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Jun 2012 | THE JUNE 2012 ISSUE

Lean Six Sigma and the Public Sector
PSD Research

I. PRIVATE SECTOR MANAGEMENT METHODOLOGIES

Between January and March 2012, Public Sector Digest conducted a study on the increasing popularity of introducing private sector performance management methodologies, such as Lean and Six Sigma, into the public sector – specifically at the municipal level. During this period, PSD Research interviewed municipal professionals and academics, and reviewed the relevant literature on the matter to help shed light on this growing phenomenon.

Now that the immediate threat of the 2008 recession is for the most part behind us – that is, job loss and financial instability - the consequences of actions taken by the public sector during the economic downturn are still very present with us. In most industrialized nations, governments at all levels felt a sudden, pressing need to react to the recession by borrowing large sums of money to fund services and large scale projects. As we know, the intent of was to not only get people back to work, but also to facilitate opportunities to keep as many people still working as possible. Now that the flashy infrastructure project announcements are over and people are slowly returning to work (many in a new capacity and setting), a very large elephant still remains present within government chambers – the debt load.

For the most part, governments are reacting to this new problem with austerity and public sector downsizing, much like they did in the late 1980s and early 1990s when they thought things couldn’t possibly get any worse. This was a golden era for New Public Management (NPM), which was highly critical of traditional bureaucratic structures associated with the public sector, deeming it to be grossly expensive, irresponsive and lacking innovation. Experiments around the world with outsourcing, privatization, and other forms of alternative service delivery, ultimately redefined the way public services were delivered to citizens. During this period things did get better, and as public finances turned from red to black with surpluses in the late 1990s, the days of hollowing out the state by applying the methods associated with NPM appeared to be taking a back seat. Its replacement: new approaches of focusing government on improving accountability and citizen engagement appeared to be on the way in.

To be fair, New Public Management and its methods, while unpopular at times and often discredited, have never truly been abandoned. In fact, in the wake of the 2008 recession, NPM appears to be very much alive and well within government circles. Governments are still willing to devolve themselves today by contracting out or privatizing services offered by the public sector just as they were twenty years ago in order to rein in spending.

This time, the approach to NPM has largely remained the same as the choices of how to reduce or eliminate the debt remain limited to the usual suspects: downsizing, layoffs, service realignment (including alternative service delivery), and/or reduced levels of service. At the same time, this re-think in reverting back to NPM is also coinciding with a political push in most parts of the world to keep taxes as low as possible, in order to avoid any shocks to fragile economies. The only difference for the most part is that it appears NPM has evolved to the point where its implementation is less obnoxious and dogmatic in application than it was in the 1990s.

There are, however, other approaches beyond these usual suspects that we argue can still broadly be grouped under the umbrella of NPM that have only begun to surface within the public sector over the past decade. Private sector methodologies made popular by corporations such as Motorola and GE have begun to creep into the public sphere in hope that the same efficiencies and cost reductions can be realized. Methods that focus on value and process improvement such as Lean, Six Sigma, and Total Quality Management, each have strong linkages to managerialism (or Taylorism), which in turn support elements of NPM. Within government, specifically local government, evidence of the use of Lean, Six Sigma, or balanced score cards, was identified to some degree or another at the local level in North America through our research but was most visible within the United States.

While this is still very much a growing movement within public administration, there have already been both high profile successes and failures of adopting private sector performance measurement strategies. Some bodies of work, such as Kumar and Bauer’s research into social housing, have offered some perspectives that are both interesting and realistic, as to why perhaps in some instances these methodologies have fallen short of achieving their initial expectations in the public sector. These authors found that while theoretically there is no reason why private sector methods cannot be applied in the public sector, it is not a panacea. There are some unique characteristics of the public sector that may impede the overall level of its success, such as the role of politics and resource constraints, which need to be taken into account. 1 When examining the success stories that have surfaced in the United States, it appears that these successes have been largely predicated on the precision and thoroughness of their application.

 

II. PRIVATE VERSUS PUBLIC SECTOR MOTIVATIONS

 

Although the literature surrounding the use of private sector methodologies within government has been fairly limited, there have been some significant contributions over the past few years, particularly in relation to Lean and Six Sigma. This section will not serve as a formal literature review per se; rather, it will seek to put our research into perspective, first by exploring some of the motivations as to why organizations in both the private and public sectors pursue these scientific methodologies in order to achieve their objectives.

PRIVATE SECTOR MOTIVATIONS

Any motivation on the part of the private sector to improve processes within their organization has one primary objective – profit. Originating within manufacturing, methods like Lean and Six Sigma have strong linkages with the scientific management culture of ‘one best way’, made popular by Frederick Taylor at the beginning of the 20th century. Just as Taylor sought to improve manufacturing processes through time and motion studies, new methods like Lean and Six Sigma also seek to improve processes. In sum, the argument for these methods is that product defects affect overall quality of the product or service, which in turn affects profitability. If there are defects, this is likely due to poor system design, resulting in increased costs and minimized profits. The goal of an organization then should be continuous design and process improvement so that present and future defects can be eliminated and value can be created. This should be examined critically by as many members of the organization as possible, usually in teams.

