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Posts Tagged ‘Lean’

The Brexit cost challenge – an effective services response

Wednesday, March 22nd, 2017

 Stock trading monitor (black and white)

Brexit challenges both UK and non-UK businesses

Over the next decade, with economic challenges and potential tariff barriers post Brexit, both UK-based businesses and also those businesses exporting into the UK, will be facing uncertainty, pricing challenges and competitive pressures.

The impact on business services

The inevitable response of businesses tightening their budgets will impact the professional service firms which supply them with research, legal, accounting, consulting, design and other business services.

Professional service firms will need to respond in two ways: 1. Enhance their business value proposition – through innovation – so that customers are less price-sensitive and 2. Reduce costs where possible. This article focuses on how service firms can reduce costs through the intelligent targeting of waste.

Use a magnifying glass – not an axe – for cost reduction

Conventional approaches to cost reduction in professional service firms – sweeping the ‘axe’ of redundancies – risk cutting away core value-adding activities in the business along with any ‘fat’. A better approach is to apply the ‘magnifying glass’ to seek out wastes in service delivery and then eliminate them using Lean principles.

By reducing the costs associated with waste activities, cost reduction goals can be met without impacting the service and value delivered to clients. Indeed the opposite is typically the case – with a more streamlined and systematic way of working delivering a more responsive and consistent service to clients.

In our work with professional service firms over the last decade
we’ve found that service re-engineering typically reduces the cost
of service delivery by between 25-50% whilst maintaining service quality.

There are three key steps required in achieving waste elimination in service delivery:

  • Find wastes.
  • Remove wastes.
  • Stop wastes returning!

Find wastes

Wastes are activities that do not add value – and so professional time spent performing such work can be eliminated without impacting the service to the client – whilst reducing the cost of delivery. The key approaches that are effective in doing this are:

  • Find a Champion – a Partner or Manager to lead the work
  • Engage fee earners – who know how work is actually performed today
  • Understand the client requirements – what’s important to them, today’s service experience
  • Map the service – create a picture of the end-to-end service as it is today
  • Apply Lean techniques – to identify waste and inefficiency

Waste elimination means that service costs
can be reduced without lowering quality.

Remove wastes

The key steps to be followed in removing waste from a service are:

  • Re-engineer the service using a TO-BE design that provides a more efficient and controlled service – making use of procedures, templates and workflow.
  • This reduces service delivery costs in two ways: (1) Reducing the fee earner time required to perform the service and (2) Performing the work using a lower cost blend of personnel (i.e. work pushed down to more junior and less expensive personnel) or automating it. Our work on service re-engineering over the past decade has shown that typically 25-50% of this cost can be removed.
  • Maintain service quality by placing work elements at the skill level at which it can be performed at least to the same level of quality as before (through use of codification into procedures and templates and then personnel trained to these methods). In our experience service quality and responsiveness is actually improved post re-engineering.
  • Use the freed up personnel to perform other work (thus yielding cost avoidance) or made redundant (yielding cost reduction).
  • Generate new revenue using experienced personnel who have been freed up by re-engineering, to work on more complex and higher margin work – if the firm had opportunities which would have needed new hires to meet.

Stop wastes returning!

It is important in a people-based business to ensure that costs don’t ‘drift back’, especially into the delivery of fee earning work. This is why new working methods need to be supported by standardisation of repetitive work elements, making use of procedures and templates. Case Management and workflow systems can help ‘lock in’ new procedures. New metrics should be put in place to monitor time spent on matters by work element and fee earner type – to both ensure that target times are being met and also to support continuous improvement.

Conclusions

A waste-focused approach to reducing service costs in professional service firms is powerful in enabling services to be delivered at a lower cost and at least equal quality and service as before. This is not the case with the more typical people-focused redundancy approach – which can significantly impact clients through reduced service quality.

Lean-based cost reduction is a powerful approach
that is seldom used effectively in professional service firms.

One key reason for this is that few of these firms have ‘process-thinking’ in place to enable process-based improvement. This is changing with the increasingly competitive landscape for services and the accelerating use of IT and the internet for digital services delivery.

Firms should seize this approach and make it part
of their ‘transformation toolbox’ to enable a successful
response to the business challenges of Brexit.

Has your Lean programme stalled (or never even started)?

Wednesday, December 9th, 2009

Lean manufacturing techniques enable companies to dramatically improve their customer service, reduce their costs and improve their quality. The origins of Lean Manufacturing are over 50 years old, Toyota first started developing the new thinking and methods that became Lean in the 1950s. Toyota has used Lean to help it  become the largest automotive company in the world, overtaking Ford and GM in the process. (more…)

Energizing Change

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