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					Service design and Systems thinking
CONTENTS
Background                                                           2

The Back office / front office debate                                2
  Introduction                                                       2
  Choosing between front office and back office activities           3
  Links between the front office and the back office                 4
  The development of theories and strategies for service delivery    4
  Problems with the current theories                                 5
  Developing a framework for service delivery                        6

Developing a design perspective                                      7
  Human resource management perspective                              7
  Marketing, or customer relations, perspective                      7
  Operations management perspective                                  8
  Taking an operations management perspective                        8

Background to identifying eficiencies through service design         9
  Introduction                                                       9
  Report of the Audit Commission                                     9
  An Alternative approach – “Lean” or “Systems” Thinking            10
  Systems and lean thinking in LAs                                  11
  Background to the development of Systems thinking                 12
  The approach taken by the ODPM in using lean/systems thinking?    14

The ODPM Pilot                                                      14
  Method used by the ODPM                                           14
  Achieving the efficiency gains identified from the ODPM pilot     15
  Principals of redesigning the service                             17

Application of Lean Thinking Principals to Benefits Services        18
 Summary                                                            18
 Problems with the ‘traditional’ method                             19
 How lean thinking deals with these problems                        19
 Comments from LA adopting lean thinking techniques                 20




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Service design and Systems thinking

Background

The Cipfa benefits policy day included an item on the use of systems thinking in
determining the organisational arrangement for benefits service delivery in Local
Authorities. The session identified an alternative systems based approach to the
organisation based approach suggested by the Audit Commission of having a distinct
back office/front office split with the associated considerations over who the back
office function can be administered by and where that administration can be carried
out. Such considerations are required as part of the overall efficiencies agenda.

The alternative approach encompasses the idea of ‘lean thinking’ in this systems
based approach to reviewing service delivery as has been developed by, amongst
others, ‘Vanguard Consulting’ and ‘Teal Consulting’ services.

Given the shortage of time at the policy day and in order to explore the issues in
further detail, these notes duplicate much of the material produced for the policy day,
but are supplemented by additional information regarding the principals involved and
in their practical application.




The Back office / front office debate
Introduction

There have been a number of studies into the front and back offices in service
organisations which have identified several ways of configuring the front / back office
activities and the variables that are involved.

Compared with the manufacture or delivering of goods, one of the distinguishing
features of delivering services is the amount of customer contact involved in the
service delivery process where many services cannot be delivered without the
customer being either present, interacting or otherwise participating in the process of
delivery. This is particularly true in the case of benefit services.

Although, however, there may be a large amount of customer contact required for a
particular service, there are also parts of that service delivery process that can be
carried out in the absence of the customer. This means that at least some activities
may be carried out behind the scenes.

As a result, the activities requiring customer contact have become known as ‘front
office’ activities, and those not requiring customer contact are ‘back office’ activities.

This distinction between front office and back office activities is important for service
delivery as the two kinds of activity have different operational approaches and


                                            2
consequences. In general, the customer contact characterising the front office
functions introduce various uncertainties and variation in the service delivery process
that are not present in back office functions.

These uncertainties are related to the time customers arrive, their specific demands
and their tendency/ability to participate as is necessary. This means that it is hard to
predict when and how many customers will arrive, how much information they will
bring with them and the work implications of their contact.

This makes the front office function more difficult to control and manage than the
back office function and often results in a decrease in the efficiency of the whole
process. In addition, the front office customer contact activities make demands on the
design, facilities and staff in the front office as well as impacting on the work of the
back office. Again, this is particularly the case for benefits services.




Choosing between front office and back office activities

The differences between front and back office activities generate a number of
questions and concerns. One of the most important of these involves the choosing
between front office and back office activities.

Although some process steps in a service delivery process can clearly be considered
as back office activities and others front office activities, it is not always clear or
straightforward in deciding where to draw the cut-off line between front and back
office activities. This decision often consists of making compromises or trade offs
between the efficiency potential of locating responsibility for a particular step in the
back office and the benefits related to locating it in the front office.

Although front office activities generally have less efficiency potential than back
office functions and make additional demands on the design of service delivery
systems, they can nevertheless, be valuable. Their main strength is that the contact
between the service provider and customer offers opportunities to tailor the service to
meet the needs of the customer and the service, providing a more personalised service
delivery

For commercial services, this may involve keeping the customer in the service as long
as possible as this increases the potential for sales. In the public service sector
however, the aim is often to keep the customer for as short a time as possible in order
to reduce the demands on the service.

Alternatively, however, the front office offers an opportunity for public service
providers to provide a package of services and advice to the customer, either across
services offered by the provider or within a particular service, including providing
what would otherwise be regarded as back office activities.




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The choice between front office and back office functions is therefore a significant
issue and triggers decisions regarding the amount and location of customer contact in
a service delivery process as well as the overall design of the service.


