productivity improvement for cost and capacity · 4. productivity improvement for cost and capacity...
TRANSCRIPT
www.bevingtongroup.com
Business Model Design • Process Improvement • Change Management
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Productivity Improvement for Cost and Capacity
Bevington Resilience Series
April 2020
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❑ Bevington Group is a specialist productivity services provider with deep expertise in Operating Model Design and Process Reengineering
❑ In response to the COVID-19 crisis (or Global Viral Crisis) the Bevington Group has prepared an initial series of six webinars to provide valuable management and leadership informationon the response
❑ All the webinars reference leading research and practice
❑ The webinars in the series are
1. Strategies and tactics for turbulent times (introducing the core concept of a “Balanced Response”)
2. Short-term actions that can be taken to get you through the crisis
3. Restructuring for cost and capacity
4. Productivity improvement for cost and capacity
5. Organisational resilience theory in practice
6. Personal leadership and resilience
❑ Each webinar is supported by materials published at www.bevingtongroup.com under the Articles tab
The Bevington Resilience series – An overview
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❑ Markets are suffering, the world is in a state of high anxiety, supply chains are being disrupted and many companies are already being driven into deep losses
❑ In short, we are in the middle of the most extreme economic turbulence or our lifetimes. At the same time, many of our loved ones are at risk. Yet now, more than ever, we need to take rational and disciplined actions
❑ In an earlier article and webinar* we have described a "Balanced Response“, which considers research on learnings from the GFC, and recommends the best approach for responding to such an extreme scenario
❑ This presentation will provide practical advice on productivity improvement methods for cost management and capacity creation
The series should be taken in context of the “Balanced Response” described in the first webinar on “Strategies and tactics for turbulent times”
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* Visit www.bevingtongroup.com/articles or search for “turbulence” from our home page
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❑ As addressed in our first webinar, organisations need to move quickly from a purely cost focus to a productivity focus – because this gives longer term benefits
❑ Productivity methods, particularly those that incorporate Lean Thinking and Theory of Constraints have the benefits of
▪ Reduced unit costs
▪ Capacity creation
▪ Reduced elapsed time (so faster service)
▪ Improved quality
▪ Reduced backlogs
❑ All of the above help you to survive in the short-term and come out of the crisis (which may be in stages) in as strong a position as possible
❑ So this presentation will firstly address key themes in productivity which the Bevington Group team feels are particularly relevant, and we will then describe how these can be applied to the capacity problems that some organisations are facing today
This webinar – Cost and capacity are two sides of the same productivity coin
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We have exceptionally relevant methods to address the challenge – and now is a good time to go hard on improvement
Lean thinking and design
▪ Reduced unit costs▪ Capacity creation
▪ Reduced elapsed time (so faster service)
▪ Improved quality
Agile development and deployment
▪ Collaborative teams – mission focused on waste, flow and customer value
The Minimum Viable Product
▪ Deploying rapidly, minimising waste and starting with critical elements
▪ Testing your hypotheses before large scale commitments
Thinking in options -Bar-bell strategies to create future options
▪ Insurance against model obsolescence
Queuing theory and capacity management
▪ Basic methods to create capacity
▪ Advanced methods to address bottlenecks and uneven resource allocation
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Lean Thinking
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Finance team example: Waste analysis
❑ The Finance Team in a large agency spent 37% of their time on waste activity (this is not unusual)
❑ This covered journals, monthly reporting, reconciling accounts, payments, invoices, credit cards, etc.
❑ This Finance Office spent over 1 day a week chasing up errors on corporate credit cards
35.9%
20.4%
43.6%
Long term average for CSDN (activity effort per category)
There is no shortage of productivity opportunity in our economy
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Productivity methods operate on a staircase of complexity
Lean and Agile Practice:▪ Swift elimination of non-value
adding work
▪ Economical means of creating simpler, more efficient processes and lower cycle times whilst engaging staff
▪ Inherently customer focused and cross functional approach
Process Improvement and Re-engineering Practice:▪ Deeper and more detailed than
Lean and Agile approaches
▪ Understanding of specific role impacts and FTE reductions
▪ Detailed insights can also be used to manage role redesign and system specification as well as process and procedure improvements
Operating Model Practice: An Operating Model is the combination of roles, skills, structures, processes, assets and technologies that allows any organisation to deliver on its service or product promises
Change Management Practice for Deployment
Tools and Software Practice (Builds Lean, Process and Operating Model Tools)
Intensity of Change
Customer
Process design Role
design
Metrics
Information
Technology
CoreFunctions
StructureGeography
Culture
Mgmt. discipline
Workforce capability
Sourcing
Policy
Customer
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Lean is a general term used in the marketplace for a set of techniques and tools that
1. Identifies ValueIn Lean, value is defined by the customer. This often means ensuring the product is provided to the customer in the right place, right time and at the right price. All the process steps that contribute to this are identified.
