100 Ways to improve your payroll processes

If you were offered 100 ways to improve your payroll processes would you accept ?

This case study covers how Leanpal specialists identified just that by working with a client team in a large organisation.

Background

The payroll department for the national branch of a global service organisation discovered some anomalies with their data processing, which was handled by an external organisation. These anomalies effectively meant that they had underpaid national insurance by hundreds of thousands of pounds in one financial year. Recognising the error 9 months into the financial year enabled the company to correct the payment deficit (so punitive penalties were avoided) but the outwards cash flow was an unexpected shock for the company in the 4th financial quarter.

Normally there should have been controls in the payroll department and finance function, which would have detected the error sooner, but nonetheless the national branch placed the blame firmly with the data processing company. The local management claimed 100% of the fault was due to the data processor, and wanted to change the service provider immediately, however the senior management decided a thorough review of the payroll processes was a more prudent approach, to ensure if and when the service provider was changed, that their own internal processes for payroll were as robust as possible.

The approach

Leanpal was contracted to map the payroll processes, identify any issues and prepare an action plan for the management to address. Leanpal specialists - one an expert in lean principles and value stream mapping, one a chartered accountant with expertise in payroll and auditing undertook the project in 6 weeks over a 3 month period.

The approach was as follows:-

Scoping the work and agreeing with management a charter for the project

Defining measures of activity and performance for the payroll department

Value stream mapping the payroll processes

Identifying the issues then prioritising these into an action plan

As those of you who have tackled lean in the office already know, the issue with understanding losses and wastes in administrative functions is the lack of transparency.

In this case the payroll office was “boxed in “ with historical records (so an opportunity for some basic 5S!) but other than that all of the “added value” or non-added value work was conducted through data entry data processing and data manipulation.

It is much easier to see added value in a factory as the product is transformed, and consequently the famous lean wastes, overburden and unevenness are also easier to detect. Faced with a room full of people desks and computers the process has to be teased out into a visual format to help understand whats going on - hence the use of value stream maps.

In our case the payroll team identified a number of work streams. Each stream was mapped by the participants identifying all the tasks performed within the process from start to end..

After mapping this, the time for each task was established, then each task was challenged as to whether it added value or not. From the performance measures established we were able to quantify the non-added value issues.

Problems were identified in discussions with the participants both from their own perspective and by comparing their process to “best in class” from the Leanpal audit perspective  In all over 100 issues were identified, some of which were easy to fix, others requiring improved discipline at all levels of management. Of the 100 only 32 were the responsibility of the external service provider.

What went well during the project?

We had good participation from about half of the people assigned to the project, they were open and honest about the issues and keen to make a difference.

We were able to establish a performance measurement system (which they didn’t have time to do before as they were so busy correcting mistakes! ) This system helped the team see where the real problems were, and in future gives them the tools to further improve performance with management support.

On the Leanpal side the combination of a process mapping expert with a lean background and a chartered accountant with payroll experience meant that all of the process was drawn up and that the right questions were asked at the right time to thoroughly understand the issues. We were able to compare and contrast the payroll processes with industry best practice, a san external objective view.

What could have been improved?

The team allocated to the project was too small - we were unable to convince the national manager to release representatives from all the functions to participate. So we were reliant on only a few viewpoints, other functions did not get the opportunity to add their contributions or understand the process we were going through. The action plan developed could have been more quickly implemented if more of the functions had been involved both from the viewpoint of resource availability and “buy-in” to the issues identified. Team building and communication would have been improved if more people had been involved.

Benefits of the exercise

In all, the company were convinced of the value of the exercise and went on to implement the actions identified. It’s perhaps difficult to fully quantify the financial benefit of the project because the benefits will arise from improving system controls and reducing risk of future errors.

Interested in applying this approach to your organisation? Call +44 7870134609 or email mark.colvin@leanpal.com

Mentoring Production Management

Mark Colvin of Leanpal Ltd was recently engaged by a firm to mentor a Production Manager as part of his continuous professional development sponsored by the Managing Director.

The firm was in the middle of a major factory re-layout project, and the MD was taking on most of the tasks. He had tried to delegate certain tasks to the Production Manager, but deadlines had been repeatedly missed and there seemed to be no sense of urgency. Missed deadlines had led to complacency and often the tasks were not even re-scheduled, just left “hanging” until the MD stepped in again.

The Production Manager had had several formal training sessions, off-site in a classroom environment, but much of the learning had not been transferred back into the workplace.

It is well known that much of this classroom type of training can be ineffective, if it is not supported back in the workplace by practical follow-up.

