‘lean hr’ six sigma philosophy process improvement transactional hr processing paul rains. mipp
TRANSCRIPT
‘Lean HR’ Six Sigma Philosophy Process Improvement
Transactional HR Processing
Paul Rains. MIPP.
Objectives of Workshop
• To understand a little more about Six Sigma.• To understand some of the Lean Tools and
Techniques that can be used to improve HR processes.
• To understand why it is relevant to the type of work that you all do.
Recent Research by PSL, on-line Assessment Specialists
• 46% of organisations still do not measure the success of their HR processes according to research by online assessment specialist PSL.
PSL carried out research with organisations to investigate where HR departments saw their focus 12 months from now.
“There is a growing pressure on the HR function to be able to demonstrate the ‘added value’ that it is capable of delivering,” said Dave Millner, Director of Consultancy at PSL. “It is critical that HR can demonstrate tangible results and express its contribution to the organisation in hard business terms.”
What is Six Sigma?
Six Sigma can be described in a lot of ways……
• A business philosophy & strategy adopted by companies who are recognised leaders in world class quality.
• Fact based decision making. An integrated part of a management system.
• Customer focused (Customer “critical-to-quality” factors) determine where we should focus our quality improvements.
• Continuous improvement methodology used to improve business processes and products.
• Utilisation of powerful statistical tools.
• Statistical measure of process capability.
Definition of Six Sigma
‘Six Sigma is a goal for process improvement that forces us to put our
vision of quality in numerical terms (i.e 3.4 defect parts per million or
99.99966% “good”)’
A more practical definition is ‘Data driven problem solving’
Darts Exercise
Process Variation
• Variation is measured by the range of the process.
• The less variation the tighter and more accurate the process.
Distance
Fre
qu
en
cy
48040032024016080
30
25
20
15
10
5
0
Mean 262.4StDev 100.1N 319
Histogram Of Where Darts Landed
Why Does it Work?
• It measures the VARIATION in a process.– Brought about by Poor Process Design.– Brought about by Environmental Conditions.– Brought about by People.– Brought about by Different Systems.– Brought about by Skills and Behaviours.– Brought about by Measurement Systems.
Is it Relevant for Transactional Services?
• It can be used for any process• It can be used for any type of data
– Continuous data• Elapsed time to Recruit an Employee.
– Count data• Number of Incorrect Sickness Entries per month.• Number of internal Job Applications.
– Attribute data• Proportion of late / incomplete paper work.• Percentage of payslip errors in a month
99% Yield in other Industries
• POST OFFICE - 20,000 lost letters per hour.• BAA – 2 short landings per day at every Airport.• NPOWER – 7 Hours a month without Electricity.• NHS – 200,000 wrong prescriptions per year.
In HR• HR DEPT 20,000 EMPLOYEES – 200 incorrect
payments per month.
99% is not Good Enough!
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-10
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How do you get Six Sigma Performance?
Existing Process
Reduce variation
Increase ToleranceYield 99.73%
Yield 99.99996%
Yield 99.99996%
Common Issues in HR / Payroll that are Process / Data Driven• Late / Missing Paper work• Incomplete / Inaccurate paper work
– No authorisation / No employee id / wrong data
• Duplicate keying• Input (keying in) Errors
– Wrongly assigned– Transposition Errors– Completeness Errors
Example Problem & Goal Statements for HR / Payroll
• Problem Statement– In the last calendar year over 250 Leaver Notification
forms were received after the payroll had run, therefore too late to process, resulting in ‘X’ hours re-work, additional BACS costs of £ ‘Y’ and un-recovered Gross overpayments of £’Z’.
• Goal Statement– To reduce the number of late Leaver Notification
forms by 95%
Cost of Poor Quality (COPQ)
• Refers to all costs associated with the problem.– Usual Suspects
• Re-work, Checking, Testing, Duplicate Keying, Errors, complaints
– Hidden• Expediting costs, low morale, loss of focus, down
time.
• Appraisal– This refers to any process, system or procedure that exists only to
look for problems. How often do you do something then immediately check it?
• Prevention– This refers to systems and procedures that are designed to prevent
things going wrong. Whilst beneficial they should be included in the COPQ
• Internal Failure– Problems that occur ‘within’ the business that may not impact the
customer directly
• External Failure– Cost of any error that reaches the customer. These failures can
become very significant
Types of Cost of Poor Quality
Who are your Customers?