Links between the front office and the back office

Another issue for service providers is how to combine front and back office functions
in one service delivery process, given their different characteristics and requirements.

One obvious solution to this is to entirely split the front office parts from the back
office creating, for example, two separate groups of employees, two facilities, two
information systems and two separate sets of planning, control and management
activities. In this way, each element can be designed separately to meet the different
requirements, demands and circumstances and the potential efficiencies in the back
office functions can be realised.

Such an approach, however, may not be beneficial from the perspective of delivery of
the service as a whole as it can lead to interruptions, duplication and
interface/communication problems which damage the speed and quality of the service
overall. In addition, such a clean split between back office and front office functions
is not always possible, particularly where back office and front office functions are
alternating processing steps as is commonly found in services such as benefits
services.

Benefits service are a classic example of this where work in relation to the customer is
passed to and fro between the two sets of activities. In such services, separating the
back office from the front office can create a vast number of interfaces. In such
situations therefore, it is often advantageous to the service to keep back office and
front office functions closely linked, without the strict separation of staff, facilities,
planning and management and control, to avoid interface problems.

This illustrates there are several strategies for dealing with front office and back office
activities in service delivery processes, each with their own pros and cons.
Developing a service strategy therefore requires careful consideration and research,
involving the need for detailed process mapping in order to identify where the back
office / front office split should lie and what the detailed interface requirements are.



The development of theories and strategies for service delivery

Several organisations have attempted addressing these issues and there is a body of
academic research into it. Some recommend the ‘industrialisation’ of services by
substituting technology for people and basically, eliminating front office activities to
improve efficiency and productivity.

Examples of this would include automatic call handling services (for example credit
card or other bill payment services), on line claim or contact services (e.g. on-line
banking or electronic claims for insurance or other services), electronic teller services


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in/outside offices (e.g. ATMs, or electronic portals directly linked to the service
provider’s information systems).

Morris and Johnson in 1987 reported on three strategies for dealing with variability
flowing from ‘processing customers’ in service processes. Chase in 1981 up to Bowen
and Youndahl in 1998 ranged from examining decoupling of front and back office
functions to advocating the empowerment of front line employees to improve
customer satisfaction and production efficiencies.

A further contribution to this debate is the development of a systems thinking
approach to the problem of back office and front office functions. This approach,
initially developed by Taiichi Ohno for Toyota production systems has been expanded
and further developed for public services and has evolved into the ‘lean thinking’
approach developed by John Seddons at Vanguard consulting, described in more
detail below.




Problems with the current theories

Despite the value of these various contributions, the issue of back office / front office
activities in service delivery remains complex, especially in services as complex to
deliver as benefits services. The current body of knowledge and theory does not seem
to provide enough help for the issues such service providers are confronted with in
practice.

As a result, a range of very different approaches have been created in LAs for the
delivery of benefit services, with the phrases ‘suck it and see’ and ‘re-inventing the
wheel’ particularly coming to mind when considering some LA’s planning and
implementation of service delivery processes.

Part of the problem is that LA services, especially benefit services, are forced to
perform well at multiple performance criteria and performance targets. Not only are
they expected to operate efficiently therefore, but also to provide high quality, flexible
and fast services in order to meet inspection requirements, upper quartile performance
targets and, increasingly, to compete. LAs can hardly afford to make trade offs
between these two, often contradictory, objectives but are often forced to do so, either
by accident, by policy or by design.

Recent developments in technology are having a large impact on the way service
organisations carry out their business, including the way they deal with front office
and back office functions. For example, communication technologies such as
document imaging and electronic workflow systems allow for large geographic
distances between the front and back office without experiencing the severe problems
associated with the passing and exchanging of information.

Many financial services now operate centralised back office services that are
conveniently located to take account of labour availability and costs, which serve
several front office facilities spread around the country.


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Such technologies however, now allow the empowering of front office staff to deal
with many tasks themselves, often without the need for follow up work in the back
office. One effect of this is to allow the development of initiatives from one-stop-
shops to instant service delivery through phone or face to face contact. This latter
initiative is the beginning of the development of the theory of bringing the back office
into the front office.



Developing a framework for service delivery

There is a need to develop a coherent and up to date perspective on the issue of back
and front offices in service delivery processes including benefits services. Any
framework will need to provide an insight in and so support design decisions
regarding the location and range of front and back office functions. This should
include consideration of three main areas.

First, there are the design issues regarding the choice between front and back office
functions and the way in which they are split or integrated. This will require design
decisions regarding the front and back office issue and identifying the dependencies
between them.

Second, consideration of the several design options that are available, each having
different effects on the performance of a service. For example, the trade off between
the efficiency potential of back office functions and the benefits, opportunities,
customisation and personalisation of front office functions already referred to above.

