CAN IMPLEMENTATION OF LEAN SIX SIGMA POSITIVELY IMPACT COMMUNITY INTEREST COMPANIES IN UK?
Lean Six Sigma is a process improvement method having a great popularity in large manufacturing companies used to improve operation efficiency. Over the time this practice has been adopted from other industries such as service or public government. However, despite that existing literature address the application of lean six sigma in private and public sector currently few research address implementation of lean six sigma in non-profit sector which makes this essay to be more challenging.
This essay will try to highlight the importance of creating a fix strategy based on adoption on LSS tools for a non-profit organization which is at the growing stage. In this case study Nbw is community interest organization which sells affordable second-hand bikes, spare parts and offers bicycle repairs and advice about bicycle maintenance. On the other hand, with the money they receive from donors and the money they make with the products and services they develop and carry out community project focused on groups that experience disadvantages.
This essay will identify the challenges faced by a non-profit organization and evaluate how Lean Six Sigma techniques can be adapted to improve their financial and operational efficiency in order to create a positive long term strategy. As computer systems are the starting point for process improvement I will focus on this as mechanism that allow for the improvement to occur. This is aligned with our study case as NBW it a small new small company where tools such as VSM, charts, visual controls, diagrams all used for DMAIC are missing. Actually this was a limitation in implementing a strong LSS method.
1. Lean Six Sigma
Lean thinking have its roots in Japan based on the Toyota Production System (TPS) developed by Taiichi Ohno. Lean philosophy strive to improve quality and efficiency (Ohno 1988) by using tools such 5s, Kanban, value stream mapping and many others. ).“Lean is a methodology which consist in an integrated system of principles, practices, tools, and techniques that are focused on reducing waste, synchronizing work flows, and managing production flows.”
In early 90s with the publication of “The Machine that Changed the World: The Story of Lean Production” (Jones, and Roos 1991) cited by Thilmany (2005) this current became very popular and adopted all over the world by companies in transforming their operations.
The lean philosophy was developed in an environment strongly focused on manufacturing although this approach has since been adopted not only in manufacturing industry and to a wide range of private-sector service organizations, including some governmental entities (Lewis et al. 2007.
As most of the times is called “lean manufacturing” or “lean production” because of the origins, there is a general idea that this is suitable only for production environments. However, the literature have shown the benefits possible by applying lean to service environments such as call centres (Laureani et al 2010) or healthcare institutions (Kovacevic et al 2016)
The main purpose of Lean is to reduce and eliminate waste also called non-value-added activities and focus on Value-added activities which contribute to customer satisfaction (George 2003).
Six Sigma have origins in the early 1980s at Motorola Corporation within manufacturing industry and since same like lean approach been adopted across many other industries. Six Sigma is complementary with Lean but is more data driven in order to improve business processes. By using statistical process SS aims to eliminate the causes of defects or mistakes in business processes by focusing on the outputs that are important to the customers (Antony et al 2008). Therefore we can say that Six Sigma represents a statistically based approach to quality.
Six Sigma have also three different meanings. As statistical tool it focuses in maintaining 3.4 defects per million opportunities; as a process it focus on DMAIC (define, measure, analyse, improve, control) approach of process improvement; as a philosophy SS means that defects are costly and can be eliminated.
2. Challenges in implementation of LSS
Lack of profit motive
As stated by Foster et al (2002) one of the main differences between non-profit and the profit sector is the lack of profit motivation. Community Interest Companies processes are very similar to private sector businesses. From what I have had noticed same as in our case study they don't think consider as a business therefore profit is usually not their primary motivation. Also another arguments that Community Interest Companies are not profit driven is that this are focusing more on social motive and forget about the bottom-line which can be heart of the problem (Ostroff 2006). On the other side Kaplan (2001) state that for non-profit organizations financial perspective is not the primary objective and success should be measured by their efficiency in meeting the needs of the community.
Lack of resources
Community Interest Companies are subject to both human resource and funding constraints. To implement LSS can be very difficult as most of the times LSS require dedicated staff which understand the real potential of LSS (Morgan 2003) and also, funding for small companies can be difficult. Many CIC have looked externally for assistance in implementing private sector improvement practices.