THE LEAN PROCESS

The Lean process, much like scientific management in general, has its origins in the manufacturing sector and was made popular by the Ford Motor Company and Toyota. For small and medium-sized companies, there are organizations world-wide, such as the Lean Enterprise Institute in Massachusetts and the Lean Enterprise Academy in the United Kingdom, which specialize in training and promoting the processes of Lean in order to synchronize work processes, eliminate waste, and increase value. The Lean Enterprise Institute identifies what can be seen as the fundamental principles to implementing Lean. They cite the following steps:

  1. Specify value from the standpoint of the end customer by product family;
  2. Identify all the steps in the value stream for each product family, eliminating whenever possible those steps that do not create value;
  3. Make the value-creating steps occur in tight sequence so the product will flow smoothly toward the customer;
  4. As flow is introduced, let customers pull (or demand) value from the next upstream activity; and
  5. As value is specified, value streams are identified, wasted steps are removed, and flow and pull are introduced, begin the process again and continue it until a state of perfection is reached in which perfect value is created with no waste. 2

 

Much of the popularity of the Lean movement has spread from manufacturing to other areas of the private sector and even into areas of the public sector, such as health care. This can perhaps be attributed to the popular book by Jim Womack, Dan Jones, and Daniel Roos, The Machine that Changed the World: The Story of Lean Production, which speaks to the success stories of firms like Toyota and how easily organizations could be transformed and improved through the adoption of Lean.3 Often, the steps outlined above are addressed by organizational working groups which thoroughly map out and break down processes into steps. This is often illustrated in Lean literature showing long chains of coloured post-it notes on walls of corporate boardrooms, to help visualize these steps.

SIX SIGMA

While Lean seeks to eliminate process waste and other activities of non-value, Six Sigma on the other hand is the actual scientific method used to address the defective process – which, in theory, could be anything from improving assembly wait times to eliminating an entire line. While in some ways the use of Six Sigma does seek to achieve similar objectives as Lean, there appears to be less emphasis on the actual creation of value and instead on simply eliminating the defect entirely. Although there is some variation found in the exact steps, in general the most popular method that Six Sigma uses to achieve this objective is what is commonly referred to as DMAIC, focusing on:

  1. Defining the issue or problem;
  2. Measuring performance;
  3. Analyzing the process and determining the cause of inefficiency;
  4. Improving the process by eliminating defect; and
  5. Controlling the improved process.1

 

It is through this process that defective areas are identified, measured using statistical analysis, and monitored for continuous improvement, typically by work teams much like the Lean application. In many ways, these two methods in particular complement each other and are often combined and simply referred to as “Lean Six Sigma”. It is the wide-reaching possibilities of application in the private sector to improve processes and create savings that has made it a particularly attractive option for many organizations and corporations to explore.

PUBLIC SECTOR MOTIVATIONS

In the public sector, the motivations and desires to allow the creep of private sector methods into their organizations are not unrealistic, nor unexpected. NPM did result in many public organizations reevaluating their functions and finding ways of improving the value of public services. At the same time, however, many of these methods, specifically alternative service delivery, also did a very good job of creating disastrous environments in some public organizations as well – not limited to some senior managers being shown the door.4

Unquestionably, the primary motivation for governments to entertain the idea of introducing private sector methods into their organizations is related to fiscal pressures and cost reduction. This is certainly true at the local level due to the limited scope of revenue that can be generated and transfers received from other levels of government. Many politicians and public servants are using the recession and accumulated debt as an opportunity to re-evaluate their organizations and their service delivery models in order to save money. To that end, private sector methodologies like Lean and Six Sigma may be an attractive means in order to meet these ends and implement the sought after objectives of elected officials. It is during this evaluation process of services that new leaders can emerge by taking on new roles and engaging in the process of improving value, and a new culture of critical thinking and pride can be instilled in the organization.

Lean and Six Sigma, as mentioned above, seek to change the way work is completed by placing the emphasis on inefficiency and waste within work processes. This is often achieved through cross-collaborative work teams throughout the organization, where departments work with one another in order to identify where synergies can be created and defects can be corrected – thus improving organizational communication by way of this cross-collaboration. This is often a tremendous issue in the public sector due to silos that have been created over decades. It is through this approach that the overall quality of the product or service is improved because the work process itself has been improved.

 

“Experiments around the world with outsourcing, privatization, and other forms of alternative service delivery, ultimately redefined the way public services were delivered to citizens.”

 

III. TRANSFERABILITY

 

While the motivations of the private sector to locate and eradicate inefficiencies and increase profits are quite obvious and clear, the question surfaces regarding the transferability of private sector methods into the public sector. For some, there is a real risk that, depending on who is driving the agenda to introduce these methods into the public sector, there may be unrealistic expectations of what applications like Lean or Six Sigma can actually achieve.

WHO IS THE CUSTOMER?

