Introduction
Pundits
are fond of pontificating that “government should be run like a business.” What
they are really saying is that since businesses answer to shareholders and must
squeeze out every cent of profit, those who run a successful business must
constantly keep their eye on the bottom line. From there, it’s an easy leap to
the conclusion that every decision made by a business or government entity
should be viewed through a fiscal lens.
Like all
simplifications, the pundits’ manifesto has some grain of truth, but upon
closer inspection one realizes that the real world is much more complex.
First,
running an entity “like a business” is not a recipe for success. Remember Borders? People Express? Enron?
Like
running a government, running a business requires the use of continually improving
tools and techniques. But tools in and of themselves are not the answer.
Take,
for example, Lieutenant Governor Kim Guadagno’s “Red Tape Commission.” No one
can argue that the elimination of red tape is a good thing. Or can they? Some
so-called red tape provides the checks and balances necessary to ensure that
promoting a good business climate does not have the side effect of destroying
the environment or putting unsafe products in the hands of consumers. So while
the elimination of unnecessary red tape is a desirable goal, one must
wonder if that’s the real impetus behind this commission. The Guadagno
Commission is a Band-Aid, not a long-term solution. As we will describe later,
the real goal is the elimination of waste,
not red tape. There’s a difference.
This
memo will outline a proven approach to improving government services while reducing
expenses and enhancing the quality and quantity of those services to the New
Jersey taxpayer.
While
incremental change to the way the state government operates may be beneficial,
a more aggressive approach is needed to react to, and eventually assume a
proactive approach to, external factors.
The Bush
Recession and accompanying financial meltdown are the main external factors
that have had a significant impact on the state’s ability to provide the
services that our citizens deserve. Additionally, weather-related calamities
induced by global climate change[1],
our century-old crumbling infrastructure, and technology advances are moving at
a much faster pace than our present approach to running the state can react to.
Yet,
change for the sake of change is a road to disaster. Any modifications to the
way state government operates must be quick, methodical, and justified by facts
and figures, not “feelings.”
The
problem with the way the Christie Administration has changed the way the state
operates is that its mantra is “doing
less with less.” Lower revenue to Christie means laying off thousands of
employees, slashing assistance to those who need it most, and exacerbating the
problem by limiting “shared sacrifice” to the poor and middle class.
“Doing
less with less” in the business world is the road to loss of market share and
eventual oblivion. Those businesses that thrive adopt a different mantra: “doing more with less.” They provide
better services or products through the systematic (as opposed to the
opportunistic) reduction in waste and inefficiency. And there’s an inexorable
benefit to these systematic methods – quality of the product or service goes up
as the cost of those products or services goes down. “Quality is free[2].”
It’s not
magic. It’s hard work. But with several decades of experience around the world,
it is proven. What is “it”?
Processes
to improve outcomes in business have been around for decades. Throughout the last century, “efficiency
experts” have been employed by businesses and governments to increase
performance and reduce expenses. In the second half of the 20th
century, the work pioneered by an American, W. Edwards Deming, was adopted in
Japan as exemplified by Toyota Motors Corporation. Over time, that automobile
manufacturer was able to change from an organization associated with cheap,
unreliable products to one that epitomized quality and reliability. Deming’s
work was eventually repatriated to the United States and is the genesis of what
we today call “Lean.”
While
the implementation of Lean processes started in the manufacturing industry,
over the years these techniques have migrated to the services industry, the
Federal government, and elsewhere.
Six
Sigma is a companion approach to Lean. It started as a measure of quality, but
it promotes consistency and predictability of business processes and outcomes[3].
Lean is
a proven methodical technique to identify and eliminate waste from a process,
whether manufacturing widgets, providing police and fire services, or handling
caseloads in the Division of Youth and Family Services. It involves all of the
stakeholders. Success is not measured by intuitive feeling but rather by a
rigorous set of metrics. Perfection is the goal – one that will never be
reached, but will always be approached by continuous, rather than intermittent,
process improvement. When properly applied, these techniques can achieve
performance improvements in double-digit percentage ranges. Application of Lean
and Six-Sigma techniques is a culture change in the way an organization does
its business.
These
techniques are not new to other state governments. They’ve been proven time and
time again. For example:
- Michigan Department of Environmental Quality (DEQ) decreased the time needed to process major air construction permits from 422 days to 98 days. Quality improved, with initial application administrative completeness rising from 82 to 95 percent.[4]
- The Iowa Alcoholic Beverages Division reduced delays in its invoice and taxation process by 81%[5]
- The Ohio Bureau of Workers’ Compensation reduced the time required to process a protest from 169 days to 66 days and is continuing to reduce that number.[6]
The
concept is simple. Use methodical processes (rather than folklore and
intuition) to identify and eliminate waste. The execution of the concept is a
bit more involved. It requires the investment in training of the stakeholders
and the employment of trained facilitators. It involves investment in
structured events that will require dedicated attention from stakeholders. But
it’s an investment that has proven to pay big dividends in reduced cost and
increased quality.