A previous project for another client  a few years ago demonstrated the same issue - some people had been on an intensive 6 day residential continuous improvement course with 12 hour days and evening “homework”  - on return to their workplace they were so “punch-drunk” they didn’t know where or how to start.

Off-site training courses often seem to represent good value for money in terms of cost per head, but if the delegates are not motivated and supported on their return to work the retention of the learning points quickly deteriorates, and the implementation of improvements becomes less and less likely. Direct mentoring appears more expensive at first sight, but the long-term effectiveness and the business benefits are likely to significantly outweigh the cost.

In many cases the key to unlocking peoples’ potential is to understand the context in which they operate, then tailor the support to suit the individual’s work environment and behaviours.

Diet & exercise experts suggest it takes at least 2 weeks to change habits and adopt new behaviours   - so why should we expect a short off-site training course to deliver radical change?

In the case of the Production Manager the first intervention was observation of a typical “day in the life of” over 2 days followed by gentle suggestions on how to break dysfunctional ways of working.

Management style was explored using Time Management tools, situational leadership concepts, and better structured meetings. 

Roles and responsibilities have been thoroughly discussed. Working relationships with peers, subordinates and the boss were examined and challenged.  As part of the mentoring and coaching, practical application of the tools and techniques was key, plus ongoing follow up to ensure the processes stayed in place over several weeks.

The mentoring process has allowed the Production Manager to raise his game, select appropriate priorities, delegate more and manage his time better. As a direct result some people management decisions on people previously put off as “uncomfortable” have now been taken, to the relief not only of the manager but also with the people involved.

As a result of the programme the Manager has not only generated more time to spend on the factory layout project tasks, he has also increased his control of the production management systems and gained more respect from the boss, subordinates and peers alike.

Your essential guide to lean success

Lean is made up of a plethora of complex theories. WM offers a handy reference guide to the kaizen team and how to employ them to ensure continuous improvement success at your site

Max Gosney Editor of Works Management Magazine kindly gave me permission to post this article on the Leanpal  blog.

http://www.worksmanagement.co.uk/article/33778/Your-essential-guide-to-lean-success.aspx 

  

Seven secrets to lean success
Lean, kaizen, continuous improvement- the pursuit of making your factory a more efficient and productive outfit goes by many names. But some golden rules ring true whatever your definition. WM gives the lowdown on seven top habits of lean success. Also, see the panel below for a lighthearted look at the key members of the lean team.

1 People power
'Died due to lack of staff support.' The words could be etched on the tombstones of many a failed lean initiative.

Popular backing will catapult a continuous improvement scheme into an unstoppable force. But resistance will quash it like a poison. Winning over your workforce is about empowerment, says Terry Carmichael, who led a lean programme at Thorn Lighting's Spennymoor site that helped the company win top prize at the Best Factory Awards in 2008.

"We insist on the involvement of our workforce in our improvement programme... It was traditional for our engineers to design our production lines, give them to operators and say get on with it. Now our people design their own work stations."

The simple change has reinvigorated the workforce, adds Carmichael. "The motivation of our people is fantastic because they really feel they've made a difference."

But, it's not just shopfloor support that holds sway over improvement bids, according to Mark Colvin of lean consultancy Leanpal. "For me, the absolute key is making sure senior management are behind the programme. That means not just committed through words but deeds as well." A stop-start approach fuels cynicism in workers, as factory managers at the recent Best Factory Conference were quick to testify. Continuous improvement programmes become branded as just another fleeting management initiative and are hamstrung by the burdens of past failures..

2 Tackling resistance
Cavemen, citizens against virtually everything, type Cs... Whatever their tag, the anti-change element of your workforce needs to be tackled if lean is to thrive. "We had those we described as cavemen who stood against everything," explains Carmichael. "Because we won the people over by talking about morale and we had some impressive results, the cavemen either changed or left."

Overcoming the resistance is about waging a tactical battle, says Carmichael: "Nobody likes to feel like they can't perform in the environment provided. It makes them feel, in their own words, inadequate. The other thing is when the rest of the organisation starts to rebel and peer pressure takes over."

Manufacturers can also look to avoid creating the breeding ground for saboteurs, according to Colvin. "Lean can often be perceived as all about redundancy. I've worked with companies which, if they need to make redundancies, do so before beginning the lean programme. That way you are working with staff who know they are part of the future and can get behind the ideas."

3 Make the time
Toyota – widely regarded as the godfather of modern lean manufacturing – puts good continuous improvement down to one thing. "The difference between success and failure is time," says Tony Wallis, operations director at the manufacturing giant's UK forklift business, Toyota Material Handling. "We create the time for our people and our leaders to give us continuous improvement. When I see it fail, it's because it's become flavour of the month... People don't allow the time for the leaders in their team to give input."

