Controversial opinion alert! Intangible benefits are the most important benefits from Lean Six Sigma. Leaders, managers, and practitioners love tangible (hard and soft) benefits because they can be measured and quantified; however, intangible benefits create goodwill and buy in among employees.
What are intangible benefits?
Intangible benefits are benefits from your Lean Sigma program that are not explicitly measurable; being even more specific, intangible benefits are benefits that cannot be directly or solely attributed to the results of the project or process improvement. Examples of intangible benefits are reduction in employee stress or increased employee engagement; however, these are not the only examples of intangible benefits. Other benefits may include customer perceptions of your organization or competitors viewing your organization as world-class.
Intangible benefits are sometimes referred to as “soft benefits,” but I would challenge this definition because benefits such as capacity or time savings can be quantified and reported to stakeholders. Intangible benefits are benefits that cannot be consistently measured or solely attributed to process improvements, such as employee morale.
Two sides of the same coin
Documenting or communicating intangible benefits have both a distinct benefit and drawback for your Lean Six Sigma program. As you know, a goal of any process improvement program is to create a culture or environment of ongoing continuous improvement. Using intangible benefits to describe the benefits of the project can both help and harm ongoing continuous improvement efforts.
Pro: Intangible benefits engage employees
Emotions are the lowest level of cognition and create powerful associations for people. Employees who associate Lean Six Sigma with decreasing stress, process complexity, training time, etc., will be more inclined to participate in ongoing improvements. Associating Lean Six Sigma with “good” things is a great way to get employees excited and talking about the amazing work the LSS teams are doing!
Con: Intangible benefits are unquantifiable
The very nature of intangible benefits means that practitioners are not able to clearly and confidently attribute these benefits to the project outcomes.
While this may not seem like a bad thing when you are recruiting team members, a central component of Lean Six Sigma is data-driven decisions with continuous data as the gold standard. Intangible benefits are at best a form of discrete, qualitative data, and at worst highly subjective and non-repeatable. This means that by using intangible benefits to describe the project outcomes, we are introducing subjectivity into our Lean Six Sigma (debating subjectivity in project outcomes sounds like an excellent ice-breaker for a LSS happy hour).
Why are intangible benefits important to understand?
When we are calculating the total benefits, or ROI (return on investment), of our Lean Six Sigma investment, we want to evaluate not just the single project, but also the impact the project has had on the organization. In order to understand this big-picture view of the project outcomes, we need to also understand the impact of intangible benefits.
1. Intangible benefits create goodwill
I know that “goodwill” is a nebulous concept (much like intangible benefits), but I remember from my business school strategy course that assessing an organization’s or brand’s goodwill is a major indicator for customer engagement and ultimately, the organization’s valuation. Intangible benefits create goodwill for your Lean Six Sigma efforts that may help the program’s long-term sustainability.
2. Intangible benefits show the “softer” side of Lean Six Sigma
One of the (often unfounded) criticisms of Lean Six Sigma is the focus on efficiency and data diminishes the employee contributions. While not generally the case (respect for employee contributions is a cornerstone of the philosophy), probing into work behaviors and processes can incite anxiety and resistance in employee participation. Reporting and sharing the success stories that may not be linked to an organization’s strategic goal demonstrates the organization values the employees as well as the performance.
3. Gauging validity
ROI is a very popular performance metric that measures the efficiency or effectiveness of an investment. Implementing a Lean Six Sigma program (or even a single project) is an investment of employee resources, time, and potentially initial cost to update the processes.
Given these are investments, organizations often like to compare performance of initiatives. That being said, intangible benefits are often not included in the ROI formula (there are a couple of companies that have a modified approach to quantifying and reporting intangible benefits), which means that the practitioner will need to understand intangible benefits to discuss as additional contributions from the Lean Six Sigma investment.
Does this bring you joy?
I was having a Netflix binge session and ended up watching “Tidying Up” with Marie Kondo. For those of you unfamiliar with her work, Marie Kondo is a minimalist, decluttering, tidying expert who helps her clients gain peace of mind by decluttering their home and, thus, bringing joy.
