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Applying Lean Principles to a Professional Service Firm: Findings from a Pilot

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Conference Paper · March 2012

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 Applying Lean Principles to a Professional Service Firm: Findings from a Pilot Study

Alex Douglas
Reader in Service Quality Management, Liverpool Business School, UK
Email: a.douglas@ljmu.ac.uk

Jacqueline Douglas
Senior Lecturer in Operations Management, Liverpool Business School, UK
Email: j.a.douglas@ljmu.ac.uk

Jiju Antony
Professor of Quality Management, University of Strathclyde, UK
Email: jiju.antony@strath.ac.uk

Debbie Green
Liverpool Business School, UK
Email: D.Green@ljmu.ac.uk

Abstract

Purpose
The purpose of this paper is to report the results of a pilot study that applied lean tools and
techniques to a financial services firm’s process.

Approach
A number of lean tools and techniques were applied to the selected process. Observation and
interviews were used to obtain step by step details of the process which was then mapped and
measured using lean metrics.

Findings
The selected process was found to contain waste. Non-value added steps were identified,
measured and eliminated from the process thus reducing this waste and significantly
accelerating the process. The process lead time was reduced by 60% and the process
efficiency improved to 72%.

Research Limitations
This paper reports the results of a pilot study only. The process used needs to be further tried
and tested on more service processes. Whilst all participants and organisational stakeholders
were cooperative and enthusiastic about the study (no resistance encountered) there were
problems in recording the observations of the process in the study. The accurate recording of
a very detailed and complex process proved challenging and it was not possible to address
potential “Hawthorne Effects” during the observation process.

Practical Implications
Lean tools and techniques can be applied to services and in particular to highly differentiated
low-volume, low repeatability services exemplified by professional service firms.

Originality
This paper reports the results of a study of lean tools and techniques applied to professional
service firms. This area has, until recently, received relatively little academic attention. This
case study adds to the growing body of evidence that supports the use of lean tools in
professional services.
Key words: Lean, Professional Services, Process Improvement.

Paper Category: Case Study

Introduction
Over the last 30 years Lean Management has evolved into a comprehensive management
system (Arnheiter and Maleyeff, 2005).It concentrates on the reduction and removal of
“waste” by process and value analysis (Bendell, 2006). The rise of Lean Management is
primarily due to an increasingly competitive and global environment that has forced
organisations to identify new opportunities to both create a competitive advantage and sustain
superior performance thus realising the commercial possibilities in the pursuit of perfection.
The harsh realities of this global competitive environment have focussed organisations on the
need to produce high quality products and services in order to achieve customer satisfaction
and loyalty in order to stimulate business growth (Kumar et al, 2008).

Lean Management
The objective of lean management is to create the ability to rapidly respond to ever-changing
customer demands, resulting in a greater value-to-cost ratio (Womack and Jones, 1996).
“Lean Thinking” was first introduced as part of the Toyota Production System (TPS) which
sought to remove both tangible and intangible elements of waste such as time, human effort,
space, material and human potential, which were ever-present in the mass production systems
that were prevalent in Western manufacturing in the 1970s and 1980s (Jones et al., 1999).
The key difference between the approaches is that where mass producers set targets that were
cost-effective to the organisation (good enough without costing too much), lean processing
demands a continuous striving for perfection, whether or not that is ultimately achievable
(Bendell, 2006). Western organisations have increasingly sought to implement lean processes
into their organisations with the aim of attaining benefits such as reduced operating costs and
increased efficiency and hence securing their long-term viability and competitiveness. The
success of manufacturing companies in achieving these benefits has led to many service
organisations looking to Lean to improve their performance. However, its implementation
within services is not without complications, resulting in a debate within the academic
literature as to the suitability of lean in services. It is this debate that is discussed in the next
section.

The Rise of Lean in the UK Service Sector

Lean approaches have been limited in the context of services, predominantly being applied
where a physical product exists, such as supply chain management or to healthcare. Maleyeff
(2006) contends that all organisations irrespective of their classification have a number of
internal systems which ultimately effect long term performance strengthening the case for
application of lean in services. However, critics dispute the suitability of lean in a service
environment with the main weakness relating to the measurement of lean and the truth of
proclaimed lean success. For example Hamel (2000) found that of 50 companies studied, 43
experienced significant downturns three years after implementing lean principles. Needy et
al. (2002) argue that any success statistics are likely to be inaccurate, since only a few
organisations adapt truly to lean. This lack of success is highlighted by Repenning and
Streman (2001): “despite dramatic successes in a few companies most efforts fail to produce
significant results”.
Although such findings contradict the reported successes of lean, they also cast a shadow on
its potential for success in the service sector. However in many cases the lack of success is
down to the extent of lean implementation and utilisation, see for example Chase (1999),
Olexa (2002), Bateman (2002) and Moore (2001).Their work identifies the need for lean to
be viewed as a company philosophy rather than a process. This “total” approach to lean is
supported by Liker (2004), Elliot (2001), Shingo (1989) and Meier (2001). Put simply, lean,
as a collection of isolated tools and techniques will not work. However, the opposite view is
also supported. The Engineering Employers’ Federation (2001) stated that utilising four lean
tools is needed to enjoy the full benefits of the approach. Their position is supported by Jones
(2009) who identified the “three Ps of Lean Action”; solving the right problems,
reconfiguring the right process and implementing the right plan. He suggested that if any of
these elements were missing then lean was likely to fail.
Pullin (2002) insists that in order to reap the full benefits of lean it has to be viewed as a
combination of both philosophy and practices, tools or processes.