4 Suggestion schemes
Staff suggestion schemes are a gold mine for continuous improvement. Yet this cheap and simple source of lean ideas is often ignored by UK manufacturers. One company that's capitalised from the concept is boiler manufacturer Vaillant. The company delivered efficiency gains worth nearly £600,000 in one year through implementing suggestions, explains Allan Harley, improvement manager. "We use a pre-treatment to clean the metal on our boilers... with between one and half and two million parts, that means a massive volume of water. Two individuals at our Belper plant suggested we recycle it, run a filter system, and get rid of the water every three months instead of every time we used it."

Cynics will point out that enthusiasm for suggestion schemes, like lean itself, can falter after early gains. Vaillant, though, has proofed its scheme so the kaizen production line keeps on flowing. Harley says: "From the suggestion scheme we will generate kaizen blitz or kaizen weeks. Contributors get a cash reward based on what we've saved. But just for taking part we organise prize draws where you could win a weekend away or an iPod."

5 Leadership
A great leader can inspire staff to walk through walls to deliver improvements. A bad one will antagonise workers and stir them only to sabotage anything the boss might get rewarded for. The difference is all about vision, communication, trust and recognition, according to lean experts.

A common misconception is that leaders must be dominant characters often seen booming out instructions on the shopfloor. In fact good leadership is a subtle art, says Carmichael. "If you want people to build a ship don't ask them to collect wood and nails, just inspire in them a desire to sail the seas and the rest will happen by itself."

The best team leaders set a vision, help the team understand the goal and coach performance in key areas, says Dennis McCarthy of DAK Consulting. Regular performance feedback is a must, with staff encouraged to assess their own skills rather than be given a static lecture. Carmichael adds: "Catch people doings things well and reward them rather than catching people doing things badly and take other measures."

Once you have honed your team's skills , unleash the ultimate motivational tool – put individuals in charge of a key project and give them a pat on the back for success.

Opportunities to lead projects and win praise from managers are significantly more effective motivational tools than pay rises or cash bonuses, according to a 2009 survey by the McKinsey business journal. Crack the art of delegation and you won't have a single leader but a powerful raft of lieutenants championing your lean agenda.

6 Set a vision
Without a clear target to aim for, you will always be subsumed by dealing with the daily grind. The vision should be a compass for business activities, according to Toyota's Tony Wallis and Thorn Lighting's Terry Carmichael.

The targets should be filtered down through your organisation through Hoshin planning (see box, p18). Pinning your raison d'être up somewhere where everyone will see it is also a top tip.

7 Go to the source
If you can't see the problem, then you can never hope to find the solution – the 'go and see' or Genchi Genbutsu principle is a key pillar of the Toyota Production System.

"Any leader in any organisation that doesn't go to the source of the problem doesn't understand what needs to be put right," says Wallis. "We very clearly drive Genchi Genbutsu... If you watch and understand and talk to the team, you will understand what the problem is."

team kaizen

Name: Kanban
What is it: A signalling system used to regulate the supply and demand of materials in a production process. Kanban is the conductor-in-chief of manufacturing telling you what to make, when and to what quantity.
Strengths: Universally applicable, can drastically reduce stockholding, cuts waste, aids just in time (JIT) delivery
Weaknesses: Inflexibility – dramatic spikes in demand or the influx of new orders can upset the kanban
Kaizen rating: 8/10 A proven player in any successful lean manufacturing bid

Name: Hoshin planning
What is it: A process of goal setting where the business sets an overall target and gears staff towards hitting it via defined performance objectives.
Strengths: Gives a sense of purpose and direction, helps you diversify from competitors, powerful tool for enhancing staff performance, can help you navigate business risks
Weaknesses: A slow burner, goal setting involves staff feedback and fine tuning objectives can take several years. The process of strategic planning is also a diary drain and involves lots of away days.
Kaizen rating: 9/10 Fail to prepare, prepare to fail

Name: Poke yoke
What is it: The art of mistake proofing, poke yoke encourages staff to seek out and eliminate any flaws in work processes and products. Poke yoke inspired inventions include circuit breakers and locks that stop you taking the car keys out until the car is in neutral.
Strengths: boosts product safety, improves workstation design, low resource tool
Weaknesses: staff may be reluctant to admit errors
Kaizen rating: 8/10 A powerful self assessment technique that can weed out costly oversights