Since the conception and rise of NPM and even more so recently with a revisiting of these methods in the wake of the 2008 recession, the public sector’s customers are considered by some to be tax and ratepayers. In simplistic terms, this certainly does appear to make practical sense. It is very easy for one to draw comparisons between a private firm with 50,000 shareholders, for example, and a municipality with 50,000 residents. In both cases there is both a governance and administrative apparatus in place, tasked with the objective of maximizing utility for those 50,000 people over the long term.

Where this argument becomes problematic, and often ignored, occurs during the early stages of planning processes where the ‘customer’ is actually identified.5 Referring back to the shareholder/taxpayer example outlined above, many (politicians, administrators, and the public) automatically assume the ‘customer’ from the public perspective is obviously the taxpayer. This practice of referring to citizens as customers first surfaced under NPM, again demonstrating its perception that the public sector needed to inhabit more business-like characteristics. While it is true that tax payers are customers to a certain degree, when this perspective is explored more deeply some glaring contradictions become very evident.

In the private sector, the customer is always the end-user: a willing participant in the consumption or purchasing of a good or service. Even though customers may be dissatisfied with the price of gas, most still fill up their vehicles as the cost-benefit of doing so is worthwhile to them. In the public sector on the other hand, the taxpayer is not always the recipient of services a level of government may offer (social assistance, water and wastewater infrastructure, etc.), nor may they be willing participants of a particular service they must receive.

To emphasize the difficulty in identifying who the ‘customer’ is, Kumar and Bauer offer an example: “unlike the private sector, where the customers are usually willing participants in voluntary exchange transactions, the person who receives a government product or service may actually be an unwilling or even reluctant participant in a non-exchange transaction, such as an inmate who is being incarcerated in a state prison.”6 This point could in fact be argued even further, asserting that the inmate may not be the only unwilling participant in this particular exchange – citizens may also be reluctant to have prisons funded through their taxes as well. In sum, simply because citizens are also taxpayers, does not in fact make them customers.

PROFITS VERSUS LEGISLATIVE OBLIGATIONS

The rationale for the use of private sector methods is easily understood when applied within the private sector context. Within this particular context, Lean and Six Sigma both work towards achieving the greatest quality of product possible, while maximizing profit and reducing overhead costs. These processes are reviewed and implemented continuously until the organizational objective is achieved. In contrast to the public sector, there are institutional checks that have been created within the governance and administrative apparatus of government that can in some cases allow these processes to only go so far – specifically, statutory floors and oversights.

For instance, while intuition suggests that in a public works department there are several areas where efficiencies could be realized through Lean or Six Sigma (such as snow removal), such departments are often heavily regulated by legislation which mandates a certain level of service. In this particular case, if minimum standards are required for snow removal by legislation, a municipality must comply with such requirements, even if metric data produced by these methodologies suggests not to in a highly underutilized area. Depending on the situation where this dilemma occurs, the benefits of using these methods could be lost entirely because of the gap between what could be (projections based on data) versus what must be (statutory obligations). This appears to be attributed to a common criticism, particularly of Six Sigma, that such methods are universally acceptable and that reducing costs are more important than user satisfaction.7

The mandate of local government departments are generally universal within industrialized nations; services such as policing, social assistance, fire protection and public works, all deliver the same core services for the same reasons. What does differ significantly is the structure of governance in which each of these functions, and other roles, are controlled within the public sector. This can become problematic in relation to leadership roles and how in-depth a public organization is able to implement methods like Six Sigma over a certain period of time. This is particularly true within government, considering the potential turnover in political leadership can be every election cycle – roughly every three to four years.8

 

IV. PRIVATE SECTOR METHODS IN PRACTICE

 

From a local government standpoint, the City of Fort Wayne, Indiana was the first municipality to gain attention for its adoption of Six Sigma and has since been widely referenced in Lean and Six Sigma materials produced by academics and by professional associations who promote Six Sigma. The former mayor of Fort Wayne, Graham Richard, first pitched the merits of Six Sigma upon his election to office in 2000, as a means to improve the quality and efficiency of implementing city services.

A career entrepreneur, Richard founded the Northeast Indiana TQM Network in 1991 - a shared-learning, best-practices organization for small businesses, local governments and non-profits.9 Following his swearing into office, Mayor Richard was quick to enroll the City into a number of networks and initiative’s to begin implementing Six Sigma into public sector practice. Richard gained recognition in both political and private realms for having such a bold vision to migrate these practices into government – it even earned him noteworthy praise in an article of the U.S. Mayor Newspaper. 10 By 2005, over 100 Six Sigma projects were initiated across the city and the use of Six Sigma was continued by his predecessor, following his retirement from office.11

Since the introduction of Six Sigma in Fort Wayne, the use of new private sector methods has been on a steady incline. In 2005, Public Sector Digest examined the use of Lean methods in the public sector and produced a mutli-series case study on various public settings where it has been used in local government and in the health care sector. Even as a new trend, our examination of the City of Grand Rapids, Michigan, showed that there was a significant increase in value created within that organization. One of the examples that were found occurred in the City’s Parking Services Department, which improved the turn-around time in cancelling a parking contract from 20 days, to 12 minutes for 85 percent of their clients.12

While it is fairly safe to assume that municipalities, particularly larger municipalities, adopt and implement these practices to one degree or another, evidence of more robust and overarching practices were found to be championed more publicly from within the U.S. For the purposes of our examination, we looked specifically at two examples where Lean and Six Sigma have been used within municipal government: Erie County, New York and the City of Irving, Texas.

