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CHAPTER SIX CONTEXTUAL FACTORS AND ORGANISATIONAL STRATEGY

6.1 It was apparent in the case study analysis that some internal and external drivers existed which were reported to have influenced organisations' decision to adopt Lean. In some cases it was possible to isolate a single driver, more often there was a more complex picture. By understanding and presenting these drivers it may help to develop mechanisms to engage public sector organisations to consider Lean implementation.

6.2 Improvement and change is often linked with strategy. Within the literature ( annex 1) it advocates that any improvement and change should be linked to the strategy. This is supported by figure 1.1 which illustrates the principles as 'strategic' whereas the tools and techniques are 'operational'. Therefore, this chapter will also present the findings related to the strategic process used within the case study organisations and the degree to which the improvement programmes were linked into this process. This relationship of how strategy can impact on Lean and how Lean can influence strategy is presented in the final section of this chapter in order to assess the relevant importance of this relationship.

A. Drivers for change

6.3 The drivers for change towards a 'Lean' approach reported included:

6.4 Effective leadership is commonly seen as an essential driver for change. In two case studies, an agency and a local authority, it was the Chief Executive who was the driving force for the changes implemented. In both cases, the Chief Executive had a view to shape new working practices and ideas. In one case, the Chief Executive promised neither to reduce pay nor enforce any redundancy as a result of the new Lean approach, which also coincided with the introduction of single status ¹⁰. In the other case, the appointment of a new Chief Executive was at a time of crisis where the media was commenting that the customers were not receiving adequate service and the agency was "in meltdown":

"The place had not been subject to any proper change programme ever since it had been set up. [We] had a lot of morale issues; staff turnover at the time was somewhere between 30 and 35 per cent." ( CS6)

6.5 Here the appointment of the new Chief Executive was seen as the catalyst for change as well as a key part of shaping the organisation as he used the opportunity to introduce new approaches ranging from implementing information technology ( IT) systems to improved quality procedures.

6.6 Achieving key performance indicators ( KPI) was another reason cited for driving change in processes and practices. It was mentioned that by redesigning some processes and looking for opportunities for change so that some KPIs could more easily be met.

6.7 New IT systems in both agencies had allowed these organisations to reflect on their current processes and use their introduction as a means to implement new ways of working across the organisation. In another case there was a perception that the systems cannot deliver change, leading to a requirement in the Corporate ICT strategy that a business change exercise must be done prior to the implementation of any ICT system. This scepticism ran deeper in the view of the change managers:

"…you can't trust IT systems to deliver… IT can help but IT must pull system…[but]…not once has there been an IT solution [as a result of the Business Change Programme]." ( CS4)

6.8 A couple of cases mentioned that the impetus to introduce Lean ways of working came from the need of managing outcomes and the relationship between itself, as the local service deliverer, and Central and Scottish Government. In these cases, drivers also included the efficiency agenda, funding (or the lack of it), e-government, the new Best Value audit regime and community planning.

6.9 In most cases, Lean had been brought into the organization by some external recommendation or policy. This is especially evident in healthcare, where most formal process improvement activity in England is underpinned by Lean thinking as a philosophy. This has resulted in diffusion of the approach across to the NHS in Scotland. This diffusion has recently accelerated with the closure of the Modernisation Agency and the dispersion of its Lean thinking facilitators throughout the UK to NHS management jobs.

6.10 A health case mentioned the change being driven from a national strategy designed to improve services over the years which hoped to provide, amongst other things, rapid access to diagnosis and treatment, improved treatment and investment in staff and technology. Overall, in a health case it was mentioned that they just wanted to work smarter and to introduce a customer focused approach to their ways of working, hoping to increase quality and help create efficiency savings to reduce the financial shortfall. However, it was also mentioned in both health cases that the consideration and implementation of Lean appears to have been opportunistic or connected to some short-term advantage usually in the form of extra funding.

