Lean Services: Doing Transactions Right the First Time

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By Sharad Sharma

In a service organization, the most efficient method for cutting waste is to attack anything and everything that is not done right the first time. This concept, known as first time right, involves making sure that all activities are carried out in the right manner the first time and every time. Examples include a customer not needing to repeat their order at a take out restaurant and a bank executive handing the customer the correct form the first time. Completing all services right the first time is not easy, but doing so can be an effective way for businesses to begin their Lean journey.

Tracking First Time Right Encounters

The first step to completing service processes right the first time is to measure the current level of performance. Practitioners can begin by measuring the number of transactions that meet this goal and comparing this to the total number of transactions. Any process that receives input from another internal process should be measured. With this data, practitioners can approach the problem in a logical manner and find the reasons for poor performance. Sheer measurement of first time right processes usually helps earn the required buy-in and attention from the stakeholders.

Measuring the first time right performance of service personnel might be a change for many organizations. For example, bank managers may be used to judging their staff by the time it takes them to resolve a customer query. However, staff may not always provide complete information to customers, which can result in repeat complaints. Thus, it is essential to link an employee’s performance or output with the transactions that are completed correctly the first time.

Improving Performance

At the transaction level, organizations need to ensure that processes are well understood by the people performing them. Many transactions are not first time right simply because there are no clear guidelines and the staff has not been properly trained. A documented process will go a long way in ensuring this. For example, creating a standard operating procedure for filling out a loan application form will reduce the number of cases rejected at the next step in the loan process.

Simple techniques such as checklists and highlighted boxes for signatures help to ensure things are done right the first time. In a restaurant, for instance, all default silverware can be kept in stands or bins so that the waiter simply has to pick up one from each bin to ensure that all the tools are served correctly. Or, if a fast food restaurant distributes an order form while the customer is in line, the customer can check the items required and hand the form to the billing clerk, thus avoiding any error in ordering and reducing billing time.

Cutting Out Waste

First time right also helps address the seven wastes of Lean. By religiously following this spirit of making things right the first time, each of the forms of waste can be reduced, as explained here:

1. Defects – The simplest and most direct waste addressed by first time right. Any service rendered to a customer that is not first time right – wrong delivery, data entry or diagnosis in a hospital – is a defect. Services do not have the luxury of rework; any defect remains a defect. However hard an organization tries, customers will not be completely satisfied after a bad service experience. The same is not true in manufacturing, where the customer may not even be aware of rework if it happens prior to product delivery. For example, the wrong order served in a restaurant will leave a bad taste with the customer even after the mistake is corrected; however, the rework on a car engine has no impact on the customer as long as the final product meets the specifications.

2. Overproduction – Services have a tendency to overproduce to make up for transactions that do not go first time right. Any rework is overproduction, and takes up effort that should be going into a fresh transaction. For example, a package misdelivered results in an extra pick up and delivery to the correct destination.

3. Processing – In services industries, a lot of processing takes place to prevent defects from reaching the customer. For example, in a bank, employees may check an account-opening form at multiple points during the process before generating the new account number. Inspection is a pure non-value-adding activity. Hence, inspection needs to be performed only when absolutely necessary and should not be used as a filtering process to hide the inefficiency of the input. If a customer address is not captured accurately on a majority of applications, it is better to devote time and effort on correctly capturing the information the first time rather than deploying someone to check and rectify all the applications.

4. Waiting – Any difference between the processing turnaround time and customer demand results in customer waiting time. In many cases, the processing turnaround time increases due to rework for activities that have not happened correctly the first time. For any kind of rework, there is waiting involved – usually on the part of the customer. Any hotel room not made up properly results in customer waiting, and a loan application not completed properly will delay the disbursement to the customer.

5. Inventory – The traditional manufacturing concept of inventory does not exist in services; services cannot be stored for future delivery. A hotel room left vacant for a night is lost business forever – it can never be recovered. However, in certain situations, services do maintain an inventory in the form of capacity. Call centers can reduce the staff on board if they ensure first time resolution of the customer’s complaint so that the customer does not need to call again for the same reason. If sufficient focus and effort is applied to improving billing accuracy, organizations need not use part of its capacity for making corrections.

6. Motion and 7. Transportation – Services incur motion and transportation in the form of various handoffs that take place at stages of service delivery. Any rework results in more of these handoffs. For example, a loan that has been rejected due to incorrect income calculations goes thorough multiple handoffs and approvals before it is corrected. This could be avoided if the calculations were done correctly the first time.

About the Author: Sharad Sharma is employed with Reliance Money Ltd. in New Delhi, India. He is an engineering graduate with a master’s in business administration from the National Institute of Industrial Engineering, Mumbai. He has extensive experience in deploying quality initiatives across the manufacturing, business process outsourcing and financial services sectors. He can be reached at sharad.sharma1@yahoo.com.

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