RSM Resources

If you’ve stood in long lines waiting to renew your driver’s license, you understand the frustrations caused by an inefficient process. But what you might not know is that an increasing number of service operations like driver’s license renewal are now applying manufacturing best practices to improve responsiveness and productivity.

"While people often don’t believe it, government services are one of the fastest growth areas for quality improvement programs," says Maqpool Dada, professor of operations management at Purdue University’s Krannert School of Business. "For example, many state governments have done a good job of streamlining their business processes in registrations and license renewals, largely because of improvements in computer technology."

While a handful of service-based companies — such as FedEx, McDonald’s, UPS and Wal-Mart — have developed almost legendary process-improvement programs, the industry as a whole has lagged behind substantial gains made in the manufacturing sector over the past two decades.

In fact, according to the federal Bureau of Labor Statistics, individual worker productivity in manufacturing plants doubled between 1980 and 2000, while employee efficiency in service-based businesses improved by only 22 percent during that same period.

The late-blooming trend in services comes as no surprise to most experts. A century ago, as the U.S. economy began shifting from an agricultural to a manufacturing focus, process enhancements tended to follow suit. However, despite the fact that business and professional services now account for about 70 percent of gross domestic product (GDP) and almost 75 percent of total employment, many service business leaders have not embraced proven improvements — often because they view them as viable only in manufacturing settings.

That’s flat out wrong, Dada says.

"Many people get too concerned about buzzwords — Six Sigma, Lean or Total Quality Management," he says. "All of these are merely methods for producing process improvements. The idea underlying all of them is to develop a process control flow chart, and that’s something you can develop to locate bottlenecks in any business where you have goods or services."

While a number of factors may contribute to a service bottleneck, Dada says business leaders should not mistake symptoms for the actual disease. For example, he described an international IT service provider that suffered from a high volume of call center complaints on a single topic — malfunctioning printers that were hindering the ability of airline ticket agents to generate boarding passes and baggage tags. When the company chose to upgrade those printers and improve response time for new service calls, complaint call volume on this issue fell 80 percent in 18 months.

More broadly, health care has been a leader in the process-improvement movement in services. Just a few years ago, the patient service billing process was largely paper-based, with forms moving via U.S. mail between hospitals and insurance companies. Under that model, Dada says it could take six to nine months for an original account statement to pass back and forth between a hospital and insurance provider before a billing determination finally reached the patient.

"Now the health care industry has an electronic standard and many hospitals, insurance providers and third-party administrators accept electronic claims," he says. "Those claims are processed in hours — not weeks — so hospitals get paid faster and patients get faster resolution on their bills."

Looking for some basic tips to assess how process improvements can help your business? Experts suggest the following ideas:

Acknowledge that all work is a process. In a manufacturing setting, thousands of automated or mechanical processes need to operate in harmony for smooth production flow. While the service sector typically has more of the "human factor" in its day-to-day operations, that doesn’t mean process improvements can’t be made.

In a white paper titled, "Jet Engines and Sales: How Six Sigma Brings Breakthrough Results to the Service Sector,"consultant Rick Schleusener urges service companies to embrace three principles of statistical thinking: All work is a process, all processes have variability,and all processes create data that explains variability. This approach not only increases productivity in service operations, such as call centers, but also helps businesses improve the quality of transactions between employees and customers.

Set meaningful measures and benchmarks. Any process control or quality-improvement project will be doomed to fail without an accurate benchmark of problems caused by an existing bottleneck and measurable targets for future improvement. For example, the Lean Enterprise Institute reported that ThedaCare, a Wisconsin-based health care system, used process-management tools from the auto manufacturer Toyota to isolate problems in accounts receivable cash flow. The organization reduced or eliminated the bottlenecks and put in place a structured improvement schedule, which quickly increased accounts receivable cash flow by $8.1 million.

"In almost every process-improvement system, you need to review your throughput, delay times and inventory of unprocessed work in the queue," Dada says. "If you can determine those answers,you then have some benchmarks that give you a good starting point for problem-solving."

Choose process improvement targets with care. In any business, there are endless practices and procedures that could function more effectively. But experts say smart companies are those that use process improvements to boost productivity in core business areas. In fact, a 2003 study reported that a hypothetical $1 billion high-tech company that raised its productivity performance from "sluggish" to "median" would typically see $120 million in additional profit. That profit figure was projected to rise to $180 million if that same company’s process improvements helped it achieve top-quartile performance.

Consider third-party assistance. While Dada says that most process-improvement programs can be launched and run by internal teams, he added that it’s not always the best choice to ensure top results. That may especially be true in closely held or entrepreneur-driven companies, where owners or executives may be too close to a problem.

"In businesses like these, sometimes people are entrenched in certain ways of doing things — or they face political issues— that make change difficult," he says. "Under those conditions, there might be value in having an outsider evaluate how to break the bottlenecks that are slowing things down."

By reviewing these key steps, you can determine how your business may benefit from a new approach to process and productivity improvement.