The performance effects related to splitting or integrated processes also need to be
considered. These performance effects are not straightforward as they affect multiple
dimensions of performance including the efficiency, quality and flexibility of a
process or a service.

Third, the considerations regarding front and back office activities in service delivery
are influenced by a number of other factors. Different types of service and different
strategies require different design options. A service strategy aimed at providing a fast
and cheap service will require a different design than for a strategy that is aimed at
providing a personal and high quality service.

Likewise, highly tailored services make different demands on a service delivery
process than a standardised service. As multiple variables exist exerting influence on
the design decisions, it is important to identify and understand their mutual relations.

Developing a framework for improvements in service delivery therefore requires
researching answers to the following three main questions

         What are the design decisions regarding front and back office activities in
          service delivery processes?




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         What are the considerations and trade offs that underlie these design
          decisions?
         What variables influence the considerations and in what ways?




Developing a design perspective

These research questions can be approached from a number of perspectives including
organisation design, personnel and staffing issues, and operations management. These
different perspectives have different perceptions of the front office / back office issue.
These perspectives are briefly described below.


Organisation design perspective

First, adopting an organisation design perspective, the decisions regarding front and
back office functions are based on the structure of the organisation delivering the
service. The main questions are therefore concerned with developing front and back
office departments and the associated coordination strategies. Options for how those
departments are formed range from locating front and back office functions in
separate departments, just one department or in several departments based on different
grounds.



Human resource management perspective

Second, the front / back office issue can be addressed from a human resource
management perspective. Here, the main focus is on job design for front and back
office staff.

Staff in the different offices require different skills. Front office staff need to be
skilled in personal and communication skills, back office staff need more technical
and analytical skills. In addition, front office activities may require different
managerial styles than back office activities.

This approach however, can create very specialised jobs. This can have a negative
effect on staff motivation and morale and so, on performance.



Marketing, or customer relations, perspective

Third, from a marketing, or customer relations, perspective, the focus is what
elements of the service organisation are seen and experienced by the customer and
what parts are hidden. Generally, only the front office functions are visible to
customers. They are part of the interactions between a customer and service provider
or where the customer otherwise meets the service organisation.


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During these encounters, customers perceive the functional quality of the service from
a basis of ‘how’ the service is delivered as compared to ‘what’ is delivered and, from
this, form an opinion about the organisation in general. For example, the appearance,
attitude and behaviour of staff, the ways systems and technology function and the
overall environment all influence customers’ expectations and perceptions.

Taking this approach views every part of the service that the customer interacts with
as being part of the front office. This includes where technology is accessed rather
than people and is therefore a much broader concept of front office activities
compared with, for example, the operations management perspective.


Operations management perspective

Fourth, from an operations management perspective, the front / back office issue is
related to the design of processes instead of departments, functions or service
encounters. Under this perspective, looking at the delivery of the service from end to
end is central to the approach.

The design of a service delivery process, including; identifying the activities that have
to be carried out, in what order and by whom, determines the flow of information and
customers through the service organisation. Common operational objectives for such
a process are efficiency, speed, flexibility, quality and reliability.

As described above, Front office activities bring uncertainty and variation that hinder
effective control of service delivery and front and back office functions have different
design requirements. Strictly separating the functions however, can create severe
interruptions in the process and may not therefore be beneficial for the service as a
whole.

The key issue to process design is how to deal with these uncertainties and variation
caused by customer contact and how to manage the interfaces and interruptions
between front and back office functions.


Taking an operations management perspective

Each of these four perspectives emphasise different aspects of the front / back office
issue, leading to different design decisions based on different considerations.
Different LAs have all used different perspectives in the design and delivery of their
service. An increasing number of LAs however, are now looking more seriously at the
operations management perspective when considering the design decisions regarding
front and back office functions in service delivery processes.

Taking this perspective means concentrating on service delivery processes from
beginning to end, the customer contact within that process, the way in which the
customer contact activities are combined with non-customer contact activities and the
subsequent effects on performance of the service as a whole.



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This perspective takes the point of view that process decisions precede decisions
relating to job design and organisation design. This means that a design project starts
with a set of activities or process steps that are required in order to deliver the service.

These activities are then combined into tasks, which are allocated to positions or
functions. Next, these functions are grouped into units or departments, which are then
grouped into larger units. In this way, the operations decisions often form the basis for
the other decisions such as jobs, departments and physical environment.

Concentrating on processes results in addressing the front / back office issue from
bottom up and sets the foundations for design decisions from other perspectives.




Background to identifying eficiencies through service design
Introduction

April 2006 sees the start of the second year of the process of producing Annual
Efficiency Statements of the efficiencies identified by the LA in operating its services.
HB/CTB services are one area where the Audit Commission have said efficiencies are
available to those LAs who are innovative. LA benefit services will therefore be
required to consider further efficiencies in their service in the finacial year 2006/07.