2. Eliminates WasteLean practitioners identify all the steps that do not add value, but consume resources, and eliminate them with the appropriate tools.
3. Creates FlowLean methods expand capacity by reducing cycle time and costs – material and information flows more smoothly through the process.
Lean process improvement approach
✓ Focuses on overall process performance using a robust toolkit from leading organisations
✓ Becomes part of business activities, led by staff
✓ Focuses on year-on-year improvement to move processes closer to theoretical limits
Benefits
Some types of change can begin more incrementally, but are nonetheless incredibly powerful. This is true of Lean
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Original mass production concepts that informed modern enterprise design
Lean is introduced to Toyota and scaled across the whole
organisation
Lean is gradually adopted by Western manufacturing
Lean thinking spread from manufacturing to other large industries in efforts to cut cost and become customer centric
Present: Lean thinking has been applied across Finance, Health, Retail, Government, Logistics, Sourcing and an ever-growing list of industries
1800’s -1950
1980 -1995
1995 -2005
2005 -2014
Present -Future
Lean is the world’s most popular approach to achieving productivity improvements
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Customers
33%
67%
Customer impacted from inside out
Customer defines value from outside in
The customer defines the value, and is impacted by the inefficiency within the organisation
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Waste
Activities
Chasing up information from
customers, departments, and people within the
branch
Duplication of work
Correcting work output from other
departments
Unnecessary checks which are in
duplicate or beyond what is needed
System failures
Errors and having to redo work
Re-keying data into multiple systems,
keying into a system and also recording
manually
Put simply, waste is non-value adding activities
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Ironically, process reengineering is faster than traditional Lean
Lean tends to be somewhat reliant on workshops
This means getting SMEs together – this takes time
Process reengineering methods use software which allows
▪ Information to be gathered directly from the frontline
▪ Can be done remotely
Also, the software supports analysis (finding the opportunities and quantifying them) and also scenario modelling 06.
SCENARIO MODEL FUTURE
05.EVALUATE KEY DRIVERS
04. IDENTIFY NOISE
02.MAP THE PROCESS
01.DEFINE THE PROCESS
03.ALLOCATE TIME
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Agile Deployment
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❑ Ideally you will be exceptionally well organised to support front-line staff
❑ In crisis situations it is not uncommon to have an 80/20 rule whereby 80% of people are actually supporting frontline staff (say clinicians, cleaners, porters etc)
❑ Front-line staff need to be effectively coordinated and supported. This may mean that…
In many situations the job is to keep the frontline 20% of specialists going. This section addresses how to mobilise everyone else to do this
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The organisation provides services to the front-line staff to keep them fully productive e.g. transport, food, laundry etc
It also addresses rapid decision making and action
It also addresses Agile practices that are important throughout the crisis such as team stand-ups to convey critical information and review performance
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❑ There is a “flawed” assumption that crises require tight command-and-control from the top
❑ However, the Harvard Business Review has reported that command-and-control systems work best when:
❑ This is not the context for a natural disaster, pandemic or major economic disruption
❑ In such rapidly changing contexts “central command” could easily become a bottleneck or become paralysed by information overload
Recent research indicates that AGILE TEAMS do better than strict command and control in a crisis
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Operations are stable and predictable
Commanders have greater knowledge of potential solutions
Centralised decision makers handle peak decision volumes
Sticking to standard operating procedures is more important than adapting to change
* Source: Rigby, D., Henderson, S. and D’Avino, M. (2018). How Agile Teams Can Help Turnarounds Succeed. Harvard Business Review. Retrieved from: https://hbr.org/2018/07/how-agile-teams-can-help-turnarounds-succeed
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❑ Agile’s collaborative and iterative nature helps with uncertainty
❑ Turnaround deployment of Agile teams is now also becoming more prevalent
So, unsurprisingly, natural disaster teams are increasingly turning to Agile team structures and methods to make a difference
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Agile reflects the real world of solution development –the way people work now and how they always have