ERIE COUNTY, NEW YORK

Erie County (1959) is an upper-tier level of municipal government located on the shores of the Niagara River and Lake Erie in western New York state. It is a relatively spacious county, and historically its economic base has been industrial. This has been in decline over the past several decades, however, due to relocation of blue collar jobs and a steady, gradual decline in population. By 2005, the economic state of Erie County had become so dire, former New York Governor George Pataki established the Erie County Fiscal Stability Authority - a seven member panel tasked with scrutinizing the County’s finances and ultimate decision making authority on any spending that was greater than $50,000. By 2007, Erie County’s credit rating had become the lowest in the entire state and had continued to struggle in establishing a budgetary surplus. This ultimately became a hotly contested issue and remained that way in the lead-up to the 2007 municipal elections.13

In the Fall of 2007, Chris Collins, a local entrepreneur, was elected to the position of County Executive in the municipal elections on a predominately neo-conservative platform of which he referred to as the Three R’s: Redefining Government, Rebuilding the Economy, and Reducing Taxes. In sum, this platform sought to implement private sector business practices in order to satisfy an ideal that in many ways closely mirrors the traditional ideology of New Public Management. This approach placed a particular emphasis on eliminating debt, producing balanced budgets, and removing “red tape” caused by multiple layers of government. Collins’ believed this could be achieved by fundamentally changing the organizational structure and culture of Erie County by implementing Lean Six Sigma.

The Lean Six Sigma project at Erie County was largely implemented with the assistance of the University at Buffalo’s Center for Industrial Effectiveness (TCIE) beginning in 2009. By pursuing organizational culture change through the use of Lean Six Sigma, Erie County sought to introduce managerialism directly within its organizational structure through the creation of the Lean Six Sigma Implementation Committee.14 The purpose of the committee was to identify ‘problem areas’ within the municipality and assign project leads (typically department heads or managers) and provide a cohort of County employees with intensified six sigma training. Erie County cites that in total, 250 employees were involved in this process, including awarding Six Sigma Black Belt Certifications to six employees, Green belts to 38 employees and Yellow Belts to 98 employees.15 This process was perceived as being a fundamental way to facilitate leadership, by creating project champions out of County employees and involving them and their subordinates directly in the decision making process to improve service quality.

During these early stages, members of the Lean Six Sigma sub-committee identified and completed a series of reviews in ‘defective’ areas. Some of these project highlights included reviewing maintenance practices in the parks and recreation department, finding approximately $100,000 in savings; reducing the booking process of County park shelters from 17 days to an average of four days; improving the paper recycling process at the County building; and reducing the child support enforcement case backlog from 7,281 to 103 cases in less than one year. Other initiatives involved the investigation of using GIS to maximize the number of site visits through strategic scheduling of municipal employees, and undertaking a review of The County’s length of stay policies for homeless shelters within the social services department, to reducing lengths of stay and accelerating permanent housing arrangements.16

The use of Lean Six Sigma and its managerial approach also sought to change culture normatively through slogans and symbols. Erie County began branding the Six Sigma symbol (6σ) on clothing and municipal letterheads, and reinforcing its methodology (specifically the use of metrics) through the placement of signs throughout its administration building, dogmatically touting “In God We Trust. All Others Bring Data” and “Variability is the Enemy.” These examples demonstrate how Six Sigma was used to systematically adjust culture, by attempting to change the way employees view their work and the purpose of the organization.17

Given these findings on the surface of things, it is very easy to find oneself being drawn into the perceived merits of the program. In contrast, by juxtaposing these findings against local media reports from the Buffalo area leads one to question the methods of the organizational shift and its impact on the delivery of services. Concerns over budget cuts by legislators and staff appear to be common in many articles related to Erie County in the lead-up to the 2011 municipal election - in November 2011, the head of the County’s Department of Social Services was even publicly cited as having deep concerns over 228 job cuts to her department proposed by the 2012 budget by the Collins administration.18

The politics of Erie County took a sudden turn, however, on November 8, 2011 when Chris Collins was defeated after one term as County Executive by two-term comptroller of Erie County, Mark C. Poloncarz. During his tenure as the County’s chief fiscal officer, Poloncarz was often critical, even challenging of, the reported savings found by Lean Six Sigma, often questioning their reported scope (one-time or recurring savings) and extent. In 2007, Collins’ business mentality appears to have resonated with voters given the economic state of the region. In 2011, a shift appears to have occurred in moving away from that same climate of austerity that was found in 2007. One local newspaper was quick to cite that: “the guy [Collins] is about as cuddly as a cactus, as warm-and-fuzzy as a polar cap. Collins said he would run government like a lean, mean machine. Folks found out in the last four years how much of the emphasis was on ‘mean’.” 19

Following the election, Collins stood by his accomplishments, touting the development of the Lean Six Sigma program; creating a $27 million surplus; and eliminating 900 jobs – largely through attrition - as a legacy at Erie County.20 In moving forward, conversations with staff members at Erie County appear to indicate that although there will most likely be a willingness on their part to continue the collection and use of metric data to improve service delivery, this will not likely be championed under the Lean Six Sigma banner.