6.11 For one case study the driver for considering changing working practices, or looking at how they could carry out their role more efficiently, had been triggered by the announcement that a second organisation (deemed to be the 'customer') would be opened, which would double the workload, with no additional resources:

"Managers within the unit were told 'Get on and do it, do the extra work, there will not be any financial resources provided'". ( CS2)

6.12 Both agencies felt the external driver coming from the threat of competition. It was mentioned a number of times by both that "the work could always be outsourced to someone else". A perceived low barrier of entry meant that the organisations felt the strong need to justify their service delivery and look to ways to continually improve:

"the world does not owe us a living" ( CS5)

"I think as a company we have to be aware that we have to be competitive" ( CS5)

"… if we are cost effective, efficient and delivering a good service it makes it less attractive for somebody to come in and do these kind of things" ( CS5)

6.13 Regular policy changes were another reason organisations gave as an external driver for change. Although some, particularly the agencies, had attempted to shape the timing of the policy changes so that they could manage their impact more effectively into their organisation. What any policy change meant was that organisations needed to be more flexible at being able to adapt to the changes. Understanding the processes, the work flow and reduction of waste were seen to help with this flexibility.

6.14 An emerging driver mentioned by some was the ' efficiency in government' agenda with the increasing emphasis not only on value for money but on efficiency - with the Minister for Finance and Public Service Reform, Tom McCabe, setting a target of £1bn efficiency savings for government in Scotland over the next 10 years. Linked to this was also the mention of the 'Gershon report'.

"The fact that 54% of Scottish GDP is represented by activity in the public sector - compared with 42% in England - has contributed to a recent and growing emphasis from the Scottish Executive on improving efficiency and achieving value for money." ( CS3)

"Modernising government was about improving customer services - now it is about saving money…" ( CS4)

6.15 There was a similar driver in the RAF case:

"… the main driver for Lean in …[this]… programme is a target of achieving a total budget reduction of 50% over with only a 3% reduction in task." ( CS8)

B. Strategy Process

6.16 In order to understand if the change programmes have been considered within the context of an overall strategy it was important to ask the interviewees some details about their strategy process. For example, this referred to the development of the community strategy for local authorities or, the vision and objectives for the government agencies.

Strategic Planning and Development

6.17 For many of the cases, in common with many large organisations, "strategy was a struggle". Strategy was cited as taking a back seat to operational requirements"can't spend too much time on strategy - too busy running things" and, that it was difficult sometimes to get the whole organisation to implement something consistently.

6.18 There was a question mark about how effective strategic planning was, citing political tensions with different pulls on politicians and managers making it difficult to create a coherent strategy for the organisation. However, for one health case, they have used this tension to their advantage by influencing the development of the plan as they had leaders in this field and areas of high profile best practice. For another case study, however, the decision to expand the provision was felt to be not well thought through and not part of a formally-planned strategy.

6.19 For one of the agencies the strategy development process has improved, especially with the introduction of the change management role. Three directors are involved in the development of the strategic direction (corporate management):

"I would say things have changed quite dramatically within the company in terms of strategy." ( CS5)

6.20 The other agency was probably the most focused case study in terms of strategy development where a small group of senior managers led the strategy development. This was followed by an 'away day' each year with all the staff to discuss the strategy for the following year based on customer and staff feedback as well as a variety of others sources.

"This [the strategy process] is the corporate plan…..we have a half day away day every year to look at things and take things back; taking things from the staff survey, customer survey." ( CS6)

Linking Strategy and Improvement

6.21 In most cases the connection (often referred to as the 'golden thread') between the organisation's aim, strategy, business/departmental/community plans and the continuous improvement work was fairly weak although there was acknowledgment that a clearer understanding of the relationship would be helpful. The ability to generate and sustain improvement activities with the strategic objectives and goals of the organisation can help in prioritising improvement and make it an integral part of their activity and not something separate (see literature review Annex 1).

