APICS is the leading professional association for supply chain and operations management.
 
APICS Magazine > APICS Magazine - Landing Page - Everyone

Operational Differences

By Ron Crabtree, CIRM, CSCP, MLSSBB | September/October 2013 | 23 | 5

There is renewed interest in lean six sigma concepts in government operations and the private sector alike. But, before you can begin to improve operations, it’s essential to understand some of the critical differences between the two groups.Tips to improve organizations of all stripes

In this department, I have discussed some of the challenges governments face in overcoming the tendency to maintain the status quo and protect turf instead of focusing on results. I’ve shared what I believe to be the top three roadblocks in applying lean concepts: failing to recognize that 80 percent of costs are people-related, not engaging all those who are affected in solutions, and overlooking the importance of public awareness and buy-in to support any change initiative.

Fortunately, progress is being made. There is renewed interest in lean six sigma concepts, with an emphasis on the lean. Right in my home state of Michigan is an example of this evolution. The Lansing State Journal recently published an article that described an agreement to share fire and emergency services in Lansing and nearby communities as “an encouraging step toward regional cooperation.”

Before you can begin to improve operations, it’s essential to understand some of the critical differences between local governments and the private sector. Following are key questions to keep in mind as you begin your lean six sigma journey, no matter the arena.

Where is the profit? In the private sector, the primary driver of lean is the mandate to make money, both now and in the future. This is more or less absent in the government and nonprofit sectors. There, the focus is around what the budget will be and what can be accomplished within that budget.

Who is the customer? In the private sector, the customer is easily identified as the party buying the product or service offered. Customers usually can take their money elsewhere if they are unhappy, which helps make the party being served crystal clear. It’s relatively easy to define process customers, as well, as they are parts of a critical chain to deliver goods and services competitively. In government operations, the customer can include politicians; regulations and requirements that must be met; and, of course, the taxpayers.

How will success be measured? Many government operations lack the ability to understand the true costs of providing products and services. On the other hand, in the private sector, bids to win business are supported by financial systems and accounting methods that can verify that the product or service is delivered profitably.

What are the resources? In private sectors, if there is a clear return on investment for dedicating resources to a project, those resources are easily found to capitalize on improvement. Executives in this world have a certain level of autonomy when it comes to spending and moving funds from one purpose to another quickly. However, this flexibility is absent in the government sector, where budgets are fixed at the yearly level or beyond and there often are requirements that funds cannot be repurposed without legislative or even taxpayer approval.

Top-down or bottom-up? A lean deployment in the private sector typically is a top-down affair. Top management drives the implementation, imposing compliance via organizational power. Local governments may lack this degree of control. In fact, imposing sweeping changes on multiple local units is a sure formula for failure. In this field, change demands up-front buy-in and support. When trying to get multiple government units to collaborate, one must start from the bottom: Ensure that a shared vision and purpose emerges from those affected, then proceed with building the systems and governance required to implement the changes.

There are numerous factors that can mean the difference between a successful lean initiative and one that falls short, no matter where you work. In future editions of “Lean Culture,” I will continue to share my insights into working with these diverse groups and striving toward operational excellence. Ron Crabtree, CIRM, CSCP, MLSSBB, is president of MetaOps and has authored or coauthored five books on operational excellence. He also hosts online radio shows, teaches, presents, consults, and coauthors an online magazine at MetaOpsMagazine.com. Crabtree may be contacted at rcrabtree@metaops.com.

1 Comment

  1. 1 Nate 17 Jan

    Thanks Ron,  This is very true.  Government has the limitations mentioned in this article and therefore can only be lean when it returns to the few limited functions it should fulfill.   

Comment

  1.