CITY OF IRVING, TEXAS

The City of Irving (1903) is a lower-tier municipality within the County of Dallas, located in the north-east region of the State of Texas. Much like countless other areas of North America, the southern United States felt the effects of the 2008 recession in a significant way, and many municipalities recognized the need to make changes in the way it delivered services in order to control spending. What was different about Irving, however, compared to other municipalities was that it had already undertaken a significant change within its organization prior to the economic downturn and became the first city in Texas to implement Lean and Six Sigma. While other municipalities that have pursued private sector management methods had these initiatives driven by political actors, Irving’s City Manager, Tommy Gonzalez, was ultimately the first to suggest to City officials that Lean and Six Sigma could be the answer to council’s pursuit for continuous improvements to the organization.

The integration of Lean Six Sigma in Irving has occurred through the City’s Strategic Services Department, which houses a number of specialized divisions including the Performance Office, where Lean Six Sigma projects are managed from. Much like what has been seen in the private sector, training City staff in Lean and Six Sigma has been fundamental in the implementation of this initiative. Irving offers an in-house orientation session on Lean Six Sigma that is mandatory for all new employees (which can also be completed online), but also utilizes external resources as well, such as the Texas Manufacturing Assistance Centre to provide Green and Black Belt Six Sigma training. As of April 2011, 950 City employees had received orientation training in Lean Six Sigma, 49 employees had received either yellow, green, or black belt training, and project leadership training (championing) had been provided for all directors. Two additional black belts and 11 green belts are scheduled to be trained in 2012.

Irving’s Lean Six Sigma projects have to date examined 75 percent of the City’s departments and comprise the efforts of over 220 city employees. Since October 2007, the Lean Six Sigma program has improved the hiring process of its police department by processing 25 percent more applicants, in addition to improving the municipality’s job application process to save 13.5 hours/week. Other areas of the organization where process improvement and value have been added include decreasing the amount of time to resolve ‘priority one’ calls received through the IT Help Desk from 29 hours to 1 hour; total processes involved in a legal services request have been reduced from 23 to 19; utility locates from 32 steps to seven, improving cycle time from 75 hours to 39 hours on average; and 80 percent of street cut repairs are now reduced to a time period of six weeks (compared to 5 percent within a same six week period prior).

Perhaps one of the municipality’s most significant areas of improvement has occurred within its municipal water utility. One of the process issues within this department involved the transportation of equipment, and the concern that the water repair crews were spending too much time going back to the warehouse to get needed parts and tools. By reviewing the processes associated with this activity, a new water truck prototype was developed and has since saved each crew member 1.5 hours a day by simply changing the way equipment was transported. Now Irving’s water repair trucks carry 80 percent of needed materials to work sites. This translates into 330 hours saved per year/person, and 990 hours per truck crew annually. Other improvements made by project teams in this department included reducing inventory by 10 percent ($62,000) and reducing the amount of steps in the inventory process from 64 to 30.

As a result of these projects, the City also feels strongly that there has been a significant improvement in the municipality’s relationships with external stakeholders and community groups. One such relationship that has been improved has been with Irving’s development and construction community, a relationship which is important for any municipality in order to create local jobs and increase tax revenue. By focusing efforts on improving the development application process, the planning review time through the commercial permit process was reduced from 15 days to three (76%) and the maximum plan review time period was reduced by 88%, from 49 days to six. City officials told PSD that this process improvement was achieved in part by including such stakeholders in the process review, allowing for the City to grasp a better understanding of client needs, while at the same time allowing clients to gain a better understanding of what the City did, and how certain processes needed to be completed.

Since Lean Six Sigma was first implemented at Irving in 2007, the City claims to have achieved an accumulated savings of $41 million from its various projects. The City indicated to PSD that of the $41 million in savings, none were recurring per se. Rather, once these savings had been achieved, the efficiencies realized from the various Lean Six Sigma projects, the total amount required to be budgeted each year were simply adjusted accordingly. Therefore, in sum, it can be said that the savings may have only been realized one time, but the value and benefits of those projects were recurring through the budgeting process by reducing the allocated amounts of monies required for departments. When PSD inquired as to whether part of this $41 million was from downsizing, City officials reported to us that there was a reduction of the civic workforce, but not as a result of process improvement. Instead, when a position was vacated it would be frozen and then evaluated by a project team. If it was determined that process improvement could be achieved from this review then the responsibilities would be reallocated accordingly and streamlined within the organization.

