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By Nari Kannan
 
Lean improvement of service processes is somewhat different from Lean improvement of manufacturing processes. Efficiency is usually a measure of speed and cost and Lean improvement in efficiency is achieved by eliminating waste in time or resources. Effectiveness is usually a measure of quality and the overall objectives of the enterprise in that regard. If too much emphasis is placed upon speed and cost in service processes, effectiveness and quality may suffer.

For example, in a debt collections process, efficiency measures are usually something like the number of collection calls made in a day by an agent and the average time spent on the phone per call. However, effectiveness measures might be the ratio of phone calls that were successful in collecting to total number of phone calls made in a day or average amount collected per agent. In the debt collection process, the effectiveness measures may be more important than efficiency measures. In contrast, fine-tuning a manufacturing process to a high degree of efficiency usually improves quality and hence effectiveness.

Balancing Efficiency and Effectiveness

If a help desk is focused on metrics such as average handle time, customer satisfaction and hence effectiveness may suffer. In healthcare, doctors and nurses be very highly efficient and process a large number of patients through their facility on any given day. However, quality of care may suffer and hence their effectiveness. Service processes usually deal with a larger proportion of the human element than manufacturing processes. Recognizing that service processes seem to contain a larger portion of subjective elements will help an organization achieve the right kind of Lean improvement by balancing efficiency and effectiveness appropriately.

Lean techniques focus on process cycle efficiency as a measure of process execution speed, the first step in understanding how a function works, according to author Michael L. George in his book Lean Six Sigma.

Process Cycle Efficiency = Value-Added Time / Total Elapsed Time

A Lean process produces a process cycle efficiency of 25 percent or more. Most business processes are not Lean with 20 percent of the activities contributing 80 percent of the waste in the process, according to George. One of the main goals of Lean is to increase process velocity. Improving process cycle efficiency achieves that goal by eliminating non-value-added activities from the process. Lean methods such as value stream mapping also provide a systematic way to identify and eliminate waste.

In a similar vein, it also may be useful to define process cycle effectiveness, especially for service processes.

Process Cycle Effectiveness = Enterprise Objectives/ Achieved Objectives

When talking about Lean improvement of service processes, understanding the correct relationship between the different factors in a service process is always helpful in striking the right balance between process cycle efficiency and process cycle effectiveness.

Also, this balance between process cycle efficiency and process cycle effectiveness can shift over time depending upon the company's size, maturity in the marketplace and prevailing competition. For example, consider two companies – A and B. Company A is a new competitor in an established and mature market. Company B is a large company in the same space and currently has a lion's share of the market. For Company A to compete effectively with Company B, it may need to distinguish itself by offering better and more attentive service. Company A may place its process cycle effectiveness measures above process cycle efficiency measures until it gains market share from Company B. Company A may not place as much emphasis on average handle time for service calls as much as scoring very high on customer satisfaction. Thus the mix of efficiency goals and effectiveness goals could be different for different companies in the same marketplace, depending upon their size, maturity level and company objectives.

Use of Cause-and-Effect Diagrams

Cause-and-effect diagrams for service processes can provide a way to analyze and map the various factors that determine the process cycle efficiency and process cycle effectiveness before embarking on a Lean improvement effort. They can provide insights into how to achieve the required balance between the two.

Consider a customer service business process: The company is trying to map the various factors that affect the efficiency and effectiveness of this process. A simple cause-and-effect analysis could look something like the figure below.

Cause-and Effect Analysis for Customer Service

Here, the root causes that determine how good or how bad the end product of customer service might be are hypothesized and sorted into a standard 3M&P (methods, materials, machine, people) model:

Methods: Methods are the processes and procedures used by customer service to deliver its services. These could be:

• Call Workflow (an efficiency factor) – Poor customer service, real or perceived by the customer, could be an artifact of how call workflow is implemented within the organization. How annoying is it to wait on hold or be passed from person to person when calling for customer service?
• Call Assignment (an efficiency factor) – How are calls assigned? Does the customer reach the right person who can solve the problem, the very first time?
• Call Escalation (an efficiency factor) – If the first customer service person cannot solve the problem, who does the customer talk to next? Does that help?

Materials: In the context of customer service, these are the policies, work environment, incentive and reward structures set up within the company for the customer service agents:

• Work Environment (an effectiveness factor) – Customer service is bound to be poor if the work environment of the person delivering it is poor.
• Incentive Structure (could be both an efficiency factor and an effectiveness factor) – Metrics drive behavior. If customer service agents are measured on how fast they close calls alone (average handling time), their incentive is to close calls whether or not they have solved the customer's problem.

Machine: In the context of customer service, these are the tools available to the agents to do their jobs:

• Customer Relationship Management (CRM) Application (an efficiency factor) – These days, most customer service agents use a customer relationship management system to keep track of all customer interactions. How good customer service is depends upon how well the CRM system is set up and fulfills the precise needs of the agents when providing service.
• Problem Knowledge Base (an effectiveness factor) – Many organizations use a problem knowledge base to see if the same problem has been solved for another customer.

People: For customer service to be good, the agents must have certain skills:

• Domain Skills (an effectiveness factor) – A customer service person trying to resolve a computer hardware problem needs to have the particular domain knowledge to be of help.
• Problem-solving Skills (an effectiveness factor) – Customer service delivered over the phone requires a rather systematic approach to problem-solving – eliminating obvious causes for a problem in narrowing it down to the root causes.
• People Skills (an effectiveness factor) – Perception of the quality of customer service depends to a large extent upon the people skills of the agent.

Steps to Lean Process Improvement

Under the 3M&P cause-and-effect analysis, the quality and speed of customer service can depend upon many factors as above, some of them efficiency-related and some of them effectiveness-related. Achieving Lean process improvement then becomes an exercise with the following steps:

1. Determine the right level of emphasis between efficiency and effectiveness factors at an organizational level.
2. Using a cause-and-effect diagram like the figure above, identify and prioritize factors for improvement according to the level of impact they may have on efficiency or effectiveness.
3. Schedule and conduct Lean improvement projects that address these factors in the order of priority.
4. Measure results, compare with objectives. Start again at Step 1.

Paying attention to the subtle interplays of process cycle efficiency measures and process cycle effectiveness measures in service processes helps strike the right balance between the two. The right balance depends upon balancing various factors that affect efficiency and effectiveness of a business process. Cause-and-effect diagrams help in systematically analyzing the process, identifying the factors that affect them and help in tailoring the right goals for each of these factors.

About the Author: Nari Kannan is CEO of Ajira, a company that designs and develops service process management tools. He has 20 years of experience in information technology, starting out as a senior software engineer at Digital Equipment Corporation. Mr. Kannan has since served as vice president of engineering or chief technology officer of five Silicon Valley startup companies dealing with a variety of problems in IT, automotive claims processing, human resources and logistics applications. He can be reached at nkannan@ajira.com.