What struck me while I was watching this is that Kondo’s process is a pop-culture example of applying the 5S tool. The steps Kondo follows to declutter and tidy her client’s homes parallels the sort, set in order, shine (or scrub), standardize, and sustain steps of 5S. Kondo clearly identifies the intangible benefit of applying this practice to a living space by focusing her work on bringing joy to her clients.
While Lean Six Sigma practitioners are not generally associated with bringing joy to their projects, the intangible benefits of decreased stress, increased morale, or increased employee engagement can be seen as a form of joy in the workplace.
4 best practices when thinking about intangible benefits
I am a strong advocate of including intangible benefits in Lean Six Sigma program development because I believe this adds fullness to understanding the impact of the team’s efforts.
However, there are a couple of things you need to keep in mind when you are considering adding intangible benefits to your benefits conversations.
1. Do explain what an intangible benefit is from the start
Hard and soft benefits are intuitive to understand from an efficiency perspective: There is either more money (hard, bottom line benefits) or more time (soft, capacity benefits). Intangible benefits are less easily understood from a business perspective, which means the practitioner needs to clearly explain what an intangible benefit is before discussing whether this project may have intangible benefits.
2. Do not lead with intangible benefits
It is easy to throw the intangible benefits blanket over a project and claim that is the main benefit. Heck, in my younger and less-experienced days, I wrote a project charter that claimed the main benefit was employee satisfaction with their role. Of course, that project was not considered a success because there are more factors than processes that go into employee role satisfaction.
It is certainly important to discuss the potential for intangible benefits resulting from this project, but the team should focus on the quantifiable objectives first and follow with the potential additional benefits.
3. Do provide an explanation for how you determined a benefit exists
Just because a benefit is intangible doesn’t mean you don’t have a way of capturing the information. If you are reporting “lean program awareness” and going to capture this during your gemba walks, document that you are going to record employee feedback gathered during gemba walk. It is important that all measurement systems (including those for subjective data) be captured for the project documentation.
4. Do agree on reporting benefits
Lastly, or probably first, get buy-in from your sponsors and champions on including intangible benefits. This is an overarching, not just one project, level decision that will require alignment and commitment as intangible benefits tend to decline over time, compared with hard and soft benefits that should compound.
Frequently Asked Questions (FAQ) about intangible benefits
1. If the benefit is intangible, how do we know it exists?
This is where intangible benefits get tricky: assessing for intangible benefits can be done in two ways:
- Debriefing/post-mortem/post-project follow ups. Because intangible benefits are benefits perceived by employees, the best way to gauge if these benefits resulted from the project is by asking for the employee’s feedback on the process. Practitioners need to be careful they do not ask leading questions when soliciting feedback on employee impressions of the improvement.
- Comparative analysis or a pre- and post-assessment. This type of identification is generally done with larger Lean Six Sigma implementations or done in conjunction with employee satisfaction surveys. A large-scale assessment such as an employee satisfaction survey limits the specificity for an individual project’s benefits.
2. How do I convince champions and sponsors?
When I have discussed using intangible benefits with leaders, I position the message from the culture of continuous improvement aspect, where to be successful, Lean Six Sigma programs need: voice of customer, employee engagement, and data-driven decisions. Intangible benefits are helpful for bolstering employee engagement.
The other tactic I have used is completing the first project and including a side note for intangible benefits. After I introduce the idea, I discuss the concept in more detail when we are chartering our next project.
3. What are some examples of intangible benefits?
We already discussed employee morale and mental wellbeing, but other examples of intangible benefits are customer goodwill, employee and customer loyalty, Lean Six Sigma program goodwill, and encouraged participation.
All things in moderation
I generally advise my mentees and teams to limit themselves to declaring one intangible benefit from the project and to list this benefit last in the project benefits report. Listing this last doesn’t diminish the contribution to the project, but it does keep the focus on the hard and soft (capacity) benefits that can be quantified (fostering the data-driven culture).