Continuous Process Improvement

By Mike Smith

Shared services leaders are regularly challenged to deliver better services at reduced cost and thus must continuously improve processes. Unfortunately, many leaders have sophisticated capabilities, yet remain lukewarm about the effectiveness of their improvement program. What’s missing? A continuous improvement (CI) culture driven by a change agent mind-set.

The Analytics Arms Race

We’re all familiar with the adage, “if it ain’t broke, don’t fix it” and its close cousin, “that’s good enough.” These expressions serve a purpose in many areas of life, but you won’t hear them uttered in a shared services environment. Positive change, enabled by continuous improvement, is the expectation. When the Shared Services Roundtable surveyed companies on their CI approach, 99% responded that CI was important to the overall success of their shared services organization (Figure 17). Further, 75% of companies have either implemented or are in the process of implementing a formal CI program (Figure 18).

While a CI program is a common practice, only 15% of shared services leaders are very satisfied with their programs, and almost one-half are lukewarm (Figure 19). While several factors likely contribute to this (rather surprising) satisfaction level, we found a clear correlation between the maturity of CI culture and the level of satisfaction with the program results. Survey respondents with an extensive CI culture were typically very satisfied with their CI programs, whereas those with limited to no CI culture were more likely to be unsatisfied.

What Is CI?

According to the American Society for Quality, 8 CI is “an ongoing effort to improve products, services, or processes… (with) incremental improvement over time or breakthrough improvement all at once.” Practically speaking, these ongoing practices most often manifest as one of a number of formal methodologies and tools, including the following:

• Six Sigma improves the quality of process output by identifying and removing errors and minimizing process variability.
• Lean targets activities without value to the end customer for elimination as waste.
• DMAIC is a Six Sigma technique to define the problem, measure key aspects, analyze the data, improve the process, and control the future state.
• Kaizen is a lean technique and a Japanese term for “change for the better,” referring to activities that continually improve all functions by eliminating waste.
• Lean Six Sigma blends lean and Six Sigma to achieve improvements in speed (efficiency) and quality, thus driving better quality faster.

The benefits of the various CI methodologies are well aligned to support the objectives of shared services leaders: quality of service (as reflected by errorfree and timely data), positive customer experience, and reduced costs.

Effective quality programs, which drive high-quality transaction processing and thus low error rates, directly translate to lower cost processes. For example, companies with lower quality accounts payable processes have a 40% higher average cost per transaction than those with higher quality (Figure 20). This is roughly the same for the general ledger process and about 60% more than for the billing process.

Finally, the American Society for Quality8 advises that “quality must be implemented systematically and strategically throughout an organization.” A successful CI program must engage employees and their leaders. The question that matters most according to the Lean Enterprise Institute9 is “what does it take for lean to become part of the company’s culture?” Their answer is “a critical mass of people who both think… and act lean.” The experts agree with shared services leaders: the mind-set and how we think about lean, or quality, is important.

CI Programs in Shared Services
Today’s formal programs are as varied as shared services organizations. Figure 21 lists a few specific examples of formal CI approaches.
A close examination of the “funding model” row reveals solutions to overcoming a major hurdle to establishing a CI program: building the business case. Both companies B and C used cost savings to fund their initial program, and company C continues to fund its dedicated resources with cost reductions from their program. Company A took a different approach; its dedicated team is now self-funded, but its leadership originally demonstrated the benefits of CI to internal stakeholders who in turn were willing to fully fund their program.

Companies use CI methodologies and tools in different combinations, but the choice of which tools to use is dependant on the primary goals to be achieved. For example, if cost reduction is a primary goal, then that team will most likely embrace lean first. If it is quality of service or controls, then Six Sigma may gain traction first. From the above three examples, each company chose a different methodology, with Company B evolving from their initial lean focus to adding Six Sigma.

More than Methodology: Energize Employees and Leaders

A CI program is more than what methodology to implement. For example, all three program examples have a training offering for the employee population at large. In addition, other attributes of a CI program include:

• Processes for idea capture, prioritization, and implementation (frequently supported by project management capabilities);
• Formal plans and annual targets;and
• Visible reporting with regular progress and status reviews.

Each of these reinforces CI with employees and creates a climate for understanding and adoption. Other activities to create or reinforce CI culture include the following:

• Newsletters and blogs focused on CI
• Celebration of major milestones
• Peer recognition of change agents
• Formal recognition of CI successes

Instead of starting by introducing lean or Six Sigma—concepts that can be difficult to fully grasp—one organization focused entirely on creating the culture first. All employees were encouraged to question how things were being accomplished by participating in a contest called “What’s Dumb Around Here?” in which employees submitted ideas for change and improvement. Building on the momentum of that contest, the organization next implemented a repository where employees could routinely post ideas for change. Employees became more engaged, while leaders grew more open to innovation and, in fact, found more good ideas than they had resources to implement them. The result was that the shared services organization developed a CI culture—yet, no one called it that. The table was set to build out the CI program, and employees created annual performance objectives related to CI. Ultimately, a formal CI presence with dedicated resources emerged.

Another creative approach involved a shared services organization that asked each salaried employee to lead a process improvement project. To facilitate that effort, a brief training package was created. Beyond that, however, employees were free to pursue their project to completion in any way they saw fit. The leadership team reported an energetic and enthusiastic response with results exceeding expectations. In addition, the mind-set of key employees had been reshaped without the existence of a formal CI program in Shared Services.

The Missing Link for Success: A Continuous Improvement Culture
Shared services leaders know that CI is critically important, but they too often focus on only the methodology and toolsets. Leaders spend time on activities such as deciding whether to use lean or Six Sigma, what the governance model should be, and how to attract and retain experts. Eventually the program is in place, yet most leaders remain lukewarm about results.
The link between results and culture, however, is clear (Figure 22). Shared services leaders must energize their teams to not only understand the need for continuous improvements but also encourage it as a key fabric of their organization and thus culture. No continuous improvement program is complete without it.

If you have any questions about this article, please e-mail Becky Abraham at abrahamr@executiveboard.com.