VOC - What do they Want? Employees HMRC Budget
HoldersPensions
DepartmentHealth Care
ProviderTo be paid
accurately and on time
A P45 when an employee leaves
the company
A list of staff costs for their particular cost centre each
pay period
Details of Pension contributions deducted and Pensionable
Earnings for each pay period for each
scheme member
A list of active scheme members
with their cover levels and the cost
of that coverA pay statement informing them what they have
been paid
The money you have collected
from each employee in
Income Tax and National Insurance
Contributions
Form P60 by 31st May each year
Information regarding the
number of days / occurrences staff have been off sick in that particular
month
A list of scheme members who have changed cover levels
A contract of Employment letter when joining your
company
A record of every employees,
Earnings, Income Tax and National
Insurance contributions for
the tax year
A list of scheme members who
have left
A list of scheme members who
have left
A P45 when an employee leaves
the company
A List of any staff that will shortly be
entitled to Long Service Awards
Critical to Quality Tree (CTQ)
Under Payment
The aim of a CTQ tree is to provide clarity around the aspects of the Voice of the Customer, in this case resolving their under payment.
No cost Quick
Easy to report
To be kept updated
Issue manual payment
Fix the issue
Fixed 1st time
Record payment on payroll
Fixed right
VOC DELIVERY
Specifications (Underpayment)
Easy to Report To be kept
updated
Issue manual
payment
Fix the issue
No Cost Quick Record on
Payroll
Fix Right
Fix 1st Time
Provide 24/7 free telephone number
Calls answered within 5 rings
Customer contacted every 24 hours with update
Issue within 48 hours of error being reported
No re-occurrence of issue next time.
One enquiry to discover the root cause of the issue
Key Performance Indicators (Underpayment - KPI’s)
CTQ’s Calls answered within 5 rings
Customer contacted every 24 hours with update
Issued within 48 hours
One Enquiry to discover the root of the issue
No re-occurrence of issue next time
Continuous or Count KPI’s
Time to Answer call
Time to provide update
Time to Issue payment
Number of Enquires made
Number of re-occurrences of same issue
Attribute KPI’s
% calls answered within 5 rings
% updates made within 24 hours
% of payments issued within 48hrs
% of errors resolved with one Enquiry
% of Errors with no re-occurrence
Examples of Measures (KPI’s) in HR Administration / Payroll
• The % of incorrect payments each month.• The % of late paper work each month.• Elapsed time to complete the New Starter
process. • The % of P45’s not issued in the same month the
employee leaves the company.• The % of SSP1 Forms issued after the 23rd
continuous week of sickness. • Elapsed time to complete a recruitment cycle. • The Number of software faults not fixed first time.
Example of an Operational Definition
KPI Name: Software Fault Resolution TimeWhat does the KPI represent: The time elapsed between a user reporting a fault and the Help Desk informing the user the fault is fixed. Process Diagram: See next slideDetailed Information: Process start - the date / time (in dd/mm/yyyy hh/mm/ss) that the help desk receive the callProcess end – the date / time (in dd/mm/yyyy hh/mm/ss) that the help desk make the call or send the email to inform the user the fault is fixed.
Process DiagramsUser Reports
Fault
Helpdesk Diagnose Fault
Inform Software Developers
Inform User
Fault Fixed?
N
Y
KP1 KP2
KP1- Time taken to fix fault
KP2- Percentage Of Faults not Fixed First Time
Process Mapping(New Starter)
Receive Paper work
Check Paper work
Set up HR Record
Identification enclosed?
One of the most common purposes of process mapping is to help identify the re-work loops in a process.
Offer letter signed?
Names of Referees
enclosed?
Medical Form
enclosed? FSA Check? Y Y Y Y Y
30% 25% 15%5%
Why ‘LEAN’ Techniques Work
• Research shows there is between 30% and 80% waste in Transactional HR Processes
• A typical / average UK HR / Payroll service operation operates at a Sigma Level of 4, whilst best in class would be at 5 or over.
HUGE OPPORTUNITY TO IMPROVE
Value Added Analysis
• All activities add COST but only a few add VALUE
• THREE TESTS– Would the customer be interested or care
about this activity or being willing to pay for it?– Does the activity physically change the output
or is it a necessary pre-requisite to doing so?– Is the activity carried out ‘right first time’?
All these HR / Payroll activities add Cost but which add Value?
• Fixing a Software Fault?• Completing a Job Reference for a former
employee?• Keying in new starter information into the HR
System from the Recruitment System?• Expediting the non-payment of Overtime?• Re-printing a Contract of Employment Letter? • Printing a P45 for a leaver?• Chasing up missing information on a new starter
form? • Issuing a copy P60?
• The Law of the Market– Customer Critical-to-Quality defines the standards and prioritises
improvement activities
• The Law of Flexibility– The velocity of the process is proportional to the flexibility of the
process
• The Law of Velocity– The velocity of any process is inversely proportional to the amount of
work in progress
• The Law of Focus– 20% of the activities in a process cause 80% of the delay
• The Law of Complexity and Cost– The complexity of a service can add more non-value added
costs and WIP than either poor quality or slow speed processes.
