we know that the improvement is significant, but the changes we suggest will have a cost to implement, so how do we quantify the value of the improvement?  Here are where good metrics and valuations come into play.  How much is a 40% improvement worth?  Assuming a twelve minute cycle, you will be finishing five transactions per hour.  If each transaction has an average sale total of $10, we are producing $50 of revenue per hour.  Assuming twelve hour days for a full year, that equates to $18,250 in revenue per year.

If we reduce the cycle time to seven minutes, our hourly transactions jumps to just over eight.  (We will round down for simplicity.)  This brings our yearly revenue to $28,800, an improvement of nearly 60%.  Simple answers, powerful results.  The times in this example are clearly a “worst case” scenario for a restaurant, and are intended to show how you can apply Lean thinking in the transactional world.

What’s coming up in 2011?

This overview should set the stage for this year’s focus on on tools and learning.  Moving forward, expect to see more about how to use and when to apply the very simple but powerful tools that LSS can provide.

5 Ways to Reduce Waste in Your Recruiting Processes

Talent acquisition is rewarding, but can be a painful process for both the recruiter and the applicant(s).  Here are some suggested methods for cutting waste and improving the overall recruiting process…

1)  Online applications.  Most companies are either in this game or going there, but many that use an application tracking system also have paper applications.  In some cases, they require both.  Not to mention the redundancies of having a CV or resume, then the online application, then the paper application.  Don’t waste you applicant’s time with rework, and don’t waste your own in dealing with reams of unnecessary paper.

2)  Incentives your externals the right way.  The best system I’ve seen offers their external recruiters a bonus payment if the first candidate they present is hired.  This gives them incentive to really learn the culture and position to give you a great candidate the first time.  If you think of the wasted time and money in looking at multiple candidates, it’s a small price to pay.

3) Cut your interview to offer time.  Sometimes the bottlenecks are simple ones to reduce, once you realize that time is not a free resource.  One team I worked with waited until the end of the process (meaning post-acceptance) to perform the background check and drug screening.  It added 5-10 days to the end of the process.  The cost for each round of checks was about $50.  Once I asked them if the position added more than $10 per day of value, it became an easy decision to move it.  Now they perform those checks on the final three candidates just before the last round of interviews.  Results don’t come back until after the interviews and (generally) the decision is made, but the delay in getting the offer and acceptance in greatly reduced.

4) Create a pull process in staffing.  Recruiters will tell you there is a limit to how many searches that can do at once before you start to lose quality.  Ten seems to be the average.  If you are using an online talent system, hold the requisitions back until one of the ten they are currently working is closed out.  This also allows you to track your staffing levels and know if you have the right number on the team, too many, or not enough.  Speaking of which…

5)  Centralize your staffing team.  Just like a call center, shared staffing resources allow you to handle the peaks and valleys of demand across your business without over- or under-worked people (as well as often needed fewer recruiters overall).  Rather than have a staffing person for each location/department/business leader, build a central team that can take requests from across the business and triage them for best responses.  Within that team you can still have specialists as needed, but you reduce your risk of losing an expert recruiter because their knowledge can be more easily shared. 

And the unnumbered bonus tip is, of course, get really good at talent retention and development.  It will help keep the recruiting needs to a minimum, which is the best way to reduce the waste in the first place.

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