01 03 05
0402
On-going collaboration between customer, business, and technology throughout the entire program better ensures satisfaction of all stakeholders
Agile demands that you regularly question the value of what you are doing – remove the waste/noise –driving continuous improvement
Greater focus on the success of the specific project component – helping identify problems early to allow change of course where appropriate and reducing chance of failure
Greater allowance for changes to requirements and priorities between iterations – based on actual results and feedback
Agile Guiding Principles
Call us if you need
help
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Australia has its own examples of this type of Agile organisational application
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WorleyParsons, a global engineering and construction firm that specialises in oilfield and other energy-related projects
In 2015 demand for WorleyParsons’ services crashed. After several rounds of cost-cutting proved insufficient to stabilise the organisation, hundreds of individual projects were established
Most of these teams operated in an Agile manner with work structured in Sprints, discipline in decision making, backlogs, daily huddles and other tools. Senior leaders helped clear away obstacles and tracked the teams’ results
The firm achieved significant results:
▪ In the first 100 days, the firm increased its cash position by 20%, reduced its net debt, and registered a $120 million gain in anticipated profitability
▪ After just one year, margins had increased by five percentage points, cost savings totalled $400 million (on an addressable cost base of $1.2 billion), and the stock price was up more than fourfold
This is an example of leaders enabling the change that needs to happen rather than defining every solution
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In summary the Agile approach has six key attributes
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Working collaboratively (co-located physically or digitally)1
Working through a task backlog4
Clear empowerment and mandate3
Self-managed teams2
Coalition of the willing to advise5
Sponsors to attend and decide6
There are many digital collaboration tools available to support remote Agile teams
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Key features and benefits of Agile
Features
of AgileCreativity
Bringing different perspectives into the room can lead to a much richer
solution setMomentum building
The swift pace of Agile sprints and implementation helps build
momentum to drive broader change
Risk reductionReduced implementation risk (from shared understanding) and the risks of design flaws
are reduced because the solution can be tested with critical players in the room
SpeedBrings critical team members together so that solutions evolve more rapidly
Decision makingSimplified decision making with business
owners interacting directly with the team, and decisions made within the Sprint timeframe
Scalable upskillingAs sprint cycles continue it is easy to
engage and upskill more staff
Shared understandingCross-functional teams share the same understanding of the problem and the
potential solution - implementation tends to go more smoothly
FunThere is a sense of satisfaction from
working together towards achieving the same goal and seeing regular results
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Four types of “Agile” are in serious play
Technology related Agile projects
Non-technology Agile projects
Scaled Agile in various forms
▪ Major programs
▪ Full organisational transformations
Agile as BAU – a new way to structure and operate your enterprise (effectively a new form of Operating Model)
Pro
ject-related A
gile
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Note – when considering Operating Model Design – there are also Agile organisation structures
Traditional organisational structures
➢ Pivot on different characteristics (e.g. function, geography, product, customer type, etc.) but nonetheless tend to use silos
➢ Silos tend to be hierarchical in terms of authority levels
➢ Most powerful governance bodies tend to sit at the top of hierarchy
➢ Budgets tend to be organised by silo (department, division) or by project
➢ Theoretically silo personnel can work together on a project
❑ Agile structures
➢ A network of teams
➢ Teams tend to be called squads
➢ Squads are organised into tribes
➢ Squads have specific objectives
➢ Tribes consist of squads with related objectives
➢ Functional skills are addressed through chapters
➢ Leadership provides a “mission” and integration function
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The MVP
Minimum Viable Product
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Trial and error have made their way back into the heart of productivity change and transformation (e.g. MVP thinking)
❑ “I have not failed. I've just found 10,000 ways that won't work.”― Thomas A. Edison
❑ Minimum Viable Product (MVP) thinking allows for a structured trial whereby failure is a possibility yet….
