Continuous improvement is not only a Lean Six Sigma staple, but also a mindset within our own organization – one that drove us to see how we could improve our payroll processes. By applying Lean Six Sigma to our own business, we were able to experience first-hand what this could do for a company.
“Lean Six Sigma is a process improvement methodology,” said Kyle Stemple, a principal in the New Philadelphia office. “Team-Oriented Problem Solving (TOPS) – where ‘no one knows the work like the people doing the work’ – is the key approach used.”
While Lean makes a process efficient and speedy, Six Sigma reduces errors or defects in a process. The result is higher quality products and services for customers.
“You can’t do one without the other either. Otherwise you may be speeding up the amount of defects you produce, or your processes may still be producing waste,” said Stemple.
To evaluate our payroll processes, we formed a cross-functional team of five employees with one principal serving as the “champion.” Stemple, a Lean Six Sigma Green Belt, served as the team facilitator and drove them toward results using a special “toolbox” of methodologies and concepts.
A value stream map is widely used in service processes, and it was our starting point. First, the team prepared a “current state” value stream to show the flow of work through each process step.
- Created a detailed process map with inputs and outputs for each step.
- Converted the map into a value stream map.
- Calculated average process times for each step.
- Identified steps with waiting time.
- Identified loops in the process.
“The map visually points out steps that may be consumed with waste,” said Stemple. “Each step was then marked as VA (value-added), NVA (non-value added), BNVA (business non-value added) or a combination of the three.”
It was important to look at the process through the customer’s eyes to identify what is truly value-added and what is not.
“If part of a process was non-value added, we examined why it’s being done,” said Becky Weiss, payroll services team, Millersburg office. “If the customer doesn’t find value in the step, we are wasting their time and ours.”
The team then prioritized steps that could make the greatest improvement in terms of efficiency and quality. The inputs of each step were analyzed and examined in further detail. As a result, the team developed recommendations to alleviate potential failures in the future.
With a good understanding of our “current state” and areas for improvement, the next step tested some of the recommendations and developed a “future state” value stream map.
“It is amazing what can happen when you have a cross-functional team working together,” said Stemple. “Each member shares their own ideas and best practices to ultimately gain an overall best practice model.”
Weiss explained that each team member is challenged to overcome the “we’ve always done it this way” thinking. “We’ve become concerned with lead times, elimination of waste and providing more value to customers,” she said.
After working through the final recommendations for the “future state” map, controls and procedures were developed to ensure we “sustain the gains”. To us, the gains included a 10 percent reduced cycle time, a 20 percent reduction in the number of steps and a process-cycle efficiency of more than 25 percent.
“We also used the same processes on our quarterly payroll tax process and our results were just as impressive,” said Stemple. “The average cycle time was reduced from more than five days to less than one.”
After going through the Lean Six Sigma program, our payroll team has established greater reliability and efficiency in our process. “This allows us to serve and provide a personal touch to each and every client,” Weiss said.
Any process can be improved with the help of Lean Six Sigma tools, including those in your business. If management is committed to understanding lean ways of doing work, then this process may be for you.
Old ways of doing things will be evaluated. Old paradigms will be challenged. A continuous improvement mindset will be developed. People will look for ways to add value to the customer. And, the results will be significant and measurable.
By Dave McCarthy, CPA, CSEP (Medina office)
This article was originally published in The Rea Report, Fall 2007.