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12/05/2011 05:27 PM
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I have a presentation to do about the Lean in a public sector. My client would like to get the references or sources about what I will say. More, it's about the % of value added in the public sector.
So could you help me to get some sources and value (%). It will help me to do my presentation.
Thanks
Guy
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12/06/2011 03:54 PM
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you can start with 15 trillion in debt and growing
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12/07/2011 11:29 AM
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Guy,
I think you'll find that generally accepted figures show that private sector companies who have not yet embraced Lean run 5-10% (or less) value added. Toyota is said to be at 40-45% value added. Scary huh?
As for the public sector, I'd venture that it's not a pretty picture. I don't know of a single government operation that could compete with a private company and win. That would mean that they would be at a lower value added percentage than the private sector. Even scarier.
Tom
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12/07/2011 12:35 PM
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Guy,
Another way to look at this is when we are talking Lean what are we talking about? Adding value. Since public sector organizations don't create anything, they can't be adding value. I am in full agreement with Tom's comments.
Ken
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12/09/2011 12:40 PM
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Guy,
Suggest you read We Don't Make Widgets. There is value added, we do deliver products to customers. Although there is room for improvement, we can still recognize the value that is there and try to make it better. You have to look into the work to find the % Value Added. Good luck.
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12/09/2011 12:41 PM
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You have hit upon one of the most difficult topics and most differential points in the Lean spectrum. How do you measure value in government? I have over 20 years experience as either an employee of, or consultant to government entities. Every time we calculate value it has to be reconsidered based on the service, opinion of the service recipients, and importance of priorities.
So, what in the heck am I saying? What is the value of a life saved if the service is to provide a search and rescue team for missing citizens? There are debates about how to arrive at the an amount. Some are more clinical, less emotional, and say that the value of the life is equal to what that person would have given to the government by way of tax revenue over the span of their life. Others - especially the the person being saved from certain death - would value the life at a much higher price. Before you can calculate a % value added you must know the value of the service received. The recommendation is to pick a number that you can rationally support and one that has at least some level of support in the academic community. Explain how the number is derived and be ready for a strong debate. In the end, for Lean purposes, it really doesn't matter unless you're trying to make the chart yield a higher impact during the presentation - a lower value make's a small increase appear like a bigger improvement on a bar chart. But this is only for valuing the service to the citizen.
A first step is probably to determine is the improvement is to the Service to the Citizen or to the Service to the Organization. The latter is easier to justify because you are more likely talking about improving operational efficiencies. If this is the case then you could make some comparisons to commercial operations who perform similar functions. For example, processing workman's compensation claims is similar to processing insurance claims. Again, the importance is to choose a point of reference, rationally justify why you think it's a match and then be prepared to defend your choice.
Take a look at "Policy Analysis, Concepts and Practice" by David Weimer and Aidan Vining. It's a start.
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12/09/2011 12:41 PM
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The responses you have received so far are discouraging, I must say. For LEAN practiioners, of all people, to not understand that business processes within government face the same challenges and opportunities as business processes do in any sector, and to belittle the "value" of the services and products delivered in order to make a political point is hard to just let slide.
However, the reason for this post is not to start a philosophical discussion about the worthiness of the government enterprise - that belongs elsewhere! Instead, I want to give you some great starting points for your presentation. Three links below will take you to a wealth of information. Plus, I highly recommend that you pick up Ken Miller's Extreme Government Makeover, and check out his website as well.
. Iowa: http://lean.iowa.gov/results/index.html
. Minnesota: http://www.lean.state.mn.us/LEAN_pages/results.html
. Federal (EPA): http://www.epa.gov/lean/government/
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12/09/2011 12:41 PM
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Work that I've done over several projects with the Department of Administrative Services in Oregon showed a pattern of value added being anywhere from 10-3%, with scores clustering most often around 5%.
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12/16/2011 11:23 AM
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I want to add my voice to those who have pointed you to Ken Miller's book: "We Don't Make Widgits". It was an epiphany for me, coming from lean manufacturing to government. And I will respectfully disagree with the statement that "Since public sector organizations don't create anything, they can't be adding value". Government provides service, and SERVICE = CREATION OF VALUE.