On a final noteworthy point, the experiences with the City and their Lean Six Sigma projects have also been gaining significant attention throughout the State of Texas. In April 2011, City Manager Gonzalez was invited to testify before the Government Efficiency and Reform Committee of the Texas House of Representatives on the methods of Six Sigma and what it could mean at the state level. At the time, the committee was vetting House Bill 3149 which would implement Lean Six Sigma on a pilot basis within certain state agencies. In 2011, the City was also the first municipality in the State to receive the Texas Award for Performance Excellence from the Quality Texas Foundation for the municipality’s pursuit of performance excellence and service quality improvement.21

 

V. IS THE HYPE JUSTIFIED?

 

There are certainly merits to the use of private sector methods in the public sector, particularly if it can lead to improved efficiencies, greater communication, and increased public value for services. It is the perception, however, that these methods can be a panacea for all of the woes of a municipality. From the two case studies that we examined in Erie County and the City of Irving, it can be determined that questions of cost and savings, stable leadership, organizational structure, and scope and circumstances should be evaluated in order to improve the chances of successful implementation for municipalities in the future.

COST AND SAVINGS

The cost of implementing such a program like Lean and/or Six Sigma cannot be ignored by a municipality. The point of Lean and Six Sigma is to find recurring savings and create value through process improvement. Reducing the amount of time it takes to install a new sidewalk or to reduce caseloads must have operational savings somehow through simply reducing the amount of time it takes to complete the task. On the other hand, if time was saved through process improvement, did it necessarily result in monetary savings – and if so, how were they measured? Many cost savings are bound to be one-time (or soft) savings not to be realized again. A municipality should remain cognizant of the scope of projected savings that could be achieved.

As was observed in our cases, a significant number of staff in both Erie County and Irving were trained in the methods of Lean and Six Sigma. Both municipalities used external resources to help get their programs off the ground, which would have resulted in an up-front cost to the municipality. In Erie County, over 100 staff members received formal Six Sigma Belt training, and roughly half that in Irving. It would make sense then to raise the question of what type of savings are being achieved through Lean Six Sigma projects, and how these figures were compared against training budgets for Lean Six Sigma.

PSD had numerous conversations with staff at Erie County about this very point. Between 2008 and 2010, a total of $449,250.10 was paid to the University at Buffalo’s Centre for Industrial Effectiveness to provide seminars and courses to staff in Lean Six Sigma. Erie County also employed a special director responsible for six sigma and corporate efficiency through the County Executive’s office during this period. Although this position was originally funded by a grant through the Erie County Fiscal Stability Authority, this grant was eventually not renewed by the Authority and the position was to be funded through the County General Fund - budgeted at $116,000 for 2012. 22 Upon taking office, the Poloncarz administration discontinued this position.

Attempting to pin-point the cumulative amount saved from these Lean Six Sigma projects in order to establish a cost and savings analysis becomes more difficult with the case of Erie. When PSD spoke with County officials that have studied this very issue in the past, it was revealed that much of what the Collins administration was reporting as savings from Lean Six Sigma was very hard to prove. In the 2010-2012 County budget summaries, the estimated cumulative savings from Lean Six Sigma projects was estimated at being nearly $20 million. An official from the Erie County Comptroller’s Office explained to PSD, however, that despite requests from the County Legislature, the comptroller’s office, and the Erie County Fiscal Stability Authority, no quantifiable data was ever produced that could validate these figures against the County’s recordkeeping software. This response generally echoed much of what our research uncovered, in speaking with our academic contacts and in reviewing local media reports.

In the case of the City of Irving, it was reported to PSD that the total cost of training employees in Lean and Six Sigma was estimated at $100,000. Since the initiative began, however, much of the introductory training in Lean Six Sigma has been offered through an in-house program. What this figure does not take into account are the additional costs of running this in-house program. When comparing this figure with the estimated accumulated project savings ($41 million), the amount required for training appears to be quite low. As noted previously, PSD was told these savings totaling $41 million was estimated based on a cumulative reduction in the City’s budget since Lean Six Sigma projects were launched. Initially, it was assumed there had to be indirect costs incurred by the City by providing this training, in terms of resources development, and in labour – particularly the loss of actual labour time from employees being away from their duties during training. When this point was raised with City officials in Irving, it was indicated that overall the in-house training does not impact the City budget. Loss of staff time translates into, on average, only a few hours a month, while the City has also attempted to convert some of the training topics to online training.

LEADERSHIP STABILITY

The role leadership played in driving the implementation of Lean Six Sigma was an interesting finding that was not expected at the outset of our research. Both cases presented different approaches to the integration of Lean Six Sigma within their municipalities, one by an elected official, the other by a city manager. In Irving, the use of Lean and Six Sigma appears to have been successful as it has been able to maintain the support of City Council, and has even resulted in some councilors wanting to take part in Six Sigma training to help better understand the way that Irving now approaches the delivery of its services. If support of decision makers can be maintained, this can allow for leadership stability within the organization and allow managers to spend more time on transforming the organizational culture - particularly for those employees who may still be lukewarm to the idea of change originally.