Organizational culture has been recognized as an important challenge to quality management implementation (R. Jadhav et al 2014; Kwak and Anbari 2004). As stated by Womack and Jones (2003) implementation of LSS can face challenges from both leaders and employees. Sometime employees could be resistant to change because they do not understand why the organization needs particular changes on the other side leaders may not execute a plan communicating the vision and why the change is required.
According to Kosicek et al (2012) there are four leadership styles in which non-profit sector leaders have adopted the quality or process improvement methods. This are democratic, people-oriented, servant and the transformational style.
The idea is that all leadership styles address the human perspective of the workforce but the transformational leader seems to incorporate a strategic vision based upon change that may advance innovation and creativity. The transformational leader style ideal for LSS as this engages employees to meet objectives and then the entire organizational culture will begin to change.
With this challenges as an argument we can conclude that a change in management strategy is clearly necessarily. This change have to be done in a way where all participants are aware of the importance of this change and in this way the company can overcome resistance to change.
3. Adapting LSS for CIC in order to create a fix strategy
In order to create a fix strategy and overcome the above challenges in propose adoption of the key fundamental simple tools to be used by NBW. This tools not only that are low cost but will enhance communication and operational efficiency in order to align it with company vision and mission.
In UK Community interest companies are normal companies. However, this has to carry out activities which fulfil a community purpose and also has a "lock" on its assets which have must be used for the community purpose
We can state that CIC also differ from the for-profit sector in its overall management to meet societal needs, rather than the overall management and procedures of the organization (Ott, 2001). As Deming (1986) pointed out, all work is accomplished through processes. Thus, advancement for any organization involves improving those processes. Process improvement initiatives employed by the non-profit sector can be seen as opportunities to perform an organization's mission more effectively and efficiently.
Based on the available literature it is difficult to state categorically that lean is or is not particularly applicable for SMEs (Prasanna 2013). Some research shows that smaller companies struggle more to implement lean methods. On the other side other research reveals positive effects of lean in SMEs.
What is interesting is that research shows that when implementing lean tools this are in relationship and to increase operational performance this tools cannot be use in isolation as stated by Shah&Ward (2007). Therefore based on literature review starting with just one popular tool won't be sufficient.
This final advantage is of great importance, because lean manufacturing offers a vast variety of tools and companies have problems to identify exactly what tools are needed and how they should be implemented (Pavnaskar, Gershenson, & Jambekar, 2003)
Åhlström (1998) suggest that lean thinking in organizations should start with eliminating waste followed by continuous improvement but do not suggest any methods of measurement of the outcomes or methods of visualization.
Karlsson and Åhlström (1996) suggest that companies should start lean efforts by implementing “quality circles” to eliminate waste and continuous improvement but same as Åhlström research there are no indications what tools to use or how to measure the changes.
Detty and Yingling (2000) suggest to model the current and future process and simulating them digitally, this method gives a precise prediction of the performance increase. However, simulation is expensive and therefore possibly not practical for SMEs.
Another method for companies to implement lean is Value Stream Mapping (Rother & Shook, 2003) which may be the most popular method find in literature. However, VSM lacks an evident connection to cultural change.
In conclusion combining these observations we can state that none of the proposed methods meets all requirements of an appropriate implementation method. However, the most appropriate method seems to be Value Stream Mapping as this method gives a clear indication of what tools to implement where in the company.
3. Adaption of LSS for NBW
In order to create a business strategy beside team work and communication computer systems play an important role of process improvement since they actually “sit on top” of the actual processes in an organization in order to bring about additional change.
3.1. Visual management
As stated by Harris and Harris (2012) to provide right information to the right people and at the right time in an efficient manner to empower them to make the right decisions and take the right course of actions is a significant difficulty for many organisations
Some organisations, both manufacturing and service, have been using simple and yet cognitively effective visual tools to provide quality information to their employee to use in their day-to-day work transactions (Eaidgah et al 2016)
By highlighting improvement opportunities, if linked to a continuous improvement (continuous improvement) programme, it supports perfection though providing initiatives for continuous improvement projects and nourishing the culture. And last but not least, it encourages a scientific approach through promoting data collection and fact-based decision-making.