Whatever the approach adopted applications of lean to a pure service environment are still
unproven (Piercy and Rich, 2009). Despite a plethora of conceptual applications of lean to
services, they found the academic coverage of lean implementation in a pure-service context
to be limited. Buzby et al. (2002) also found that to-date the application of lean beyond the
product-service had received relatively little academic attention, with often confusing and
contradictory findings. There is also limited literature on the suitability of lean methods for
sectors such as professional service firms with highly differentiated, low-volume, low
repeatability service offerings (James-Moore and Gibbons, 1997). Development in this area
appears to be the next logical step and it this gap in the extant literature that this paper aims to
fill. The main aim of this paper is to report on the application of lean methods to a selected
process of a professional service firm.

Method
In order to achieve the main aim described above a pilot study was set up to remove waste
and to improve the performance of one example process at a small financial services firm in
the UK. If successful this could then be used as the template for implementing lean across
other processes.
The case study organisation operates within the financial services sector. It was formed in
1998 by a group of investment specialists with the aim of providing clients with an efficient
wealth management service. The company operates from a small office in the business
district of Manchester, UK. The total number of staff employed is twenty, five of whom are
administrators.
A non-core process was chosen for the pilot study as according to Gronroos (2000) it is the
additional supporting services which increase company value, and not the core service. The
specific process chosen to be mapped for the application of lean techniques was the Client
Valuation Process. The process is used twenty times per month and is performed by all five
administrators. The Valuation Process is a service performed for clients on a yearly basis and
involves obtaining up-to-date values of all client investment and pension holdings and
informing them of the overall value of their portfolio.
Observations and interviews were used to obtain step by step details of the process performed
by the financial services firm’s staff. The observations involved shadowing an employee
whilst they completed the process and recording the process details, the resources needed and
the time it took to complete each step in the process. The data were recorded on observation
sheets and from that information a process flow chart was produced. This process flow chart
mapped out all the steps (16 in total) used in the process.
Results
Examination of the process revealed that steps 2, 6, 12, 13 and 15 were classed as non-value
adding steps and therefore should be eliminated. The majority of waste in these non value
adding activities involved wasteful printing and filing. In total 290 steps and 7 minutes 34
seconds were wasted collecting files from cabinets, collecting unnecessary copies from the
printer. Nine high quality sheets of paper were also wasted completing these tasks. The
elimination of such wastes in time, resources and movement were an improvement on the
original process, however further improvements were still possible through a critical
examination and analyses of the business and value added steps of the process. This would
lead to improved efficiency and increased value to the customer. This critical examination
questioned the following:
Purpose; What is done and why? What else might be done?
Environment; Where is it done and why? Where else might it be done?
Sequence; When is it done and why? When might it be done?
Manpower; Who does it, and how do they do it? Who else could do it?
Methods; How and why is it done like that? How else might it be done?
Materials; What is used and why is it used? What else could be used?
Therefore waste could be removed and the process improved by eliminating non-value added
work and questioning and improving value added and business value added work.

By the application of such lean principles and tools to the process, lead time could was
reduced from 2 hours 3 minutes and 11 seconds to 48 minutes and 46 seconds. This is a total
reduction of 1 hour 14 minutes and 25 seconds which is over half the original lead time.
Given that this process was completed on average 20 times per month by 5 administrators the
time saved was over 124 hours per month, and just over 186 person days per year (assuming
an 8 hour working day), this is a significant time saving. Time and human resource are
valuable to a service organisation. The time saved can be utilised more effectively elsewhere.
This time saved is achieved through the combination of waste removal and improvement
initiatives at each step in the process.

Conclusion
In conclusion, the results showed that the application of lean principles to this service process
reduced total lead time by 60%, improved process efficiency to 72% and significantly reduce
inventory costs and movement wastes. These results prove that lean principles have value in
a financial services firm and support Maleyeff’s (2006) contention that lean is applicable to
all organisations irrespective of their classification.

Management Implications
In order to take advantage of the potential savings in time and money that the application of
lean principles can bring about managers must firstly be aware that all process contain waste
and then be educated in the theory and practice of lean tools and techniques. Organisations
need to either recruit or train staff with the necessary skills to apply lean principles to
organisational processes. The development of in-house expertise has been made much easier
in recent times with the proliferation of training courses aimed at developing levels of
expertise at Yellow, Green, Black and Master Black-Belt level. Such courses are being
offered by universities and training organisations throughout the world. Such courses are not
cheap but any such expenditure must be viewed by management as an investment not a cost.
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