The first step of lean is always to define value from the perspective of the final customer - what they want, when they want it, and at what price they are willing to pay. In that sense, you can have a quality overnight stay at a Holiday Inn Express, or a Four Seasons hotel. In government, often times there is a disconnect because the customer is different than the payer (much like healthcare). So it becomes what the customers want at the price the taxpayers are willing to pay, or the legislature is willing to appropriate, and with limited resources they are seldom willing to pay for a night at a Four Seasons.
Good luck to you!
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12/19/2011 02:05 PM
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I think what I'm detecting here is a good bit of defensiveness on the part of folks in the public sector. Nobody wants to admit that much of what they do doesn't add any value in the eyes of the customer. Truth be told, it doesn't matter if you're in private sector manufacturing, healthcare, teaching or government. Waste is waste and the true value added portion of what all of us do is pitifully low.
I'd propose that instead of beating a dead horse on just how little (or how much) value is added, we get on with getting rid of the waste and improving the people and the process. Otherwise one can get into all sorts of non-value added debates on such things as which waste category a particular activity falls into. And trust me, you don't want to waste your time there.
Tom
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12/19/2011 02:06 PM
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Rick,
I will try to keep politics out of this, but I would submit that in most cases government operates at a price that far exceeds what the taxpayers are willing to pay. Look at the debt, the new healthcare law. What value did the stimulus provide? If I ran a business with the same amount of WASTE that governments do, i would have been out of business long ago.
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12/19/2011 02:06 PM
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really agree with you!
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12/19/2011 02:06 PM
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Originally posted by: rbossingham
In government, often times there is a disconnect because the customer is different than the payer (much like healthcare). So it becomes what the customers want at the price the taxpayers are willing to pay, or the legislature is willing to appropriate, and with limited resources they are seldom willing to pay for a night at a Four Seasons.
Good luck to you!
I am not wiling to pay as a taxpayer - Then what? I want only to pay for a service that I am directly connected with, and I don't want to pay for someone else to use a wasteful service. Since that eliminates the waste of not being able to provide direct feedback for that service.
I have developed a new revolutionary product that eliminates 90% of all health care products. Can I open a business and put healthcare out of business. No.
Govt, especially Federal govt that tries to provide all services for all people is waste. It is an added step in the value stream that is completely unnecessary.
www.leaneconomics.org
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12/19/2011 02:06 PM
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Thank you very much, Emily. It is what I'm looking for.
Regards
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12/19/2011 02:06 PM
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Thank you, everybody. It was a pleasure to read you.
You know, when you have to do a sale speech and this kind of organization (public sector in Quebec, Canada) you have to be able to justify what you say.
It was why I asked you about some sources or references to improve my presentation.
Thanks
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12/20/2011 10:01 AM
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I think there is a fundamental difference between public and private sector value added. Keeping in mind that a value added activity is generally defined as "something a customer would be willing to pay for." Let's look at the differences:
In the private sector, products or services are paid for directly by the consumer. When a customer goes to buy a product or service, all they really see are the product and the price. Although we Lean folks say that the customer gets to define what they're willing to pay for, in reality, very few consumers know what activities took place in the value stream that produced that particular product. But they do have one key decision - whether or not to buy that particular product, another product or no product at all.
In the public sector, products or services are generally paid for through taxes. When a customer needs a product or service, they rarely see the actual price because it's buried somewhere in their tax bill. Like the private sector though, very few consumers know what activities took place in the value stream that produced that particular product or service. When it comes to the decision as to whether or not to "buy" that particular product or service, they have no choice at all since taxes must be paid by law.
So I'd propose that anybody attempting to implement Lean in the public sector needs to be very careful with defining value added. Just because people are paying for it today doesn't mean it actually adds value. The same holds true for the private sector by the way.
Tom
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12/23/2011 03:36 PM
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Glad you found the links helpful. Although it is not always intuitively apparent how the LEAN concepts apply to government, once people get their heads around the ideas of value and customer, the process improvements are remarkable. As an example, the old tried and true definition of value as being "something a customer is willing to pay for" has lead to some great conversations in our LEAN classes. We find it helpful to start with that definition, lead a discussion around a DUI ticket (!) and then arrive at the revised definition of value being something a customer would care about if they knew about it.