Goodson (2002) refers to visual management as "tools that provide visual cues and directions to clearly guide employees to appropriate tasks and locations".
3.1.1. Visual planning
To make the work easier Toyota highlighted the need of using VP in order to be align with their projects and also as a communication tool. By working in this way everyone becomes involved and understands better in which direction a project is heading, which also facilitates faster problem solving (Liker 2012).Also making job tasks visible will increases awareness and staff can be more responsive to the changing priorities making sure that the job will done eliminating the risk of being late. In this way we can say that this is acting as a Kanban signalling tool eliminating waste of motion by prioritizing the tasks similar with JIT.
3.1.2. Lean CRM
With today's increasingly competitive economy, many organizations have initiated customer relationship management (CRM) projects to improve customer satisfaction, revenue growth and employee productivity gains.
Customer facing processes often represent significant inefficiencies that can be remedied by Six Sigma CRM processes. Thus, we can say that Six Sigma CRM improves understanding of customer behaviour, allowing you to acquire new customers and build loyalty among both existing and acquired customers.
Toyota sustains their marketing strategic by implementing Lean CRM since 2003. Lean CRM serve as a "Pull customer" Strategy, where Toyota go for the customer first before they come. Lean CRM was developed by Toyota in Europe to gather customer information through customer lifecycle (Hill, G. 2006).
In CICs CRM can represent more than a simple contact database. It can be helpful in targeting the market, sending emails in segmented lists, keep in touch with stakeholders and even pass the information in case there are changes in the organizational structure.
As discussed about visual management base on CRM we can create graphs, diagrams and charts which can be used as analytical tools for further business strategies.
3.2. Employee problem-solving skills - quality circles
Employee problem-solving skills are often cited as an important aspect of lean approaches Worley & Doolen (2015).
As stated by Jones and Balle (2016) “the people are the process”. In today fast moving environments traditional management approach seems to be not so effective in providing new ideas to solve problems. Therefore Quality Circle was introduced as a tool where a group of members are having a meeting and discuss about workplace and service improvements and make presentations to their management with their ideas (Prasanna and Desai, 1998). QC circles promotes team work and communication in order to achieve organization effectiveness. Normally, meetings take place once a week for approximately an hour. After presenting and analysing the problem all the members propose solutions of the problems.
However, most cited in literature In order to have effective Circles and achieve the interaction, it is necessary they function in a unique way and each of the members give own contribution in solving the problems. Within the Quality Circles, each member should be creative and present their ideas. In order to prevail such environment, it is necessary that management release the employees and do not manage the Circles, but members themselves manage independently the Quality Circles.
Another tool suggested was to implement a BSC which can be easily aligned with LSS and be used to identify company performance over time (Afonso & Cabrita 2015).
CIC can apply LSS practices to increase their efficiency by working smarter with their low resouces. Implementation of a LSS fundamentals can create a fixed strategy and create open communication among members which can become a further strong foundation for company problem solving and operational efficiency. However, an organization with limited human and financial resources to be dedicated to the LSS can find the transformation process slow but on the long term benefits can be enormous.
Also been shown by literature that Lean Six Sigma is a methodology that is applicable not only for manufacturing services and also for non-profit service industry. The non-profit industry is a service based sector that can particularly benefit from the Lean Six Sigma Methodology. Non-profits companies faces several challenges and a need for stability to reduce uncertainty based on standardization and a new organizational culture is very important
The literature review and case studies in the non-profit sector is facing a lack of research, therefore there be the need for further research.
The essay tried to highlight the necessity of a change in thinking of non-profit organizations based on the fundamental tools of maybe the most popular method of continuous improvement: LSS.
The usability LSS of the case study was limited in metric evaluation as it was freshly implemented but I can state that board directors was happy to embrace qc circles and visual management as they seen multiple benefits in this methods. However, this will mean flexibility from all members, communication and a team effort.
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