Value Analysis is deployed widely in the Toyota Production System as well as Manufacturing in general. In its purest form, Value Analysis digs deeper into whether any activity on the manufacturing floor adds Value to the End Customer. For example, on the manufacturing floor, fixing the car door on a car in an assembly line is a Value Adding step for the end customer. On the other hand, if the person on the manufacturing floor is filling out a form on some manufacturing activity and if it is only for the company’s accounting or audit usage, the end customer receives no direct value from this activity. It is deemed to be a Non-Value Adding activity. In Manufacturing, they try to eliminate non-value adding activities completely while improving the way Value addding activities are done. This is a systematic way in which companies like Toyota effect continuous process improvement in the manufacturing arena.

This is a powerful concept that can be modified, tinkered with and adapted for use in the Business Process area also. In Business processes there seem to be three classifications instead of just two: Value-Adding Activities, Mandatory Activities and Non-Value Adding Activities.

In many business processes, an example of a Value-adding activity may be answering the phone and supporting the customer for a product or a service. The employee in a call center filling out a Leave Application form is a non-Value Adding activity. It is of course, extremely valuable to the employee, but the end customer does not receive any direct value from this activity. This is not a value judgment but just a way of identifying activities that can focused on, for improvement.

However, in business processes, many activities may be Mandatory but add value to the end customer in an indirect way. For example, if someone applies for a passport, doing a fingerprint check against a database of known criminal offenders may be a Mandatory activity. In a Mortgage Processing application making sure that the Fair Housing laws are followed properly and the compliance related activities for these are mandatory activities. When evaluating an applicant for a loan, in the U.S., the Equal Credit Opportunity Act may have to followed.

Value Adding Acitivities can be targeted for execution faster, cheaper and with better quality. Mandatory Activities may need to be tested on whether laws have changed since the business process was designed. If laws have changed and some mandatory activities are no longer needed, they can be eliminated. If not, process improvement can focus on performing them faster, cheaper and with much better quality.

Non-value addding activities are good targets for elimination completely.

Lean Manufacturing and the Toyota Production System (TPS) have a number of lessons they can teach us in Business Process Improvement. Borrowing, Tinkering and adapting techniques such as Value Analysis can effect the same kind of quantum leaps in business process productivity that manufacturing has achieved.

Value - The real price of everything, what everything really costs to the man who wants to acquire it, is the toil and trouble of acquiring it.-- Adam Smith

Most Process Improvement efforts start usually looking at Turn-around Time (TAT) for each step in a process. This is useful but not as useful as looking time that is wasted in between process steps.

This article shows how a hospital in Dallas reduced the waiting time to be admitted into the Emergency Room from three hours to just an hour.

Passports in any country take anywhere from 4 to 6 weeks or longer, not because there are experts poring over your application checking every fact in your application and making sure you are not a member of Al Qaida! Nothing as exciting! Between bursts of a few seconds activity for each process step, the application just waits for some human being to do something.

That’s the reality if you are waiting for a reply to an email you sent to the customer service department regarding your purchase or if you have submitted an application for a home mortgage loan. Truth is that these are waiting interminably in someone’s inbox, physical or electronic, for a human being to take some action, somewhere.

Mercifully, many new examples of technology concentrate on the application of the Pareto Principle to these situations and cut down waiting time to Zero. 80% of Credit Card applications are either accepted or rejected on the spot and a decision given directly by the computer. The other 20% is directed to human beings for making a decision.

Many Insurance companies make auto insurance underwriting decisions automatically. The combine the information in an application with accident records retrieved electronically and a straight accept or reject decision made using some business rules. These could things like "if the applicant is a male driver, under 21 years of age and the car is a Red Convertible,put it in the manual underwriting pile" or "If the driver has had more than three accidents in the past year, reject the application". This way the 80% applications where a machine can make a decision quickly, be it positive or negative is taken off the list of things to be done manually.

Japanese automakers, especially Toyota have performed wonders by systematically looking at what activity is taking what time and eliminating delays. If they want to change a production line from manufacturing Toyota Camrys to Toyota Corollas, the stamping machines (the ones that stamp out steel doors or body panels) used to take weeks to switch over. By systematically studying the delay times, they have reduced it to minutes! A typical improvement example would be to have the dies for the different cars in a circular table and just rotating the right one into place!

The same kind of miracles are possible in services also. Cutting down time directly increases productivity, decreases costs and counterintuitively increases quality also (quality includes satisfied customers also!).

Looking at waiting time may be more important than looking at TAT!

Delay is the deadliest form of Denial! - C.Northcote Parkinson

Performance Guarantees are offerred routinely in services. Fedex and UPS give you an expected date of delivery for normal ground shipping. Next day air and 2-day deliveries have their own implicit performance guarantees. Ordering computers online always includes an expected date of shipping that changes dynamically, if you change configurations from standardized ones to custom ones!

Even pizza deliveries are guaranteed within 30 ninutes or your pizza may be free!

You bet that all these people are monitoring their services very closely minute by minute so that they can keep their performance guarantees. This applies to most services. If they are not there now, they are coming! If Acme Mortgage company cannot process your Mortgage application in two weeks, some online mortgage processor promises to, and will do it.

Defining a set of Performance Contraints is key to making sure that services are delivered properly. In many cases, the Performance Contraints may be in conflict with each other. If you make sure that your support phone calls are short, achieving your Average Handle Time (AHT) goals, your Customer Satisfaction Index may suffer.