Although the Audit Commission have recently reported on where savings may be
identified in the benefits service, their report assumes all LAs operate their services in
a specific way, and their recommendations are based on the traditional organisation
design approach both in operating benefit services and in identification of savings in
their operational costs.


Report of the Audit Commission

The Audit Commission report “The Efficiency Challenge – The Administration Costs
of Revenues and Benefits” examines examines the potential for savings in the
administration of revenues and benefits services in LAs and makes various
recommendations.

This report is written in the context of the Government’s Efficiency Review (Sir Peter
Gershon’s report ‘Releasing Resources to the Front Line’) which expects LAs to
make overall efficiency savings of 2.5% per annum. The Audit Commission regard
benefits services as a transactional service which they, and Gershon, identify as one
area where LAs can make savings.

The report concludes that those councils prepared to be more innovative in delivering
revenues and benefits services can make considerable savings, without lowering
service quality.




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Partnership working, either within the public sector or with the private sector, is the
method identified by the Audit Commission as offering LAs the greatest potential for
efficiency savings. They identify that partnership working between two district
councils is already releasing over £100,000 per annum to each partner. If this
approach were extended across the country it could generate substantial savings.

Part of this partnership working includes consideration of transferring responsibility
for the back office function to partners, freeing up resources in the LAs through
economies of scale in order to reinforce the service at the front office.
For example, the report says that for London councils, where costs are higher, the
relocation of back office functions outside London presents a “considerable
opportunity for cost reduction”.

The Audit Commission report however, assumes that all LAs operate their benefit
services in a similar way, using the organisation perspective outlined above, where
work is divided between front and back office functions. Although they say they are
open to alternative approaches the report seems to suggest that those are LAs who do
not operate this way should consider doing so in order to achieve the efficiencies that
are available through streamlining back office functions.

This also seems to be the same assumption adopted by the DWP in terms of LA
administration of benefit services.


An Alternative approach – “Lean” or “Systems” Thinking

This alternative approach involves applying an operations management perspective
and can be described as being based on the idea that “going big” may not always be
the answer. Efficiencies of scale obtained in the back office, or even the front office
can be limited and eventually may be wiped out by the problems associated with
‘going big’. Examples of this can be seen in the administration of certain national
benefits.

A ‘national’ service is surely the ultimate in obtaining efficiencies of scale, but their
very ‘bigness’ can be identified as one of the main causes of the problems recently
experienced in the administration of tax credits, with JSA at Job Centre Plus offices
and, of course, at the Child Support Agency

It is true that many LAs do operate in the way expected by the Audit Commission and
the DWP and many have only recently adopted such an approach. However, this is
not the approach taken by all LAs or even other Government Departments responsible
for the overseeing of LA services.

For example. The Office of Deputy Prime Minister (ODPM) has recently reported on
a major pilot they have carried out with Housing Services on the use of “lean
thinking” or “systems thinking” and have identified significant non cashable and
cashable savings in these services as a result of adopting the new aproach. The
approach they take is summarised later in this document.




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In addition, a number of LAs have looked at taking a lean thinking approach to
reviewing their benefits service. The first to consider applying this approach was
Harringay in 2001. A number of other LAs have however, either implemented or are
in the process of implementing changes in their administration arrangements using
lean thinking procress. These LAs include, Waltham Forest, Newham, Swale and
Milton Keynes, all of whom have already made significant and continuing efficiencies
and improvements in their benefits services.


Systems and lean thinking in LAs

Although all of these LAs have come up with slightly different arrangements, the
consitent factor in all of them seems to be the introduction of a the radical concept of
“bringing the back office into the front office”.

These LAs have identified that many problems with the service are created by areas of
blockages, repetition, duplication and failure which can be inherent in the back office-
front office interface and communiacation arrangements.

The alternative approach they have adopted looks at the service as a whole,
identifying what is important in the benefits service from a customer point of view. In
this way, they have identified that the processing and payment of claims is the ‘value
item’ and everything else is there to support that. Front line customer service is not
always a value item in itself, its value relates to how it supports the processing of
claims. Everything else is “waste” that can be eliminated.

A number of consultants have picked up on the idea and are, or have been working
with LAs in adopting such an aproach. These consultants include Vanguard and Teal
Consulting, both of whom have assisted LAs in applying lean thinking techniques in
re-evaluating of their services including housing and benefits services.

The idea of lean thinking or systems thinking however, is neither new, nor is it rocket
science. Much of it is common sense and it is perfectly possible for an LA to review
its own benefits service using a basic lean thinking approach without having to
involve external consultancies. Adopting such an approach can however be time
consuming and this is where outside consutancy services may be of some help.