In Erie County, while its Lean Six Sigma projects may have achieved some ‘big wins’ for the municipality, the initiative itself ultimately fell victim to leadership instability, with the election of a new County Executive who did not support the Lean Six Sigma program. Since the County Executive position formally became occupied by Poloncarz in January 2012, all Lean Six Sigma material on the Erie County website has been removed, which is reflective of the County Executive’s commitment made in December 2011 to end the Lean Six Sigma program. For the time being, we were able to learn from civic staff that the mood at the County building under the new Poloncarz administration is one that has created caution on the part of public servants in moving some ‘Six Sigma-like’ projects forward, particularly among those individuals who received green and black belt training.

ORGANIZATIONAL STRUCTURE

There are some interesting observations to be made from our two cases in terms of organizational structure and how Lean Six Sigma in Erie County and the City of Irving differed from the implementation approach. The case of Erie County and its implementation approach to Lean Six Sigma speaks to the point of where this change initiative was really coming from. The former County Executive ran his election platform in 2007 to run Erie County like a business. Once elected, Collins used Lean Six Sigma to drive the culture change he was pursuing.

At the time of its adoption, Lean Six Sigma integration was actually situated at the top of the organizational chart and cascaded throughout the organization. Whether or not this organizational design impacted the pre-determined expectations of certain process review projects or not is not entirely clear. It did nevertheless lead to process improvement and creative thinking by involving staff in the improvement process. In the future, those who received formal training will more than likely continue to apply this training in approaching various aspects of their work from one degree or another. It does present, however, some curious questions at the same time for future organizations to consider as to whether it was the best way to initiate a new organizational initiative, particularly one that was done in such a big and bold way like at Erie County.

 

 

The adoption of the Lean Six Sigma program in Irving appears to have taken on a much more practical approach to implementation. It is important to note that unlike Fort Wayne, Indiana, or even Erie County, the champion of integrating Lean and Six Sigma within the municipality was actually the City Manager, not an elected official. Much like Graham Richard and Chris Collins, however, Tommy Gonzales was experienced in Six Sigma prior to its implementation at the City of Irving, receiving formal training at the University of Texas.23 In examination of Irving’s organizational structure, it was interesting to find that their Lean Six Sigma program is being managed out of the Performance Office, a division of the Strategic Services Department. When this was examined, City staff at Irving explained that because of that particular department’s focus on organizational strategy and citywide performance, Lean Six Sigma seemed to be a logical fit as part of that process. This particular area of the City administration works with all other departments in setting strategic objectives, so they have a fairly unique understanding of the organization by being able to monitor the pulse of the municipality through facilitating and evaluating improvements.

SCOPE AND CIRCUMSTANCES

Finally, it is particularly important for public administrators and decision makers to critically evaluate both the scope and circumstances for which private sector methods are to be implemented. With regards to scope, agreed objectives of what expectations of projects to be carried out within the municipality must be established up-front, and should consider all restraints which may affect these expectations, particularly legislative obligations. While there appears to be merit to implement Lean and Six Sigma in municipal areas such as sidewalk repair or park maintenance projects for example, the scope of which Lean or Six Sigma can be implemented in say, social services, may be far less reaching because of various statutory requirements.

The circumstances in which to implement these practices also need to be considered for a variety of purposes, specifically on the human resource management front. Lean and Six Sigma requires, as noted above, a significant amount of training and requires a drastic culture shift to occur within an organization for the methods to be truly effective, since it is the employees themselves driving the process of change on the front-lines. Without stereotyping, this type of change is something that will most likely be welcomed by a few, and feared by many in the public sector. Adding value to a service through improving processes could potentially lead to jobs becoming redundant. If this change is initiated during a period of economic hardship, like during the 2008 recession – or future recessions – this may cause significant push back by employees, little value-for-money in terms of training, and result in disaster for the initiative itself. This is why, perhaps, leadership from senior staff and not a political figure would be the most beneficial for implementation, providing stability beyond an election cycle.

 

VI. DISCUSSION

 

With the various threats and challenges currently facing the public sector in the wake of the 2008 recession, NPM has once again entered the realm of public decision making. While there continues to be the use of what we have referred to as the ‘usual suspects’ (across the board downsizing, contracting out, reduction of service), there has also been a surge in interest of other private sector management methods that were not present when NPM first emerged in the late 1980s.

As was demonstrated by the cases presented on Erie County, New York and the City of Irving, Texas, two of these new methods in particular that have been used are Lean and Six Sigma (Lean Six Sigma). From these two cases, it was demonstrated that the appeal of training municipal staff to find efficiencies and create greater value for public goods through these methods has been an attractive alternative for both politicians and senior staff. While this idea of transferability does have merit, one must be cautious of the applicability of private sector methods like Lean and Six Sigma within the public sector. This can be determined for a variety of reasons, but does support in many ways the adage that the public sector is not the private sector. The right kind of leadership and circumstances lay central in determining if private sector methods in local government can achieve any level of success. Culture change does not happen overnight; therefore leadership must be stable beyond a three to four year term in order to ensure this change can be fostered throughout the organization. In tandem with this, the organization must have a realistic outlook on project scope in determining what Lean and Six Sigma can actually achieve in the public sector - not what they ought to achieve. The public sector is a different beast than the private sector precisely because it must be. There are no profits to be made, despite the links that try to be made between real profit and simply generating revenue through user fees to offset operational costs. Citizens depend on public services, and cannot simply change providers the way they can with private goods if they are unhappy, unless of course they decide to ‘vote with their feet’ and move from the municipality entirely.