In any
organization, those who are best equipped to push for change are the ones least
likely to initiate it. After all, the elected and appointed officials who run
state government got to where they are by doing things the “old way.” Lobbyists
and special interest groups often abet inefficiencies in how tax dollars are
spent.
Nevertheless,
I’m optimistic that there are a few enlightened public officials who are
willing to go out on a limb and start the process.
Successful
change must come from the top. In the case of a business, the CEO and his staff
are the impetus for applying Lean and Six Sigma throughout the enterprise. In
the case of the State of New Jersey, the Governor and his cabinet must be the
champions of controlled radical change. Whether or not the current
administration is willing to embrace these techniques, it is not too early to
plant the seeds of these ideas in Trenton.
These
techniques require an open and honest discussion of how things are done today
(the “present state”). Some people, whether in government or a commercial
enterprise, are reluctant to expose inefficiencies and loathe to applying
quantitative measurements to their work products. An aggressive and
comprehensive top-down training and indoctrination program is necessary to
break down that barrier. Success will come only when top executives “walk the
talk.”
Some
people will look at any systematic method of process improvement as a vehicle
for eliminating their jobs. But the reality is that jobs are already being
eliminated today – haphazardly, unfairly, and inefficiently. Lean processes provide
the opportunity for workers to enhance the quality of their jobs. After all,
who wants to go to work every day doing something wasteful and inefficient? Job
satisfaction benefits not just the worker but the end customer as well.
Successful implementation of Lean and Six Sigma techniques requires the
involvement of all stakeholders – employees, managers, customers, unions, and
suppliers – from Day One. Everyone’s voice is not just important, but is
critical to success.
Expectations
must be set appropriately. Implementation of significant change is neither free
nor instantaneous. It will take several years to cement the culture change of
continuous improvement. There will be some people who will be willing to
sabotage change in order to maintain their comfortable status quo. Senior
management must make it clear from the outset that this is unacceptable
behavior.
States
like Connecticut, Iowa, and others have already embraced these techniques. They
have established central administrative groups that provide the training,
facilitators, and measurement techniques that are required for success. Here in
New Jersey, we don’t have to re-invent the wheel, but should learn from the
successes and failures in some of these other states as we plan our approach to
Lean and Six Sigma.
While
the ultimate goal is to implement these process and quality improvement
techniques across the entire spectrum of state government, doing it all at once
is neither feasible nor advisable, but doing it quickly is.
One
approach would be to find a department or agency with enlightened leadership
that is willing to pilot these techniques. Accelerated training could be given
to that agency’s employees and stakeholders followed by a six- to nine-month
pilot program where several dozen process improvement initiatives are
undertaken and measured. Success should be celebrated. Failures should not be
looked upon negatively, but rather should be used as learning moments. From
that, those employees who are skilled in the techniques can seed other state
agencies as the training and implementation is rolled out state-wide.
Eventually, this cadre of experts could also be used to help implement Lean and
Six Sigma at the county and municipal levels. Standardization of process
improvement techniques and measurements across agencies will make it easy for
experts to work on the many inter-agency improvement opportunities as well as
transfer among different departments. Progress will be evaluated using rigorous
statistical measurements and techniques, and must be open and transparent.
Continuing
to do business as usual will give us the same results as usual – higher taxes
and reduced services. While the measures of success may differ between a commercial
business and the state, the proven tools and techniques that have been
successful in business can make a big difference in providing the vital
services that only the state can provide.
[1]
There can be no debate that global climate change is real. Whether or not it is
man-made is a debate beyond the scope of this memo.
[3]
Six Sigma is a statistical technique, which when achieved, results in a limit
of 3.4 defects per million. In some industries, this goal may be too
aggressive, in others not aggressive enough. For example, in the process of
printing a daily newspaper, a larger ratio of defects is not a calamity. But
consider commercial air traffic in the United States. There are about 6,000
commercial flights a day in the U.S. If
a “defect” is defined as an accident with fatalities, the Six-Sigma goal would
be a statistical average of 7 fatal accidents per year. Fortunately, our
airline safety systems have been better than that over the past decade. Just
considering the cost of a fatal incident to an airline, the money spent on
safety nets a positive impact on the bottom line.
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