Sunday, September 1, 2013

Lean Processes, Tip #02

Minimize the number of handoffs

If you want a fast and reliable process, cut the middlemen.

A process handoff is an intermediate step in a business process where work and information passes from an upstream player to a downstream player.

Handoffs are the usual suspects for a slow process. Here's why:

1. a handoff is an opportunity for cycle time build-up
Prior to a handoff, the upstream employee usually prepares the information, the documents, the action history or any other data that will assist the downstream employee in performing future work.
After the handoff, the downstream employee will consume the data prepared by the upstream employee, will seek clarifications and / or further guidance and will then proceed with work.

These additional activities create additional time in the process, only for the sake of the process.

Example: most Sales people abhor doing paperwork - especially when they create a new sales transaction. If they have to bring complete cases to the Legal Department, they have to spend time building them. Under pressure, they will deliver incomplete cases just to hand them off quickly and then the time waste is moved in the Legal Department. This could be redesigned through a technique I am going to discuss about next week.

2. a handoff adds noise in the information flow
With signal, comes noise. The more we communicate, the more likely we are to be misunderstood. When handing off multiple activities multiple times, the noise can get out of control.

In the SCRUM methodology (an agile software development methodology), an estimated 50% of knowledge is wasted after 5 successive handoffs. Therefore, a handoff is a significant opportunity for mistakes and misplaced work, to the point you could reliably measure its cost.

Example: a purchasing employee obtains an additional rebate deal for a complex Purchase Order, gets approval of Management in one form, then passes this to Contract Management, who then passes this to the Warehouse (if it's a goods deal) or to a Service acceptance function (if it's a service deal), then somehow this info needs to come to Invoice Passing (maybe other functions, like Engineering or Tax). The more complex the deal is, the more likely it is to get misunderstood, to get stuck, or to get executed very differently from what has been approved - and generate lots of waste.

If you cannot minimize the number of handoffs (especially in large organizations), there is a solution: morph your handoffs into teamwork.

More on that next week :-)