There are, however, efficiencies to be made in government and it is important, perhaps more now than ever, to uncover them. Public servants owe it to tax payers to be effective, responsive, and innovative. What they need to be questioning is how much of the theory found in these private sector management methods are public administrators already doing to one degree or another. While the DMAIC process may not be followed explicitly in most organizations, much of what it identifies for process improvement is (or should be) identified by rational problem solving and the use of statistical tools. Simply put, much of this should be common sense. Involving front-line employees on project teams to improve the way work is done is simply good management practice.

 

 

END NOTES

1 Sameer Kumar and Kenneth F. Bauer (2010), “Exploring the Use of Lean Thinking and Six Sigma in Public Housing Authorities,” The Quality Management Journal, 17:1, 43.

2 Lean Enterprise Institute, “Principles of Lean,” What is Lean? (2009) http://www.lean.org/WhatsLean/Principles.cfm (accessed March 20, 2012).

3 Sameer Kumar and Kenneth F. Bauer (2010), “Exploring the Use of Lean Thinking and Six Sigma in Public Housing Authorities,” The Quality Management Journal, 17:1, 31.

4 The RIM Park Inquiry from the City of Waterloo, Ontario, Canada, is a particularly good example of some of the initiatives that have been undertaken by municipalities in the past at significant risk , which was later incurred.

5 David Krings, Dave Levine, and Trent Wall, “The Use of “Lean” in Local Government,” Public Administration (September 2006), 13.

6 Sameer Kumar and Kenneth F. Bauer (2010), “Exploring the Use of Lean Thinking and Six Sigma in Public Housing Authorities,” The Quality Management Journal, 17:1, 33.

7 T. N. Goh (2010), “Six Triumphs and Six Tragedies of Six Sigma,” Quality Engineering, 22:4, 302-304.

8 Sameer Kumar and Kenneth F. Bauer (2010), “Exploring the Use of Lean Thinking and Six Sigma in Public Housing Authorities,” The Quality Management Journal, 17:1, 32.

9 “Best Practice: Fort Wayne Adopts Six Sigma Methodology to Improve City Services,” U.S. Mayor Newspaper (June 11, 2011), http://www.usmayors.org/usmayornewspaper/documents/06_11_01/ ft_wayne_best_practice.asp (accessed March 13, 2012).

10 “Best Practice: Fort Wayne Adopts Six Sigma Methodology to Improve City Services,” U.S. Mayor Newspaper (June 11, 2011), http://www.usmayors.org/usmayornewspaper/documents/06_11_01/ ft_wayne_best_practice.asp (accessed March 13, 2012).

11 “Is Lean Six Sigma "Cool?" Ask Employees of Ft. Wayne, Indiana!,” IBM Centre for the Business of Government (April 1, 2008), http://www.businessofgovernment.org/brief/lean-six-sigma-cool-ask-employ... (accessed March 13, 2012).

12 Kelly Stymiest and Holly Cornies, “Everything You Wanted to Know About Lean But Were Afraid to Ask,” Public Sector Digest (February 2006).

13 The Centre for Industrial Effectiveness, Efficient Government Through Lean Six Sigma: A White Paper,” (November 2009), 4.

14 Ibid, 7.

15 Erie County, “Completed Lean Six Sigma Projects for Erie County,” Projects (2011), http://wwww.erie.gov/frog_095_exec/?reformgovernment/lean-six-sigma-init... (accessed December 1, 2011).

16 Erie County, “Counting Employees In Training,” Lean Six Sigma Initiative (2011), http://wwww.erie.gov/frog_095_exec/?reformgovernment/lean-six-sigma-init... (accessed December 1, 2011).

17 The Centre for Industrial Effectiveness, Efficient Government through Lean Six Sigma: A White Paper, (November 2009).

18 Denise Jewell Gee, “County budget cuts raise concerns: Head of Social Services addresses legislators,” The Buffalo News (November 15, 2011).

19 Donn Esmonde, “Collins' fall has as much to do with personality as politics,” The Buffalo News (November 8, 2011).

20 Robert J. McCarthy, “Collins discusses his defeat, says he kept vows; rejects 'arrogant' label,” The Buffalo News (December 17, 2011).

21 “City of Irving Testifies on Success of Lean Six Sigma Method,” Irving Weekly (April 15, 2011).

22 Denise Jewell Gee, “Six Sigma? It's ending, but salary is in budget: Poloncarz must address $116,000 directorship,” The Buffalo News (December 12, 2011).

23 David Brandt, “Case Study Solution in Practice: Lean Six Sigma and the City,” Industrial Engineer (July 2011, 43:7), 51.