Name: Total productive maintenance (TPM)
What is it: TPM aims to involve all parts of an organisation in ensuring the effectiveness of production equipment and banishing time lost to breakdowns and stoppages.
Strengths: Allows you to make more and sell more, prevents costly downtime
Weaknesses: Takes a lot of time and resource as you're involving all areas of the business
Kaizen rating: 8/10 Prevention is better than cure

Name: 5S
What is it: The five Japanese words starting with S can be translated as: sort, straighten, shine/sweep, standardise and sustain. 5S ensures a clutter-free, optimum, working environment that leads to happier, more productive people, according to the theory.
Strengths: Productivity gains with less time hunting for parts, cleaner and safer environments increase product quality, and boosts morale.
Weaknesses: Can be difficult to quantify the gains as 5S offers a series of small improvements, heavy staff training
Kaizen rating: 9/10 5S can help you clean up on continuous improvement

Name: Value stream mapping
What is it: A diagram of the physical and information flows that contribute to a production process. The map highlights the value adding steps needed to produce the final goods.
Strengths: Allows a quick and easy reference point for strengths and weaknesses in the production cycle. Focuses staff on adding value and encourage employees to think outside of their own department. Value Stream mapping is highly versatile and can be used in back offices as well as on the shopfloor.
Weaknesses: Requires a lot of time to set up and extra training may be needed to help staff get to grips with the graphics.
Kaizen rating: 8/10 Steer the shortest path to improvement

Name: Six Sigma
What is it: A data-driven methodology that strives to remove variability and defects from manufacturing processes. Six Sigma borrows from martial arts disciplines by introducing expert green and black belts to further teachings.
Strengths: Highly effective problem solver, reduces defects, cuts waste
Weaknesses: Time consuming and requires heavy staff training, highly advanced and can be like using a sledgehammer to a crack a nut in some businesses, say lean advisors.
Kaizen rating: 8/10 The big gun of the kaizen team – best handled
with care

Want to become a continuous improvement king? Join WM's new CIN network: share valuable experiences with your peers and have an expert guide to help steer your successful lean journey. Contact
Richard Henley on 01322 221144 or email rhenley@findlay.co.uk

  Author
Max Gosney    

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Case Study - Practical Application of Kanban in a Complex Assembly Operation

This case study covers the implementation of a Kanban system for a more complicated range of products – the steps leading up to the implementation are described as is the change management process. 

The information presented has been desensitised - the company and its products are not identified for confidentiality reasons. 

It is divided into the following sections:-

·         Background

·         Value-stream mapping

·         Customer demand analysis

·         Kanban loop and card design

·         Advantages of the Kanban System

·         Change management

·         Summary

Background

The company, which we will call XYZ Ltd, is a division of a global concern.  It produces a range of complex and sophisticated electro-mechanical assemblies, employing over 200 people.

There are 15 live products of similar overall appearance but with different sizes and different functions. Demand is not equally split between the products. 

There are 8 sub-assembly lines feeding one common process (which we shall call the gluing line) from there on to 6 calibration/testing stations.

The sub-assembly lines are roughly split by product size, but also include new lines where new products have been developed and installed.  The test lines are also split by product size and age.

The gluing station is not particularly complex, but all the products are glued. The glue typically takes 36 hours to set. A series of roller tracks holds the products waiting to set before testing.

Sketch below shows a schematic of the process flow.

Leanpal got involved with the project because the overall productivity of the factory was deemed to be too low.  Throughput was less than expected, and the products were not coming off the lines in the expected order for the end customer.

The initial project was scoped as an exercise to improve the throughput of the calibration/test department, where it was thought that the changeover time (taking products off the test stations and replacing them with the next product to be tested) was constraining the overall output of the factory.

The supervisor of the calibration/test department, whilst open to the improvement project, maintained that the changeover time (and his department) was not the bottleneck - it was the way that the products arrived at the department which held up the overall throughput.

This was quickly investigated and found to be true.  The calibration and test was split into different product families, and could handle up to 11 assemblies any one time across six test lines.

In practice large amounts of the same size product were presented to the calibration test department at the same time.

Never mind waiting for a bus and three turn up at once – a better analogy would be like waiting at a main line rail terminus in London only to find that the first 30 trains were all going to Wales, the second 30 were going to Scotland and the third 30 were going to Cornwall rather than 1^st train : Wales 2^nd:  Scotland 3^rd: Cornwall 4^th: Wales etc.

The planning system already in place relied on line supervisors constantly scheduling and re-scheduling according to the master plan, without taking into account the queuing at the common process. 

Assembly lines were also manned by individual teams who concentrated on optimising their line performance without being aware of the bigger picture.   