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The following table summarises the differences between the traditional approach and
the alternative approach using systems thinking




Proponents of this alternative approach would probably argue that, by adopting the
approach suggested in the Audit Commission’s report, those LAs who transfer out the
‘transactional processing’ element (i.e. the back office function) would, at best,
actually be losing control of what is the value element of the service. At worst, they
would argue, LAs are abregating their responsibilities in this value item area.

This is not an argument against outsourcing parts of the benefits service however. It is
more about the organisation administering the service retaining control of the value
work and the means of achieving it. In Milton Keynes, the service is outsourced (not
just the back office function) and it is the contractor who is adopting the lean thinking
approach.



Background to the development of Systems thinking

Systems thinking is not a new approach, it has been successfully employed in the
manufacturing sector for many years. However more organisations in the service
sector are now exploring whether it can assist them to deliver their services more
efficiently and effectively.

Traditional analysis concentrates on separating individual parts of the system and
improving them, often without reference to one another. Systems thinking, in contrast,
analyses a system in a fundamentally different way. It focuses on the relationship
between the various parts of the system, so that instead of isolating smaller and
smaller parts, the analysis is widened as other parts are taken into account.




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Systems thinkers say that it is this relationship between the parts, not the parts
themselves, that is essential. Systems are more than the sum of their parts. Even if the
parts can be identified and separated out, this does not help with the problem if the
relationships and their effect on the system are ignored.

System methodologies have evolved since the end of the Second World War and the
systems approach is now valued as contributing to resolving a wide range of complex
problems. The ‘lean systems’ methodology is adapted for the service sector from the
Toyota Production System. The key to this approach is that improving performance
means improving how the different parts of the service interact.

The ‘lean systems’ methodology assesses a system from the customer perspective
through a cycle of; ‘check’ (an analysis of the ‘what’ and ‘why’ of the current
system), ‘plan’ (establish the framework to remove waste) and ‘do’ (redesign the
system to eliminate or reduce waste where possible).




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The approach taken by the ODPM in using lean/systems thinking?

Unlike the DWP and the Audit Commission in respect of benefit services, the ODPM
have been pilotting an alternative approach using systems thinking techniques in
housing services.

The ODPM piloted a systems based approach in housing services and published the
result of this pilot in their recent report “A Systematic Approach to Service
Improvement - Evaluating Systems Thinking in Housing Services.




The ODPM Pilot

Method used by the ODPM

Although the ODPM identifies there are a there are a number of different approaches
to systems thinking, Vanguard Consulting and its “lean systems methodology” was
used in the three pilots they carried out in housing services. The main principals used
were;

   The system is designed to do work resulting from customer demand and
    therefore must consider work from their perspective.
    What counts for the customer is that the work is done right first time as quickly as
    possible. All other processes are “waste” – of no value to the customer. “Waste”
    may have another purpose such as auditing, accountability to other stakeholders,
    otherwise it arises from “system conditions” and can be designed out by changing
    such areas as the structures, measures, procedures, or IT systems or, in some
    cases, simply eliminated.


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   The system is designed against predictable demand and must be analysed to
    determine what the customer is asking for.
    For example, customer calls may be “value calls” asking for a service or “failure
    calls” arising from the failure of the service to do what the customer expected it to
    do. When analysing the volume of calls, it is more useful to measure the upper
    and lower number of calls reasonably expected in a day over time than the mean
    number of calls –this allows for fluctuations in demand and complexity of calls.

   “Understanding the flow of the work through the whole system is critical” –
    Seeing it as an end-to-end system. This involves concentrating on the
    relationships between different stages in the system particularly where there are
    issues that stop the work flowing smoothly e.g. work may be duplicated or passed
    back because the information was incomplete. These can sometimes arise
    because the staff involved have perverse incentives which have negative effects
    elsewhere.

   Customer demand “pulls” work through the system
    Work is only done in response to customer demand and “just in time” for the next
    stage in the process. “System conditions” such as targets for a particular part of
    the work may prevent this from happening.

   “The people on the spot have the responsibility and capability to do what is
    needed”
    This encourages ownership and pride in the job, increases the likelihood of
    getting it right first time and reduces time-wasting interactions with other parts of
    the system.



Achieving the efficiency gains identified from the ODPM pilot

The pilots indicate that systems thinking has the potential to deliver wholesale
efficiencies in service delivery. The work undertaken in all three pilots demonstrates
cashable and non-cashable efficiency gains and significant service improvements.

       The efficiency gains arise out of the amount of waste identified. Each system
        had significant amounts of waste and this methodology allowed for that waste
        to be identified, categorised and removed.

       By concentrating on the relationships between sections, systems thinking
        allows the organisation to look at itself as a whole. This creates organisational
        development as sections discover that their role is part of the delivery of the
        overall service and not an end in itself.

