Thursday, June 12, 2008

How much work actually creates value?

When Fleet Financial Inc., in Providence, Rhode Island, set about examining how its 6,000 employees added value to their banking business, what they found shocked and surprised them. For example, they discovered that although each of Fleet’s 800 branch offices prepared 28 monthly reports, no one read 22 of them. Four employees worked full-time collating credit-card reports which they Federal Expressed daily to managers who could already access this information on their computer terminals. Thomas Tomai, a senior vice president involved in the study commented, “A lot of people did rinky-dink things we didn’t need…. If you looked closely, you could find ways to save millions of dollars in costs.” Surprising as it may seem, most organizations can make similar discoveries:

• When asked how they spent their time, nurses at Brigham and Women’s Hospital in Boston reported that half of the handwritten doctor’s orders they dealt with required them to contact the doctors later to translate illegible writing or provide missing information about times and dates.

• A financial reporting team at Ameritech roamed the company asking employees “Do you really need these financial reports?” As a result, they eliminated six-million pages of unnecessary paperwork - a stack four times higher than Ameritech’s forty-one story headquarters building in Chicago.

Managers often think their operations are working efficiently only because they’ve never stopped to examine just what‘s really going on. Work processes tend to acquire extra steps as time passes, sometimes to divide up responsibility among functional specialists, other times to cope with problems that arise. In most cases, informal practices develop when employees can’t accomplish their work by following the formal system (e.g. when parts don’t arrive on-time, people go out of their way to expedite “hot” items). As this sort of elaboration grows over time, more and more energy goes into making a business process work rather than on making sure the process does the work it was originally designed to do. Once people add additional steps, even if they intended to do so only temporarily, they soon find them taking on a life of their own and quickly becoming permanent. These tasks now “belong” to someone, who jealously guards them since they help justify that person’s employment.

A value-adding activity is either required by law, or it contributes to making the product or service more valuable to the customer. Potential non-value adding tasks include filing, re-working, moving, copying, tracking, expediting, reviewing, approving, verifying, inspecting, processing change requests, etc. Management should involve employees in identifying and dropping any activities that don’t provide added value from the customer’s perspective.

1 comment:

Unknown said...

This is great! Thank you!