6.22 A common issue across many cases was how well embedded a particular change programme was within the strategy of the organisation. In one case it was described as fully integrated:

"This appears to be a successful business change programme firmly tied to the theme of modernising government and improving access to services - and as such it matches very well the Lean ethos of service improvement through staff and customer involvement." ( CS4)

6.23 In other cases there was a post-facto realisation, leading to a "retro-fitting" of a particular approach into a broader improvement programme. Within a local authority case it was described that whether or not Kaizen was initiated as a corporate continuous improvement programme or simply as a way of engaging more staff in fairly low level service improvement there was little doubt that the organisation, having seen the benefits of Kaizen, was seeking to embed it in its overall continuous improvement approach:

"Kaizen is now beginning to embed itself within the Council's strategic approach to quality development. It lies at the heart of our corporate commitment to continuous improvement in the way we deliver services to customers, and supports the Council's approach to achieving Best Value by bringing about real improvements in service performance." ( CS3)

6.24 In another case there was partial alignment of the strategic goals to the improvement activity but these goals were not known to the entire organisation. Hence, the link between the strategic goals and the improvement exercise could not be drawn and so it led to a certain amount of scepticism, lack of ownership and a feeling of another top down initiative.

6.25 For one local authority there was a formal strategic planning process linked to the electoral cycle and, in the opinion of one of the Senior Managers, the Council has recently got better at linking the strategic plan and service plans. However, the links between the strategy and budget planning were weak and it was also perceived that there was a weak connection between strategy and improvement.

6.26 This was supported by a health case where the improvement programme had not yet been sufficiently integrated into the organisation's strategy, which had constrained its effectiveness. The following exchange with the regional facilitator indicates that, in this case, there was no systematic link between strategy and service improvement:

" Q:So there was a group who in one sense were reasonably switched on to the idea of improving the system?

A: Yes, met regularly to look at the service.

Q: But they were not working to very specific objectives.

A: No.

Q: They probably did not have a consistent methodology.

A: No I would not say they were aware of anything.

Q: But there was a will.

A: Yes." ( CS7)

6.27 One agency cascaded the strategy to people in a variety of ways including encouraging Improvement teams to help with the implementation of major pieces of work:

"On a strategic level there is always something and at our level we have set up a number of improvement teams. It is getting them to think about themselves and we know what the solution might be." ( CS5)

6.28 The other agency had focused on IT and the use of technology to improve operating efficiency:

"I think within the next year or two we will be as close to a paperless office as it is possible for a civil service outfit to get." ( CS6)

"We have seen a lot of suggestions for change, on the IT front …we have done as much as we could that is where we have been heading over the last five years." ( CS6)

6.29 Another approach taken was to create an improvement programme across a network of hospitals to help support the change process which itself has aims which are in line with health agenda and targets.

"…working in support of improvement. The focus of the work is to enable clinical teams and their support staff to make changes happen and to encourage changes that are sustainable." ( CS7)

"The programme was the glue between the networks and the trusts" ( CS7)

6.30 However, even with this approach there was a variable fit between the programme and the strategies which the hospitals had developed. Although, in their view there had been more of an alignment over the past year due to the programme being linked with a short-term target with the hospital Chief Executives receiving monthly reports which they feed into the action plans.

6.31 Some cases cited the use of tools such as the European Foundation Quality Model ( EFQM)ü or a local version of it, as providing a link between the deployment of improvement tools and the improvement strategy.

6.32 In the RAF case, while the consultants had aspirations that the organisation would adopt Lean at a strategic level, the reality was that it was competing with a number of other approaches in different parts of the organisation, including the use of the balanced scorecard:

"[The consultants are]… trying to get them, with varying success, to go down the policy deployment routine …so that effectively they have clear cascading down from their high level objectives and the methodologies needed to get there …It's a difficult one to sell to them - with the IPT [Implementation Project Teams - part of the Defence Logistics Organisation] they are on the balanced scorecard, which is roughly doing the same stuff but a completely different methodology so it does seem to be a waste of time to do both." ( CS8)

6.33 Two cases highlighted the possible approaches to developing an improvement strategy. In the first, one of the local authorities, what had started out as a relatively low level process improvement technique was increasingly becoming broader and linked to the corporate continuous improvement approach based on EFQM. In the other case (one of the health examples), the project seemed to follow the opposite trajectory starting out as an improvement programme with a very broad remit but very quickly trimming its sails to become more of a technique to help deliver a time-limited target. As it was observed in one case study:

The …[Organisation] seems to have adopted a "broad and shallow" strategy as opposed to a "narrow and deep" approach. This was probably essential given its limited resources and relatively short timescale. ( CS7)