       There are many types of systems thinking and business re-engineering
        processes. Before embarking on wholesale change, organisations should



                                           15
       research the field fully and ensure that the product offered will work within
       their organisational culture.

      In the pilots, the reviews were carried out by operational staff (i.e. those doing
       the work). This allows for development in a number of areas including:
           –      The review itself, which is an accurate reflection of what is actually
                  happening.
           –      The self-development of the staff involved.

      The process is resource intensive.

      Managers must be supportive of the process. They need to be aware of, and
       understand, the work at an early stage and allow the review team unfettered
       access whilst carrying out ‘check’ (i.e. the initial review of the service). The
       support of the Chief Executive and senior management is crucial in driving the
       changes in their organisations.

      Organisations should also encourage all staff to be involved, even those not
       directly affected by the service being considered.

      Also, they should consider the effect that outside agencies and departments
       have on the service and on working relationships. The experience in the pilots
       indicated that the method was easier to introduce in the more self-contained
       organisations and services.

      There is some evidence from the work in the pilots that performance indicators
       can dictate the way that the service is provided and that this is not always in
       line with customer expectations, or with the original intention of the ODPM.

      Performance indicators should complement rather than drive the service and,
       in principle, recognise that the customer is central to service delivery.

      The role of performance indicators needs to be more clearly explained to
       housing organisations. All three pilots initially included maximising
       performance indicator values as the purpose of their respective systems.

The pilot organisations demonstrated some significant gains in efficiency, both
cashable and non cashable, by removing waste and redeploying resources more
effectively. They are providing an improved level of service using the same resources.
It is anticipated that gains will continue to be achieved and monitoring of the pilots
for a further twelve months is currently underway.

This kind of improvement will help in meeting the targets set by the Gershon review.
In particular the efficiency gains arising out of removing waste from the system will
contribute towards the Annual Efficiency Statements in respect of management and
maintenance.




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Principals of redesigning the service

In lean thinking techniques, the overall purpose of the service is first re-considered,
and then the service is redesigned to support the new purpose. The general principles
of the redesign in each pilot were set as:
      Design against demand – in essence this means, having established the
       customers’ needs in defining the revised purpose, the system is designed to
       meet those needs.
      The customer sets the nominal value – the ‘target’ for the work is to meet the
       customer’s requirement.
      Only do the value work – the value work here being that which is important to
       the customer. Clearly, there is some ‘waste’ work that cannot be removed and
       must continue, but, as a principle, the redesign would be considered in terms
       of work that matters to the customer.
      Work flows are 100% clean and fit for purpose – clean and fit for purpose
       work is ready to be progressed and ensures that the work is not passed
       backwards and forwards.
      Pull not push – demands drive the system, not fit in with it. The principle here
       is to treat each demand as unique and tailor the service to that need.
      Pull on expertise as needed – use the skills of the employee to best effect.
      Minimise handoffs/duplication – maximise ownership – in holding to this
       principle, the work will flow through the system. Much duplication had been
       discovered during ‘check’ and the redesign would look to minimise this.
      Keep the customer informed – the customer to be kept informed of progress
       throughout the whole process. A lot of failure demand had arisen out of not
       keeping the customer informed.
      IT should support the work – the IT system should be used to make the work
       work better, not as the determining factor in how the work is done.




                                          17
Application of Lean Thinking Principals to Benefits Services
Summary

From a benefits service point of view, the key words can be said to be

      Ownership
      Efficiency
      Motivation / Job satisfaction
      Retaining control of the end to end process

The key service change is that what can be processed is processed immediately, at the
point of customer contact, i.e. at the front line level (customer service points, home
visits, telephone).

Where a claimant brings in a claim form or reports achange in circumstances, it is
checked for completeness, the claimant informed at that time of the outstanding
information and an interview arranged when the claimant can bring in all the
remaining information and evidence. Where there is then sufficient information to
process the claim, it is processed there and then. The claimant is informed of their
actual entitlement rather than being given an estimate of the time it would take to
process the claim and, in the meantime, given a provisional assessment.

On processing the claim, it is even possible to print out the decision notice on a local
printer and hand it to the claimant at the end of the interview.

Where there is further information required, interviews can be arranged for the same
day or within a couple of days at a time convenient to the claimant. As a result, the
claimant does not have to wait when they call back, and they call back with all the
information required.

Technology allows this process even where the interview is held as part of a home
visit.

This avoids duplication of work not just in examinining the documents for their
adequacy and completeness, scanning them, indexing and referencing them and
giving provisional advice on entitlement, but also in the back office where the
documents are then retrieved, looked at and checked again before the claim is
processed, notified and paid.