❑ There is always value in the learning
❑ “Many of life's failures are people who did not realize how close they were to success when they gave up.”― Thomas A. Edison
❑ The MVP thinking requires a clear hypothesis and the willingness to keep testing
❑ It also rapidly accelerates deployment
❑ For example, one bank trialled a leading edge credit solution on only a thin sliver of deals, but learnt enough to be two years ahead of the market
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Minimum Viable Product A Minimal Viable Product (MVP) is a strategy used to test a product or product feature
Originated from web applications development
It is designed in a way that comprises only the basic features of that product
Deploying a MVP test allows us to gain valuable information about a product’s possible success on the market with minimal utilisation of resources
Due to its quick implementation, it can get to the customer much quicker than a fully featured product or service
‘Revolutions are celebrated when they are no longer dangerous’ (Boulez). Applying the Minimum Viable Product approach to reduce risk
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Thinking in Options
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Strategy Side 2Create options for entirely new offers or business models(our opportunity)
Strategy Side 1 Strategies to optimise and extend today’s business(our strength)
Barbell thinking presumes that in a rapidly changing world, organisations with options for different models will be those that survive. Those organisations that don’t have the right balance and focus
too much on today’s business are those that go into accelerated decline when the environment changes rapidly.
What can we do when the future looks so unpredictable?The rise of ‘Bar-bell’ thinking (Taleb)
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Cases whereby organisations transform themselves are becoming the stuff of legend
• Amazon could have thought of itself as a retailer
• However, in Taleb-esque style it moved to thinking of itself as a provider of web-based services
• It is well into the process of building a massive online services business
• This diversifies its income and acts as a natural hedge against a range of risks
• Alternatively, managing networks, hardware platforms and even software is no longer seen as core for many organisations
• Many have become exceptionally sophisticated at outsourcing these services
• However, some tactical experimentation has proven a prudent path for many organisations pursuing outsourcing of non-core activity
Business models and operating models will now change – will your organisation be a leader in this, a follower or an entity in the organisational history books (and no more)?
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These really big changes are Operating Model changes
Some changes do require a long term vision – they are the Operating Model changes, as in the automated port system
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What is an Operating Model?
▪ Operating Models answer the big
questions in how organisations are
organised effectively
▪ An Operating Model is the combination
of roles, skills, structures, processes,
assets and technologies that allow any
organisation to deliver on its service or
product promises
▪ It is in effect the way the organisation is
set up to deliver VALUE – both in terms
of the customer and in terms of the
business
Effective Operating Model Design ensures complex organisations can change and grow, while delivering an excellent customer experience
Customer
Process design Role
design
Metrics
Information
Technology
CoreFunctions
StructureGeography
Culture
Mgmt. discipline
Workforce capability
Sourcing
Policy
Customer
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Capacity Creation
Constraints Management and Queuing Theory Basics
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There are common, and sensible, strategies that organisations usually deploy to manage emerging capacity constraints
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Demand redirection to alternative service
(e.g. Emergency Depts directing patients to the
GP next door)
Increasing capacityResource-levelling
across teamsCross-training across
teams
Rapid training methods for staff
onboarding
Skills routing to handle new service agents
Promoting self-serviceEnabling out-of-hour
services
Promoting off-peak demand
(e.g. offering price incentives)
Promoting complementary
services
(e.g. when customers have to wait)
Rebuilding demand forecasting models
Creating adjustable capacity
(e.g. Reserve Police Force, contractors, part-
time employees)
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However, to generate more ideas it is useful to recognise that there are 5 sources of customer induced variability (which Lean can help you manage)
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Source: Frei, F. (2006). Breaking the Trade-Off Between Efficiency and Service. Harvard Business Review. Retrieved from: https://hbr.org/2006/11/breaking-the-trade-off-between-efficiency-and-service
Type of Variability Meaning
Arrival variability Customers arrive at a different rate OR at a different time
Capability variability Customers have different skill levels to collaborate with you on the task in hand
Request variability The larger the number of service types being requested by a customer the harder it can be to rapidly change to address variability
Effort variability Customer make different levels of effort to help out (think of returning the trolly at the shopping centre)
Subjective preference variability
Customers have different levels of expectation on what it means to be treated well
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Thinking about the different types of variability helps you work through the different improvement strategies and tactics
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Type of Variability Accommodation Reduction
Arrival Provide generous staffing Require reservation
Capability Adapt to customer skill levelsTarget customers based on capability
Request Cross-train employees Limit service breadth
Effort Do work for customers Reward increased effort
Subjective PreferenceDiagnose expectations and adapt
Persuade customers to adjust expectations
Source: Fitzsimmons, J. A., & Fitzsimmons, M. J. (2011). Service management : operations, strategy, information technology (7th ed). McGraw-Hill, New York
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❑ Queuing theory is a key part of Lean practice that helps you manage the flows for increased speed of service, reduced backlogs and reduced cost