This meant that labour transfer to meet demand across lines was rare and expediting critical items through production was frequent and disruptive (one senior manager spent almost all of his time on this activity).

Leanpal advised the senior and middle management that a Kanban system throughout the factory could increase throughput and conformance to customers’ schedule by better ordering the presentation of assemblies to the calibration/test department.

Value stream mapping

Value-stream mapping exercises were carried out across three of the eight assembly lines to improve the line layout, task balancing, single piece flow and pull production within the assembly lines themselves.  

It became apparent that despite the scheduling carried out by the line supervisors, assembly teams took it upon themselves to change the plans dependent on their personal build preferences.

The tail was wagging the dog.

Not only were the products’ arrival at the gluing station not being coordinated, the assembly of the products within the 8 lines were not being carried out in accordance with the plans.

Value Stream Mapping also revealed that the opportunity for significant productivity savings through task balancing within the lines, not to mention across the lines.

Customer demand analysis

The overall production demand pattern was analysed using Pareto analysis, and broadly split into runners, repeaters and strangers depending on the volume of throughput.  A “model plan” was developed to explore how the runners repeaters and strangers should (in theory) be presented to the gluing line in order to optimise the delivery of finished assemblies to the calibration/test lines.

Kanban loop and card design

Kanban cards were designed and pre-printed for the runners and repeaters. 

Blank Kanbans for the strangers allowed the product name or specification to be handwritten into the Kanban.

It became clear that two Kanban loops were required – one between test & gluing, plus one to pull products from assembly to the gluing line.

The system was designed so that only the test supervisor received a copy of the customer orders to be processed.  As runner/repeater products passed testing, the (blue) Kanban cards taken off these products were placed in the back of a Kanban box situated close to the gluing line.  This triggered a differently coloured (red) Kanban card to be sent to the eight individual assembly lines, each of which had its own Kanban box.

The red Kanban card signalled the assembly line to build the product, the build order was dictated by withdrawing the card from the front of the box.

The products assembled with red Kanban cards reached the gluing line, the red cards were replaced with blue cards, then the red cards were filed in part number order waiting for the next call off.

Staff on the gluing line were responsible for matching the assembled products with the blue Kanban cards in the order dictated by the cards coming out of the bottom of the (blue) Kanban box.

This ensured that the products going through the gluing line were processed in the order required by the testing station despite the 36 hour lag time as the glue hardened.

The sketch below shows a schematic of the line and the Kanban Loops 

Advantages of the Kanban system

The whole process significantly improved delivery measured by OTIF (on time in full) by smoothing the flow through the gluing and testing processes.

Due to the visual nature of the Kanban cards, where assembly lines had no product to be pulled, the supervisors found it much easier to manage the movement of assemblers to different assembly lines where the products were required.

Change management

The implementation of the Kanban System represented a significant change for the assembly line personnel.  They were used to managing the pace and order of their own assemblies according to their preferences, and generally stuck to one particular type of assembly rather than crossing line boundaries. Night shift and day shift competed on assembly numbers by attempting to produce the easiest products rather than the ones which were actually required by the customer according to the schedule.

Individual line and shift targets set by management had encouraged this behaviour in the past.

The installation of the Kanban System smoothed the overall flow through the factory, but forced the assemblers to build strictly in the order required by the customer, and to be flexible between easy/difficult products and across the production lines.

The design of the card system itself, the Kanban boxes, and the need for strict discipline in terms of ordering the Kanban cards was also a significant change.

In order to address this culture change, the complete system was extensively modelled with stickle bricks representing products, card labels standing in for Kanban cards and cardboard boxes standing in for the Kanban box. 

Initial table-top simulations were tested by a small team of four managers and production engineers. Then glue line, assembly line and test line supervisors were taken through the simulation to model the process and deal with any questions.

Having proved the system worked through the simulation, real Kanban cards and boxes were produced and installed on the factory floor, flow charts and standard operating procedures were drawn up to explain the process and awareness sessions were run for all the shop floor personnel to explain the system.

Summary

The installation of the Kanban system took several months to design and develop.  Whilst the concept of Kanbans is relatively simple, the devil was in the detail : understanding the demand pattern, where the issues were and how to design the practical application.

Understanding lean and the overall picture needed to be developed across senior management, middle management and shop floor staff.   

The project would not have succeeded without significant application of resource from the company to analyse the detail and adapt the system into something which would work within the company. 

Nor would the project have succeeded without a strong management champion capable of seeing the big picture and committed to addressing the whole rather than fire fighting individual departmental issues.