5 Laws of a Lean Process
Law of FocusReasons For Late Paperwork
0102030405060708090
100
Too
Bus
y to
Com
plet
For
m
Aw
aiti
ngA
utho
risa
tion
Ret
urne
d to
Em
ploy
ee
Los
t in
Tra
nsit
For
got
Non Value Adding Activities NVA = Waste
90%
10%
Add Cost onlyAdd Value
• Value Added Work– Work that adds value in the eyes of the customer.
• Non Value Added Work– Delays / Waste / rework / checking.
• Required Waste– Waste that the customer does not necessarily pay for,
but is needed for accounting / legal / statutory purposes.
• From this we can calculate the Process Efficiency Cycle.
Value Stream MappingTime Map
Time Value Stream Mapping for New Starter Process
New Starter Appointed
Line Manager fills out form
Send Form to HR
HR issue offer letter & Starter
pack
Employee returns documents
HR check docs and chase up missing info
HR send out Job references
HR Issue Medical Form
HR inform Line Manager of DOS
HR create record on HR system
Employee Starts
0.5 2 0.5
1 15 0.5 0.5
0.5 0.5
12
2 2 2
= (Value Added Time) / Non Value Added Time
= (4 Days) / 35 Days
= 4 / 35
= 11.43%
Process Efficiency Formula
Type of Application Typical Cycle Efficiency
World Class Efficiency
Business Processes (Services)
10% 50%
• The Waste of Over Processing.
• The Waste of Waiting.
• The Waste of Transportation.
• The Waste of Over Production.
• The Waste of Motion.
• The Waste of Errors / Rejects / Defects.
• The Waste of Inventory.
7 Deadly Wastes
• Trying to add more value to a service than your Customers require or will pay for– Ties up Resources– Uses additional materials– Fills the process with un-required work– Hides the problems– Increases Lead Time
• Question - How well does what you do fit with your customer’s requirements?
The Waste of Over Processing
• Any delay between one Process / Step / Activity ending and the next beginning– Waiting increases lead time and reduces throughput
• Breakdowns• Shortage of materials, information or other resources• Set ups and preparation• Rejects & Errors• Over production and doing things not required
• Question – Have you accurately mapped your processes to identify the above?
The Waste of Waiting
• Unnecessary movement of materials or information– Every move:
• Takes time• Creates a queue• Creates return loops• Usually seen as people walking excessively
• Question – Have you mapped transport into your process map?
The Waste of Transportation
• Production of service outputs beyond what is needed– Paper work– Consequential Processes– Poorly designed process– Testing– Inspection / Checking
• Question – Have you identified all the activities that should be ‘right’ first time?
The Waste of Overproduction
• Needless movement of people– Workplace layout– Office ergonomics– Constant switching between different systems
• Question – When was the last time the layout / ergonomics were examined?
The Waste of Motion
• Any work in progress (WIP) that is in excess of what is required to produce for the customer– Ties up working capital– Increases lead time (cycle time)– Hides problems and breeds complacency
• Question – What processes are in place to identify excessive inventory?
The Waste of Inventory
• Any aspect of the service that does not conform to the customers needs– Missing Information– Materials– Labour– Resource Capacity– Process documentation
• Question – Have you completed a value stream map that includes reject corrections?
The Waste of Rejects
New Starter Process
Line Manager
Employee
HR Admin
Payroll
Receive Form Check Form is Form Ok? Input Data
Send doc Doc Ok?
Check Details Input Data
No
Send to PayrollYes
Check Form
Complete FormSend to
Employee
Form OK? Sign FormReturn to Line
Mnager
Pass to HR Admin
Pay Employee
No`
Yes
Value Stream Mapping
Process Mapping
Inputs in HR / Payroll that could affect Outputs
• Late / No paper work.• Incomplete paper work.• Time spent transferring paper work from
department to department.• Time spent obtaining additional information from
other departments to complete a task.• Duplicate Keying• Poor initial data input quality requiring re-work.• Checking.
Use LEAN Tools and Techniques to…
• Identify HR Processes that are inefficient or ineffective.
• Build a business case to implement Workflow, Manager and Employee Self Service.
• Prepare a business case showing the maximum return on Investment (ROI) to procure a new HR IT System or develop and existing one.
• Prepare a SRS to improve manual non-value adding processes.
Colleagues
(ASP) HRMS SYSTEM
OutputsInland Revenue
EDI
D
E
L
I
V
E
R
YHR SSC Service Delivery Model
Line Managers
Finance System
HCMPayslips
P60’sMI
Transactional HR Services
Changes Starters Leavers
Fleet Provider
MSS / ESS
Inputs
Data Warehouse
Web Recruitment
Absence CPD
Pension System
T&ASystem
P11DSystem
P11D’sTRS
HR Metrics
Flex Bens
In Conclusion
• HR / Payroll processes can be improved using Lean six sigma tools and techniques by :-– Identifying the Cost of Poor Quality.– Understanding the VOC– Reducing the Non Value Added activities.– Reducing Waste and implementing Leaner
processes.
• Can you think how you might improve a process in your department?