❑ We will address the following parts of queuing theory thinking
The Theory of Constraints is enormously useful in helping you manage a mismatch between capacity and demand
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Seeing the flowsBottleneck identification
and managementResource levelling
Fast-track and fall-out management
Understanding non-linear responses to signal delays (think of cars
leaving at a traffic light)
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❑ The means of “seeing” where the problem resides include:
Most of the proven ways to address constraints rely on you “seeing” where the problem is ……
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See the flow
Interviewing system participants for clues. Amazingly this is often not done – remember the people working in the system can tell you a lot if you ask them the right questions
Tracking devices. Not popular but very handy in knowing where people are physically
Observations. E.g. Specially trained personnel make observations on patient movements and mark-down times for certain activities
System data. E.g. When a patient is marked as free to move from ED to ward
Digital observations. Like “observations” but basically using data recorded on video
Finding backlogs. Either on systems, on paper or by interview find where there is a queue waiting to move to the next stage – YOU HAVE JUST FOUND A BOTTLENECK
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❑ You may need to keep a “Control Room” with a visual (paper on wall is fine) of the process and keep updating the numbers of cases at each stage in the process AND the number of patients waiting for something or a move to the next stage
❑ In a crisis, this room will be staffed for 24 hours. There will be a process team allocated to the room with responsibilities to act on problems as they emerge
❑ You will need to determine the authorities of the process team in advance. Reporting lines should be to operational management
…… and hopefully diagnosing the cause – with a control room and measures
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See the flow
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❑ According to The Theory of Constraints, a system can only go as fast as its slowest point
❑ This implies that we need to find “bottlenecks” – or the points in a flow where movement slows down
❑ We should all be familiar with “bottlenecks” from our driving experiences, points in a traffic system where the road is narrower and causes a back-up in traffic. In Queuing Theory this is a backlog
Bottleneck identification and management. Understanding and clearing these bottlenecks is critical to creating an efficient process flow
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➔ Flow of client direct care services ➔➔ POTENTIAL Flow of services ➔ ➔ Flow of client direct care services ➔
Assessment/ Intake
Bottleneck
Servicing
Bottleneck/s
(insufficient
resource)
Discharge
Bottleneck
Unused
potential
capacityNoise and
wasted
effort
The restricted resourcing applies a throttle to the intake, care delivery, and
discharge planning processes and constrains the flow of service delivery
below capacity/demand
Example: Health Care Service Bottleneck identification and management
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Once one bottleneck has been addressed, you will need to move onto the next bottleneck
Addressing “bottlenecks” is done in 5 distinct stages
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Bottleneck identification and management
05
04
03
02
01 Identification of the bottleneck
Finding the causes of the bottleneck (there is often more than one)
Developing solutions for the bottleneck
Deploying the solutions (e.g. add resources, find root causes of problems, find alternative flows)
Observing and adjusting based on feedback on solution effectiveness
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❑ The challenge is that different teams (or individuals) can end up with ineffective or inefficient workloads (either too much or too little)
❑ In fast changing circumstances it can be extremely difficult to “allocate” work appropriately as volumes and rates of flow will change
❑ Rates of flow to different teams will be affected by “case complexity”, available resources at prior “work stations” and by team competencies in prior workstations
❑ So, the best approach is to try and build a fully or partially self-managing system
Resource levelling means ensuring appropriate distribution of work to avoid underload and overload BUT also getting cases and tasks to the right person
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Resource levelling
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Resource levelling (keeping the teams at a fair level of work via workflow management)
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Resource levelling
Pull systems and flowing cases to
right queue
Staffing the queues appropriately01
03
02
04Building
redundancy into queue staffing
Using multi-tasking and multidisciplinary teams as a source of redundancy
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❑ Pull systems are such that when a person or team is ready for the next customer they “pull” from a queue. Practically, this just means they move onto the next job when they are ready
❑ In operations environments sometimes a digital queue is created so that the team member knows what to do next – hence pulling the work from the queue
❑ The trick is prioritising the queue. In a health context this will require significant triage skill. So the queue needs to be closely linked to the triage system
Self-managing resource levelling relies on “pull” theories
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Simple Task
Simple Task
Simple Task
Simple ONLY
Complex Task
Complex Task
Simple OR Complex
Team leader can now focus on optimising workflow
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❑ This provides invaluable planning information
❑ Digital queues do NOT need much time to be established. Simple software can be established and utilised within 24 hours if necessary
❑ HOWEVER, one of the skills is deciding on what the queues are and who gets allocated to them
The advantage of a digital record is that it also keeps a track of how long it is taking to address each case at that stage
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Workflow Management Dashboard
Queue 1 – Standard
Standard 1 – PeterStandard 2 – MaryStandard 3 – (next-1)Standard 4 – (next-2)...
