Creating Value - Where should we improve?

Lean Nation,

As part of our leadership series,  one of the questions we need to address is where to focus our improvement.  We have several choices to pick from.  We could focus on information flows;  scheduling, registration, order entry,  supply ordering, etc.  We could look at the value added activities.  Depending on the business you are in this could include design services,  manufacturing, clinical healthcare, distribution,  point of sale services, call center operations, etc.  We could also select from back shop processes including human resource management, finance and accounting activities, purchasing, organizational development, and customer service.  So where do we begin?

There are a few guidelines you can use to help you in your decision making.  First,  remember we always want to improve along a value stream.  As a refresher, a value stream is all the activities (good and bad) that deliver value to a customer.    When we improve along a value stream,  we will be improving both process/product and information flows. So choosing whether to begin with value added operations or information flows is a distinction we need not make.  we'll be improving both.

Now what about the distinction between value added operations versus back office operations.  Most organizations want o focus almost exclusively in the value added areas.  This is a great place to begin, and I encourage most organizations to begin in these areas.  So the question I believe we want to answer is when should we move into back office operations and is there a ratio of value added to back office improvement.

I prefer that we work within one back office value stream for every four value added streams.  Basically 80% value added operations to 20% back office.  You must get into the back office operations or you will start to slow the effectiveness of the value added improvement.  Examples include hiring the right people, having the right promotion criteria,  having effective employee relations and performance reviews, and ensuring accounting is value added to the rest of the operation.  I believe you can see how having poor back shop operations can negatively impact the your operation. Many organizations wait too long to start into the back office processes. 

To select the proper back office place to begin,  let that get pulled from your value stream improvement.  As you are improving your process/product and information flows,  you will discover which back office processes are impacting the improvement of your value added operations.  When you discover where to go, then go there.  Don't wait until you you get through all the value added areas or you will be too late.

Lean Blessings,

Ron

Ron Bercaw
President, Breakthrough Horizons
www.breakthroughhorizons.com