Reducing the cost of living – the Lean way
How can we become more efficient and effective while at the same time reduce costs?
In these incredibly tough budget times, you would think government agencies would be trying to emulate private enterprises and be working extra hard to find ways of doing things more efficiently.
Unfortunately, politicians are grabbing the same old playbook — retrenchements, hiring freezes, paycuts, travel restrictions, delaying much needed programs and so on. They’re not examining the actual work being done — the operations remain fundamentally the same. Instead, they’re left with tired, overworked employees trying to do the same operations with fewer resources. This approach creates an illusion of efficiency.
Real efficiency is about looking at the systems — the way work itself is designed — and finding ways to streamline the work so that we do our important tasks well in less time and with less hassle. Systems are where the costs are incurred. Systems are where the value of the agency is created.
And systems appear to be the last thing anyone is focusing on.
Nevertheless, recently there’s been a new exciting development . The new Obama administration has given commitment to a new government policy of pushing for increased accountability and government performance.
Performance Management is taking center stage for all government organizations and the pressure to become more efficient, effective and transparent through embedded Performance Management and strategic improvement. Optimal delivery of increased performance results for less money, has been made the number one priority for all government organizations.
Continuous improvement tools like Lean & Six Sigma (formerly used by business organizations to drive down costs and improve efficiency & productivity) are now increasingly used to help government agencies achieve theses same goals. Some of the government organizations that are using Lean Six Sigma in the U.S. are; the Department of Agriculture, Department of Defence, Missile Defense Agency, US Navy, Federal Prison Industries, City Government Councils, LAPD , just to name a few.
What is Lean Six Sigma?
So what is this thing called Lean Six Sigma? Lean and Six Sigma are actually 2 different process improvement concepts, that have only in recent times been increasingly used together to help businesses improve and cut costs. Lean started in the manufacturing industry. In fact, it’s often referred to as Lean Manufacturing. Based on the system Toyota used for producing high-quality low-cost vehicles, Lean focuses on reducing waste. In this case, that means any activity that does not add value to the customer. A good example is Toyota itself, a typical ‘Lean’ organization, admired worldwide for its Efficient Production System and the millions of dollars of cost savings it has since achieved.
Six Sigma, on the other hand, was developed at Motorola in the ‘80s and is still widely used today in many industries. The basis of determining Six Sigma performance capability is measuring performance around specifications set by the customer using a data-driven process. The quantitative focus of the method insures objectivity and accuracy.
In other words, this approach allows you to determine the factors that significantly contribute to process variation, or the deviation between what you want and what you have. Once you have narrowed this list of factors, your change efforts are targeted at the areas that will do the most good. It is common knowledge that most organizations run at a three-sigma quality level and that they lose between 20 and 40 cents of every operating dollar to poor quality. At Six-Sigma quality level, less than 1 cent is lost! Besides being a model of efficiency, it has been calculated that Motorola itself, over the last 25 years, has achieved over 16 billion dollars of cost savings! Now, hundreds of MNCs like GE, Honeywell, Caterpillar, and an ever growing list of smaller companies worldwide, are turning to Lean Six Sigma to help them become more profitable.
So what now for Singapore? What can we learn from this? How can we translate the benefits of Performance Management and continuous improvement tools like Lean Six Sigma, to our Government and its agencies? How can we become more efficient and effective while at the same time reduce costs?
Imagine a day when the people of Singapore have a more ‘Lean’ Government which is able to provide its people with better services at reduced costs. Imagine a ‘Lean Government’ which is continuously improving itself in the services it provides to its people, while at the same time, achieving cost savings. Imagine these cost savings then being passed on to Singaporeans as tax breaks, reduction in GST, restoration of employer CPF cuts, reduction in cost of basic necessities like healthcare, transportation, education, housing services, etc. etc.
However, at present, this is not the case in Singapore. We have ‘BIG’ government with all the trappings of bureaucracy. The civil service has grown into a sea of agencies and departments, with related responsibilities parceled out among several agencies. This inevitably leads to complications as organizations need to coordinate policy implementation. But as things stand, it takes too much of our resources, or to put it plainly, too much money, to get even the clearest policy implemented. There are just too many decision makers, too much central clearance, too many bases to touch, and too many overseers with conflicting agendas.
Leadership responsibilities often fall in the awkward gap between inexperienced political appointees and unsupported career managers. Too many of our most talented people in our civil service hate the constraints that keep them from serving their country with their full measure of talent and energy. Too many of the most talented leave public service early; too many of the least talented stay too long. Compounded over the decades, we have a management structure that is top-heavy, cumbersome and contrary to the goals of effective leadership and meaningful accountability.
As a result of an inefficient big government, the quality of policy making and implementing has declined, while costs have steadily gone up. To cope with this problem of costs, time and again, the government and its agencies and by extension, government-linked companies as well, have simply taken the easy way out by raising the costs of their services, everything from basic necessities like housing services, healthcare, education, transportation, etc., to essentials like water and electricity prices, food prices and household provision prices (direct result of ever increasing HDB rents and business costs), car park fees, taxi fares, etc. The list goes on. Another quick fix that comes naturally to these organizations to cope with rising costs is by cutting wages, reducing employer contribution rates, hiring freezes, burdening their workers with more work but giving them less resources and so on and so forth.
Solutions for improvement
I believe that it’s essential for the government and all its agencies (including government-Linked companies) to move towards a fundamental shift in mindset and embrace and embed the Lean Six Sigma Culture into their organizations. We need to work better, faster and at lower costs without compromising on quality, be it to provide better but cheaper services to Singaporeans or to be more able to compete effectively in a globalized world. We also need to mobilize all our talent, our ideas and creativity, while at the same time being data driven, so as to be better able to make the right decisions at the right time; be it at the policy level or business level.
P.S. – In the Next Article, I will present specific solutions and cost cutting improvement ideas that can be implemented in Singapore in areas such as Healthcare, Education, Transport, HDB Town Councils, etc.