Queue 2 – Complex
Complex 1 – PaulComplex 2 – (next-1)Complex 3 – (next-2)Complex 4 – (next-3)...
Mary is currently working on Standard 2.
Complex 2 and Standard 3 will be assigned next .
Standard 8: L
Standard: M
Standard: H
Standard: H
Complex 4:L
Complex 3:M
Complex 2:H
Tasks sorted by customer need, e.g. urgency
Queue 1 – Standard Queue 2 – Complex
Standard 1: H
Complex 1:H
Standard 2: H
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Staffing the queues appropriately – ‘Competency-badged’ management provides resource levelling benefits and identifies resource levelling risks
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➢ Badging is an accreditation technique that verifies staff as competent to perform specific skills or to demonstrate specific capabilities
➢ Allows resources to be allocated to tasks by matching competency to task complexity
➢ Enables work to flow continuously by avoiding unnecessary blockages due to complex tasks
➢ Reduces handovers and errors because the right people are getting the right work and getting the work right the first time
➢ Provide clarity around staff development without the proliferation of role types
➢ New staff work on standard tasks at first but gain experience and accreditation over time to operate in multiple queues, providing the benefits of flexibility and resource levelling
Queue filter 1: Badge A, B & C
Queue filter 2: Badge D & E
Standard: L
Standard: M
Standard: H
Standard: H
Standard: L
Standard: M
Standard: H
Tasks sorted by customer need, e.g. urgency
Queue filter 3: Badge F & G
Complex: L
If complex queue becomes
empty or low urgency
compared with simple queue...
Staff can move between queues to balance resource level
Complex: H
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❑ It is a Lean principle to ensure you have some spare capacity
❑ This may or may not be possible in a crisis BUT you can
▪ Look for cross-trained team members
▪ Cross-train for critical queues if the crisis is likely to continue
❑ The idea is that you have team members who can run on multiple queues… so when one queue is appropriately resourced this person can operate a queue that is “short-handed”
❑ The trick with queue design is to take account of multiple bottlenecks (CALL US if you need to do this) – take hospital as an example
▪ Clinicians (of various types)
▪ Beds
▪ Equipment
Building redundancy into the resourcing of queues and using multi-tasking and multidisciplinary teams as a source of redundancy
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❑ Triage is often introduced to perform a first level (quality) assessment of each task as it arrives, and place it in the appropriate stream, but triage operators are often the most lightly trained/experienced, so...
❑ Placing the task in the wrong stream or missing items in the task detail, resulting in the requester being contacted (multiple times) about problems as the task progresses
❑ There are two potential solutions
▪ Put the most experienced staff closest to the front (in triage roles)
▪ Remove the triage step – use fast-track fallout (if most tasks are simple)
Fast-track and fall-out management – the most basic forms of streaming are based purely on task complexity
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Fast-track and fall-out management
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Contact details and disclaimer
47
Contact points for any questions or clarification of the content of this report can be directed to:
Report authors
Roger Perry +61 3 9663 5522 [email protected]
Jan Kautsky +61 419 432 404 [email protected]
Other enquiries can be directed to
Bevington Group Office
+61 3 9663 5522 [email protected]
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