So, people at first balk at considering the drunk driver to be the trooper's customer. No, they'll say, their customers are the traveling public for whom they are keeping the highways safe. They further point out that the drunk driver is *never* willing to pay for a DUI citation.
We then draw a very simplified value chain, showing the relationships - We start with the definition of a customer as a person who directly receives your product or service. That would be the drunk driver. S/he gets the ticket. But why? So that the courts can make proper adjudication (jail, alt service, rehab). Why? So that highways indeed are safer. (I"m skipping some steps here, re the backroom coding, etc). Now, what process does the trooper use to produce the ticket - what value-added steps are involved that the drunk driver in fact would care about? People can usually see that accuracy, doing the steps right the first time, etc can conceivably be things an innocent or a guilty drunk driver could care about. Certainly back room coders prefer legible citations, etc.
Same line of thinking re nursing home inspections - turns out that nursing home operators by and large see the sense in protecting vulnerable people (fits their own values and business propositions), and as the customer of an inspection report are in fact happy when the inspectors are consistent, timely, accurate - these are things they care about, and quote-unquote would be willing to pay for.
Anyway! Great topic.Government products and services, to quote Ken Miller, are invisible things for people who do not want them on behalf of others who do want these things for reasons we rarely articulate. LEAN helps us dig through these challenges in a very healthy way.
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12/28/2011 12:02 PM
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Hello there,
Governmental organisations are much more complicated than private because of the diverse role of the citizen. Citizens are rarely true customers of government services. Perhaps an individual is only a citizen from government services when there is a choice left: go to the competitor or find another way to satisfy needs. I think only public traffic is a good example, when not privatised.
Most of the processes from the public sector have two different stakeholders: an individual and the community. An individual needs a buildingpermit, he's not a customer. One can built fine houses without that piece of paper. A building permit is conceived to protect the community/the neighbours against buildings that are all too weired or even dangerous.
There are 7 citizen roles: customer, user (of public facilities), subject (when fined or in prison), voter (election process), taxpayer, partner (with civil society) and as an administrator (alderman, major, minister).
One might say that value for a citizen is when the service is first time right, there is a transformation and he or she is willing to pay taxes for it.
That means that most of the answers from Call centers are sheer waste, because the questions the citizens have are already answereld by the civil servants in their woolly text or complicated folders - not first-time-right. The only value adding action in the process of giving subsidies to theatre or wellfare organisations might be the handing over of the money - from the receivers point of view. The value adding action in this process for the point of view of the community is a good analysis what is going to be done with the money. Is it for empty venues? Does it contribute to some social plan? Find more about this in Lean for the Public Sector from productivity press.
What makes it even more complicated is the question what to do with the time gained after improving processes. Create more value? Oh, no. Much people think they create value enough, they should do it with less the time and the money. That means Lean and cutting back?
Bert
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01/03/2012 12:44 PM
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GuyGordonGuy Gordon
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Hi Emily. I enjoyed both of your examples very much. It is my sense that while there are key differences between public and private sectors, there is an important contribution that approaches such as LEAN can make. Efficiency and prudent disposition of public resources is one of a number of critical values public sector managers need to be able to understand and assess. If for no other reason than to be able to make reasonable trade offs with with competing public sector values as effectiveness, probity, democracy and justice.
Using LEAN and similar concepts to understand how government operations actually work ,what they cost, and what may be unnecessary as defined by the client is unfortunately the exceptional circumstance rather than the rule. It is the rare public sector senior managment meeting agenda that deals regularly and forthrightly with issues of operations and service excellence. Those that do adopt such a focus are demonstrating they can make improvements. Reaserch in Canada, eurpope, Australia and the US show that such improvements (derived by LEAN and other methods) establish credibility and trust among staff, peers, senior managers, elected officials and most importantly citizens.
Increasingly public sector organizations around the world public sector are focusing on questions of efficiency, cost, and effectiveness. This poses a challenge to many managers and leaders to reconsider the "art of the possible." LEAN in my my mind can make a very valuable contribution or perspective to this dialogue.
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