Why Process Improvement Works...Sometimes
Lean Six Sigma (LSS) has reportedly generated substantial benefits and savings for public sector organizations. Finding a way to repeatedly achieve process improvements and costs savings would be a large step forward to achieving sustainable, high quality and cost effective public sector services.
In a previous blog, I discussed some of the grandiose claims different organizations have made about how beneficial process improvement has been for them. But what I really want to know is: are these claims true? Can you really save up to 40% or 50% of your process costs, and if so, how? Is it repeatable and consistent?
What I went looking for is the “smoking gun” or causal links using objective results from empirical efficiency research projects.
Note: There are different types of efficiency projects (check out this previous blog post for a good summary), but a lot of research has been done on Lean Six Sigma projects, including within healthcare and the broader public sector. So I have used research on Lean Six Sigma as a proxy for efficiency projects.
I was particularly interested in any research that could be deemed repeatable, or whether there were consistent results across multiple separate studies: are the results repeatable across multiple circumstances? And if so, why and how can others use those results?
Co-related Not Causal
In one well-researched, extensive study, after a review of hundreds of projects across 128 organizations using Lean Six Sigma, the researchers found that effective implementation of Six Sigma led to an average savings of 1.7 percent of revenues over the period of implementation. Also, it led to an average return of more than $2 in direct savings for every dollar invested.
I have not found a large number of empirical studies that can provide a causal (or even close to causal) link between the use of efficiency projects like Lean Six Sigma and significant savings. In addition, none of the research to date that I could find lead to any repeatable and consistent results.
However, there is a large amount of research showing promising correlation:
A recent study carried out by the American Society for Quality (ASQ) revealed a “correlation” between deployment of Lean and Six Sigma within 77 hospitals and improved clinical outcomes and financial performance appeared equivocal (ASQ, Lean Six Sigma Hospital Study Advisory Committee, 2009). The study has also revealed that a high percentage of hospitals do not track common operational metrics (for example, length of stay and patient complaints) and financial metrics (such as, cost per patient), making it challenging to identify causal relationship.
In a peer reviewed meta-study of 200 studies on Lean and Six Sigma (similar to the one above) found that the positive reported outcomes are largely based on conceptual arguments, and there are very few empirical studies that can tie the benefits of Lean and Six Sigma methodologies to improved clinical outcomes, patient safety, efficiency and financial performance.
A review of the use of process improvement in healthcare in the UK found few examples of empirical studies that could determine a direct causal relationship between the completed project and successful results.
My search wasn’t exhaustive, but I have yet to find a study that conclusively links process improvement techniques to significant cost savings in a repeatable fashion (despite the claims of some rather large organizations that sell these services). Maybe it is out there, but the researchers above couldn’t find it, and neither can I.
A study carried out by the ASQ Lean Six Sigma Hospital Study Advisory Committee found a lack of sustained improvements across over 70 projects. The reasons they found for the lack of sustained, repeatable achievements within the same organization or community included:
Lack of sustained support from leadership;
Competition within the organization from other initiatives;
Inconsistent leadership commitment;
Lack of availability of the appropriate resources;
Lack of employee motivation; and,
Inability to make lasting change on the organization’s culture in a meaningful way.
This well-researched article in the Wall Street Journal underscores many of these same points.
Why Should You Care?
Thankfully, there is some research being completed on success factors in those organizations that do find a way to achieve more sustained success. A recent study of over 200 Lean Six Sigma projects found that the following were the most important factors for achieving sustained success:
Senior management commitment and involvement;
Focusing on critical processes for improvement;
Establishing a culture for continuous improvement;
Focusing on the needs of patients; and,
Establishing measurement and feedback systems.
The same study found the following as the least important factors for achieving success:
Linking Lean/Six Sigma to business strategy, Government targets, etc.;
Training in Lean/Six Sigma;
Including best practice/gold standard achievements in a documented quality management system;
Organizational infrastructure for Lean/Six Sigma program (e.g. project champions); and,
Understanding methods, tools, techniques, etc. within Lean/Six Sigma.
Several research studies and books (This book covers it in detail, and it is referenced in this study too, for instance) point out that just using one method alone does not achieve the full efficiency or cost reduction.
The Wall Street Journal article cited previously also mentions the following lessons learned to consider to successfully implement and sustain process improvement:
Extended involvement of a Six Sigma or other improvement expert is required if teams are to remain motivated, continue learning and maintain gains;
Performance appraisals need to be tied to successful implementation of improvement projects. They highlight based on studies that raises, even in small amounts, can motivate team members to embrace new, better work practices;
Make your teams small and dedicated. The bigger the team, the greater the chance members will have competing interests and the harder it will be for them to agree on goals, especially after the improvement expert has moved on to a new project; and,
Executives need to directly participate in improvement projects, not just "support" them.
Summary: Sometimes, and Use Common Sense
In summary, it seems that a public sector or community organization can achieve a small amount of efficiency and cost savings but only if they are focused, really behind it from top to bottom, and apply principles that seem in retrospect to be obvious project management lessons learned.