six sigma_process improvement

8/12/2019 Six Sigma_Process Improvement

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Lean HR

Six Sigma Philosophy

Process Improvement

Transactional HR Processing

Paul Rains. MIPP.


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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.


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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 theorganisation in hard business terms.


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What is Six Sigma?


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Six Sigma can be described

in a lot of ways A business philosophy & strategy adopted by

companies who are recognised leaders in world classquality.

Fact based decision making. An integrated part of a

management system. Customer focused (Customer critical-to-quality

factors) determine where we should focus our qualityimprovements.

Continuous improvement methodology used to

improve business processes and products.

Utilisation of powerful statistical tools.

Statistical measure of process capability.


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Definition of Six Sigma

Six Sigma is a goal for processimprovement that forces us to put our

vision of quality in numerical terms (i.e

3.4 defect parts per million or99.99966% good)

A more practical definition is Data

driven problem solving


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Darts Exercise


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Process Variation

Variation is measured

by the range of the

process.

The less variation thetighter and more

accurate the process.

Distance

Frequency

48040032024016080

30

25

20

15

10

5

0

Mean 262.4

StDev 100.1

N 319

Histogram Of Where Darts Landed


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Why Does it Work?

It measures the VARIATIONin 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.


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99% Yield in other Industries

POST OFFICE - 20,000 lost letters per hour.

BAA2 short landings per day at every Airport.

NPOWER7 Hours a month without Electricity.

NHS200,000 wrong prescriptions per year.

In HR HR DEPT 20,000 EMPLOYEES200 incorrect

payments per month.

99% is not Good Enough!


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-10

0

10

20

30

40

50

60

1 2 3 4 5 6 7

-10

0

10

20

30

40

50

60

1 2 3 4 5 6 7 8 9

-10

0

10

20

30

40

50

60

1 2 3 4 5 6 7 8 9

How do you get Six Sigma

Performance?

Existing Process

Reduce variation

Increase Tolerance

Yield 99.73%

Yield 99.99996%

Yield 99.99996%


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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


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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 Notificationforms by 95%


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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, downtime.


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Appraisal This refers to any process, system or procedure that exists

only to look for problems. How often do you do somethingthen immediately check it?

Prevention

This refers to systems and procedures that are designed toprevent things going wrong. Whilst beneficial they should beincluded 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


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Who are your Customers?


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VOC - What do they Want?

Employees HMRC BudgetHolders PensionsDepartment Health CareProviderTo 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 cover

A 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 sickin that particular

month

A list of scheme

members who

have changed

cover levels

A contract ofEmployment letter

when joining your

company

A record of everyemployees,

Earnings, Income

Tax and National

Insurance

contributions for

the tax year

A list of schememembers who

have left

A list of schememembers 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


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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

Easyto

report

To bekept

updated

Issue

manual

payment

Fix

the

issue

Fixed

1sttime

Record

payment

on payroll

Fixed

right

VOC DELIVERY


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Specifications

(Underpayment)Easy to Report To be

kept

updated

Issue

manual

payment

Fix the issue

No Cost Quick Recordon

Payroll

FixRight

Fix 1stTime

Provide

24/7 freetelephone

number

Calls

answeredwithin 5

rings

Customer

contactedevery 24

hours with

update

Issue

within 48hours of

error

being

reported

No re-

occurrence of issue

next time.

One

enquiry todiscover

the root

cause of

the issue


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Key Performance Indicators

(Underpayment - KPIs)

CTQs 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

KPIs

Time to

Answer

call

Time to

provide

update

Time to

Issue

payment

Number of

Enquires

made

Number of

re-

occurrence

s of same

issueAttribute

KPIs

% 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


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Examples of Measures (KPIs)

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 P45s 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 firsttime.


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Example of an Operational

DefinitionKPI Name:Software Fault Resolution Time

What does the KPI represent:The time elapsedbetween a user reporting a fault and the Help Deskinforming 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 call

Process endthe 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.


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Process Diagrams

User 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


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Process Mapping

(New Starter)

Receive

Paper work

Check Paper

work

Set up HR

Record

Identificationenclosed?

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

Refereesenclosed?

Medical

Form

enclosed?FSA Check?Y Y Y

Y Y

30% 25% 15%5%


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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


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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?


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All these HR / Payroll activities

add Cost but which add Value? Fixing a Software Fault?

Completing a Job Reference for a formeremployee?

Keying in new starter information into the HRSystem 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?


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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


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Law of Focus

Reasons For Late Paperwork

0

10

20

30

40

5060

70

80

90

100

TooBusy

to

Complet

Form

Awaiting

Authorisation

Returned

to

Employee

Lost

in

Tran

sit

Forgot


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Non Value Adding Activities

NVA = Waste

90%

10%

Add Cost only

Add Value


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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 / statutorypurposes.

From this we can calculate the ProcessEfficiency Cycle.

Value Stream Mapping

Time Map


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Time Value Stream Mapping

for New StarterProcess

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


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= (Value Added Time) / Non ValueAdded 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%


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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


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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 withyour customers requirements?

The Waste of Over

Processing


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Any delay between one Process / Step / Activityending 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

QuestionHave you accurately mapped yourprocesses to identify the above?

The Waste of Waiting


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Unnecessary movement of materials orinformation

Every move:

Takes time Creates a queue

Creates return loops

Usually seen as people walking excessively

QuestionHave you mapped transportinto your process map?

The Waste of Transportation


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Production of service outputs beyond what is

needed

Paper work

Consequential Processes Poorly designed process

Testing

Inspection / Checking

QuestionHave you identified all the activitiesthat should be right first time?

The Waste of Overproduction


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Needless movement of people

Workplace layout

Office ergonomics

Constant switching between different systems

QuestionWhen was the last time the

layout / ergonomics were examined?

The Waste of Motion


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Any work in progress (WIP) that is inexcess of what is required to produce forthe customer

Ties up working capital Increases lead time (cycle time)

Hides problems and breeds complacency

QuestionWhat processes are in place toidentify excessive inventory?

The Waste of Inventory


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Any aspect of the service that does not conform

to the customers needs

Missing Information

Materials Labour

Resource Capacity

Process documentation

QuestionHave you completed a value streammap that includes reject corrections?

The Waste of Rejects


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New Starter Process

Line

Manager

Employee

HR Admin

Payroll

Receive Form Check Form is Form Ok? Input Data

Send docDoc 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


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Process Mapping

I t i HR / P ll th t


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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.

U LEAN T l d T h i


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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.

HR SSC Service Delivery Model


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Colleagues

(ASP) HRMS SYSTEM

OutputsInlandRevenue

EDI

Line

Managers

Finance

System

HCMPayslips

P60sMI

Transactional HR

Services

Changes Starters Leavers

Fleet

Provider

MSS / ESS

Inputs

Data Warehouse

Web Recruitment

Absence CPD

Pension

SystemT&A

System

P11DSystem

P11Ds

TRS

HR

Metrics

Flex

Bens


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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?


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For More Information

www.transacthr.com

Email: [email protected]

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