This approach often involves the need to recontact the claimant for duplicate or
additional information. This builds in delay resulting in the customer re-contacting the
front office to chase progress of their claim or to bring in additional documentation.
Lean thinking principals call these failure visits.




                                          18
Problems with the ‘traditional’ method

There has been a large move in LAs towards the creation of call centres for service
access. In benefits services, this has often been a result of either corporate initiatives,
or based on a belief that removing the customer contact function from the claim
processing function in a front office / back office arrangement, frees up the processing
staff to process claims without interruption from callers to the service. The DWP and
other Government agencies have often encouraged such an arrangement.

As a result, those proponents of lean thinking argue that, because of the problems with
‘diagnosis’ and ‘access’, there are high levels of ‘failure demand’, that is demand
caused by a failure to do something or do something right for the customer, on the call
centre. Customers are progress-chasing or, for a variety of reasons, are having to
make calls they would not have to make if the system worked properly. This is waste
and it can consume the majority of the call centre staffs’ time.

It is estimated that up to 90% of claims are incomplete when first received resulting in
the need to revisit with the information. In benefits services where a front office- back
office arrangement is in place, the front office staff are required to deal with
customers within standard target times set by the LA and to send the information
received to the back office for processing, usually using a document management
system purchased and designed for the process.

To use a scanner you have to batch things into 'like' piles. So documents are sorted,
batched, then scanned; and then in the back office they are re-sorted to find things that
need to be put back together and even then many customers may be required to
provide further information. Is any of this value work? Lean thinking says it is all
waste and say "buy a scanner, and it will introduce dirt into your information flows".

Errors occur because of the way the work is designed. The ‘front office’ to ‘back
office’ procedures are full of handovers, inspection (‘checking’) and unnecessary
bureaucracy - doing work that adds no value to the processing of the claim. The fact
of sorting, batching and queuing work causes low levels of errors. The volume of
errors is exacerbated by the focus on arbitrary measures and the fact that no one is
responsible for the whole job - determining whether a claimant should get benefit and
getting it paid.

Because there are backlogs in these systems, managers focus staff in the back office
on clearing them. Staff can get a case out of their in-tray by doing something to move
it forward, but that something is often not doing what is needed to get it determined
and paid.


How lean thinking deals with these problems

Lean thinking processes argue that this whole approach is fundamentally flawed.
Adopting lean thinking means benefits processes can easily be improved by designing
the system to meet the demand. The object of the work design is to hold work at the


                                            19
front end of the flow to ‘make it clean’ before it moves in to the flow. This principle,
they say, removes all the major causes of waste.

It is estimated that the time it takes to do the value work, i.e. how long it takes to
process a typical claim for housing benefits is actually less than thirty minutes for the
majority of claims. The remainder of the time is taken by up by waiting for the
information required to process the claim to reach the processing officer, either
because there are delays in the claimant supplying the information or there are delays
in passing it through ‘the system’ once the information has been supplied.

In LAs where the lean thinking method has been applied the true end-to-end time, the
average time it takes from the customers’ point of view, for processing claims has
fallen from as many as ninety days to as few as two days. In addition, the average cost
of processing a benefit claim has fallen from in excess of sixty pounds to less than ten
pounds. It is the principal of ‘clean flow’ that makes for fast flow and costs fall, the
current approach however, lead to dirty, slow and costly flow.



Comments from LA adopting lean thinking techniques

LAs who have adopted this alternative approach have found many advantages over
the traditional approach. Checking, reviewing and mapping the flow of information
provides a clear picture of the system, the demands on it and the type and frequency
of that demand.

The check identified the amount of duplication in the system, the amount of times the
claimant had to be recontacted and the number of staff involved in dealing with a
piece of work before it actually got dealt with. Each person within the separate stages
of the process tended to repeat things done at an earlier stage. This is as a result of the
system being split into so many parts, with different people involved at each stage,
that no-one really understood how the process works from end to end.

At the customer services point, the value work was identified as dealing with
claimants calling in to make a claim or notify a change in circumstances, but the
majority of callers were calling to query progress on their claims or revisiting the
office to provide additional information, which all represented failure and waste in
the system. This waste simply suffoctaed the value work which is what the staff
should really be doing.

This contrasts with the normal view of such a service where, because local targets for
seeing a caller to the office within a target time and lasting for a max target time are
being met, it appears that the service is providing value. The opposite however is the
case. Removing the failure demand results in the actual amount of the work reducing
significantly, but the value of the work is increased.

Staff at the customer point of contact currently have to let the claimant know that the
information is to be sent to the back office, but do not know exactly what is going to
happen to that work in the back office, or know with any accuracy, how long they are
going to take to process it.


                                            20
Delivering the sevice end to end at the local customer service point means claims are
dealt with by staff who know the claim and the work required to be carried out on it,
resulting in better information given to the claimant and the claim being paid quicker .