6.34 Therefore, the link between strategy and an improvement strategy or even improvement could be argued to be fairly weak across most of the case studies. However, as highlighted in the outcome chapter (chapter 5), this weak link has not hindered the impact of Lean, particularly the RIE approach. This may be due to the reported great opportunities for improvement within the public sector, as one management consultant stated "the opportunities are not even low hanging fruit but apples on the ground", which means that the need to link the activity to strategy is not needed to achieve any benefit in the shorter term. Whatever the reason, there is a great possibility that if greater links between strategy and improvement are not made then issues of sustainability and replicability become important i.e. it may become difficult to sustain a Lean programme which has no link to the aim or vision of an organisation and, it may be difficult to replicate a Lean approach if the reasons or context for it are not understood. The following section expands on this importance of linking Strategy with Lean.

C. Reflections of the Relationship between Strategy and Lean

6.35 Figure 6.1 attempts to clearly illustrate the advantages, benefits and outcomes of having a clear relationship between strategy and Lean. By having a strategy it allows clear policy deployment and concentration of effort which in return, allow increased process capability and exploitation of new capabilities.

Figure 6.1 Relationship between Strategy and Lean

6.36 Lean potentially represents a major change that impacts upon the long-term direction and focus of the adopting organisation. It is important that this role of Lean, as part of the strategic development process, is understood. In case study 1, the organisation faced short-term financial pressures and also had a desire to substantially improve the quality of patient care, both in terms of outcomes (mortality) and the "customer service" quality of the delivery process. It was recognised that the Lean implementation, by itself, was not the appropriate mechanism to deliver the required substantial cost savings, due to the short timescale for this change and the sensitivities of the situation. The short-term financial outcome was not included in the role of Lean in the early implementation phase. It was seen that Lean could help improve quality performance and so the role of Lean was focused on reducing mortality as a key measure. This was achieved through improvements to patient waiting times and reductions in process waste, indirectly achieving some cost savings as well as the quality improvement. This decision affected where Lean was started, its timing and how the first RIEs linked to later events.

6.37 Organisations are often faced with a number of improvement priorities that may conflict with each other. For example, healthcare organisations are facing the twin aims of "demand pooling", to reduce the likelihood of queues forming, and the "choose and book" initiative to provide patients with more choice about when and where treatment is delivered. The two have an obvious conflict as demand pooling sometimes stops patients from choosing precisely which doctor they see ( e.g. for a follow-up outpatient appointment). Such interactions need to be managed in a process of policy deployment, which relates high-level strategy to specific improvement projects and identifies the areas of potential conflict. A strategic Lean implementation normally starts with a policy deployment exercise. This exercise helps to define improvement priorities and generates ideas about the content, timing and sequence of specific aspects of the Lean implementation. This would include decisions such as identification of the areas that receive attention for RIEs etc. The policy deployment brings cohesion to the implementation plan for the roll-out of Lean.

6.38 The results demonstrated that Lean has potential to dramatically improve the quality performance, or process capability, of individual services. When this is achieved, the new process capability impacts upon strategy. For example, in case study 4, the Lean process radically redefined how the organisation tackled the problem of abandoned vehicles. They recognised that they could in fact expand their service offering to one with a more customer-friendly approach, that provided better facilities for the disposal of unwanted vehicles and was also more cost effective. After Lean, the new "vehicle collection service" collected more than double the number of vehicles as before, but at less cost. In fact, the new service has a small income stream. The service also has better integration with other public organisations that interacted with the service, such as the police. The redefined service represents a radical change to the service concept offered by the council.

6.39 Before Lean, many sites reported concerns that an increase in service quality may increase demand for services, creating financial pressures. The case studies showed that the increases in customer focus and delivery efficiency also tended to reduce concerns about demand, as increases in demand could be absorbed more readily by the more efficient processes. It some cases, anticipated requirements to restrict demand for services are not as necessary. Improvements to processes and radical changes to the types of services offered may actually help redefine organisation strategy through the exploitation of new capabilities. An organisation that develops a capability to deliver enhanced service quality at no additional cost can develop more ambitious improvement strategies in future years.

C. Summary

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