The check stage also identified that LAs often have a misconception as to what it was
that was actually causing the problems encountered. In backlog situations for
example, LAs often concentrate resources at the end point of the process as it appears
additional assessors are required when actually, the reverse was true. Additional
resources in the back office often results in additional work for the front office More
investment was actually required at the front line to get clean information and respond
to claimant’s immediate demands.

A typical comment from a front line member of staff involved in the process is
    “I've taken the claim in at the counter and as far as I'm concerned I've got all the
    information ready to process that claim that would go by courier to processing
    centre and then it would go through the scanning process and then through the next
    process then through the checking process even though, at the very beginning, I
    had written on that claim form that it was ready to be assessed. So it went through
    this whole chain, this whole flow of work to get to the assessor at the end for them
    to recheck it, it had already been rechecked at this stage because it was pre-
    assessment checking, then I'd checked it, then the assessment, what we did at the
    end was just bypass all that and it went straight to the assessor.”

Systems thinking allows LAs to identify the real purpose of the service from a
claimant’s point of view. This purpose is to get clean information, assess entitlement
correctly first time and to pay those who are entitled. Everything else in the system
should be geared to achieving that purpose.

The key to this is redesigning the service based on that purpose and looking at end to
end measures rather than “silo” measures (e.g. a series of in-trays)

Perverse performance incentives can sometime interupt this process. An examination
by one LA whilst operating the traditional approach identified a wide range in
processing times. The overall average was less than 36 days and the LA therefore felt
their performance was satisfactory, but in looking at the variation, no claim was
actually dealt with in that average time, they either provided a good service to some
claims by processing them in 10-12 days, or a bad service to others which were taking
3-4 months. Providing advice to claimants querying progress of their claim that it
should be dealt with within an average 36 days was actually meaningless to that
claimant.

The perverse incentives driving this result are that those straightforward claims which
can be dealt with quickly are prioritised at the expense of the fewer, more complex
claims in order to get the overall average down.

Staff dealing with claims from end to end are identified as having better job
satisfaction and being better motivated. Staff have more control over their work and
can see the direct result of their work in terms of the service provided to the claimant.
One member of staff said “it now seems to take longer to explain to a claimant they



                                             21
             do not have to come back than actually dealing with their claim because they can’t
             grasp how quickly we are doing it”

             When consulted, claimants said they didn’t mind waiting a bit longer if it means they
             only have to visit the office once . The check identified the previous arrangements
             resulted in each new HB claimant had to call into the office an average 4 times and,
             although they were seen each time within the 15 minute target, overall this meant an
             hour waiting time.

             Adopting such an approach can result in the end to end cost of processing claims
             going down because, in the words of one LA manager “all that stuff is not going to
             keep going in to the back-office to get churned back to customers then the front-
             office, to the back-office as it has been doing for years.

             This can result in a lot of the back office disappearing. Under current targetting and
             budget monitoring arrangements however this could result in the unit cost of each
             element of that remaining work increasing.

             In conclusion, a manager in one of the LAs adopting this approach has said;
                 “Our achievements have been reported nationally and I think the only word that I
                 can use to describe it is transformational, in our case we were the worse performing
                 housing benefits authority in the country and now we're performing with levels that
                 compare with the best and the most important thing from my point of view was that
                 we were able to turn things round within a matter of five months”

             In spite of the apparent successes in adopting a systems thinking approach, the DWP
             and Audit Commission are still primarily concerned with economies of scale
             including urging LAs to create shared back office services to process their HB/CTB
             claims. When asked about this, managers in those LAs adopting the alternative
             approach said;
                 “If I had been asked that about a year ago I would have thought it a good idea. You
                 can get some economy of scale in terms of procurement and save some money on
                 stationary, IT etc. It seems to make strong economic sense. I would have a
                 fundamental problem with such an approach now however, because I think to
                 actually split the front office from the back office and to think you can deliver
                 efficiencies from doing that is a fundamental flaw”
             Another manager had a similar view
                 “What appears to be, at first glance, a very coherent model for joining together
                 some back office functions, getting economies of scale, forcing down unit costs
                 and joining together some front-office customer contact in a call centre and
                 giving their neighbouring boroughs a sort of shopping list of different things to
                 buy into is something which, a couple of years ago I would have been interested
                 in.
                 But if I've learnt one thing now from the recent review of benefits, it is that there
                 is no back office, there are customers who need a service and where they come in
                 to the service on the telephone or invariably face-to-face for housing benefits,
                 that's where you need to deliver your service end-to-end, so in actual fact, if we
                 split that function through a long-term contract, that division is just going to lock
                 in poor service."
Sheldon Wood
CIFA Benefits Consortium,
January 2006
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