Now making sure that you deliver a service properly, means that all of your Performance Constraints are within acceptable Ranges rather meeting single absolute numbers but balanced against each other in acceptable ways. It also means that you don’t come to know AFTER THE FACT, that you will not be meeting a Performance Constraint. If you can get alerted in real-time on a possible Performance Constraint violation, you can take some corrective action.

If you are not meeting your Average Handle Time (AHT) goals in a call center, you can get some more people on the phones and make sure that your acceptable levels of service on the phone are met.

Performance Constraints provide a very valuable way to think about service processes and how you want to deliver them. More importantly, they provide a pro-active way of managing them.

It is an immutable law in business that words are words, explanations are explanations, promises are promises but only performance is reality. - Harold S.Geneen.

Following up on my previous blog entry on Performance Constraints here, I would like to follow up on some more ideas on how to do better Performance Optimization in Services.

Usually in Services, a number of Key Performance Indicators like Efficiency Metrics (Average Handle Time, Average Speed of Answer, Average Hold Time, Number of Mortgage Applications Processed in an Hour, Number of Collections Calls made, etc) and Effectiveness Metrics (Total Collections in a Collections Process Compared to Target Collections, Total Number of Telemarketing Calls made vs Number of Calls that resulted in a Qualified Lead, Customer Satisfaction Index), etc are routinely measured. In the Business Process Outsourcing context, some of these KPIs are also in the Service Level Agreements (SLAs) and are shared with the end client.

Often in Services, Efficiency Metrics and Effectiveness Metrics are opposed to each other as contrasted with Manufacturing where they seem to be less conflicting with each other. Faster manufacturing may quite often mean more output as long as the manufacturing process is stable and quality precautions are taken.

In Services, faster hanging up of phones as a goal often erodes Customer Satisfaction. When your doctor spends only 10 minutes with you as opposed to spending 20 minutes with you, your past history and talking to you about your ailment, the quality of care and your Customer Satisfaction Index invariably suffers.

When you are processing Orders in an Order Processing application, when your productivity metrics such as number of orders processed per hour goes up, your effectiveness factors such as Accuracy and Precision suffer and you make errors that may require rework and cost the company money!

If you look at Service Process Performance as a set of Performance Constraints and BANDS of values for KPIs are acceptable rather than just a single value, as long as they are compensated by better performance in another KPI like Customer Satisfaction, it should be Optimal Performance.For example, let’s say that Average Handle Time could be anywhere between 10 minutes and 15 minutes on a phone call AS LONG AS lower performance in AHT is compensated by higher Customer SatIsfaction Scores!

Or if you have 10 Key Performance Indicators in a Service Process, good performance can be defined by 6 our of 10 KPIs being in certain ranges rather than an individual value for each one.

Services seem to demand bit more sanity and thought into how to measure, and what constitutes good performance. Call center managers will tell you horror stories about how the KPI tails usually wags the Agent Performance Dog with very undesirable results. There is the story of agents suddenly in the middle of the call saying" Hello, Hello, I can’t hear you anymore" and then hanging up on customers. When they realize that the call has lasted more than 10 minutes and they will be in trouble with their own Average Handle Time metric, this has been known to happen!

Performance Constraints and Bands of Acceptable Performance may provide a better way of managing performance in a saner way and not let poor metrics design drive behavior into unacceptable territory, defeating the whole purpose of measurement!

For me, goals and daily metrics are the key to keeping me focused. If I don’t have access to the right stats, every day, it is so easy for me to move on mentally to the next thing. But if I have quick access to key metrics every day, my creativity stays within certain bounds–my ideas all center on how to achieve our goals - Paul Allen

Managing Virtual teams is becoming more and more the hot topic in the project management world, as outsourcing continues to grow. I thought I would share with you a book I read recently which I believe can assist Virtual Team managers, while not the most recent book, it is from 2003, I still found it useful.

The book is called: "Quick Guide to Interaction Styles and Working Remotely: Strategies for Leading and Working in Virtual Teams" by Susan K. Gerke, Linda V. Berens and can be found on Amazaon, for example for approximately $8.95, 36 pages in length.

What can you expect from a short 36 page book called a "Quick guide"? Well apparently enough to make the book a worthwhile buy for the price.

After reading the book, I believe if any project manager, who is managing a virtual team picks up this work book; they will be introduced to a number of small changes that they can put in place for dealing with their remote team, and these changes can make a world of difference. If today's style is to make continuous
improvements, this book gives enough suggestions and ideas that can help just about any project manager put in place their own quick changes. The layout and format of the book goes a long way in making that happen with the numerous bullet point suggestions and lists for many of the topics.

The appendix also contains useful information. Appendix A concentrates on tips for when to use what means of communication. I had seen this in a previous book from 1998, in that book email instructions had also been included at the time, but this newer guide includes more concrete suggestions for breaking out the subject line which will hopefully get the emails answered when you need them to be answered. Again
little steps which can make the whole interaction process much easier and less stressful for the project manager.

There is one thing that initially bothered me when first going through this book. The Interaction Styles model is another four-quadrant model. Most of us have seen one or more of these types of models for explaining personality types, etc. The Quick Guide is a work book and the interaction styles presented in this book would be further defined in the book, "Understanding Yourself and Others: an Introduction to Interaction Styles". Without having the additional explanation of how the interaction styles model was derived, it seems like it would almost be easier to understand and relate to this new four-quadrant model if it followed a
widely accepted four-quadrant model and if it were presented in relation to that model. For example against the DISC model (behavioral and personality model), I see some similarities but then the styles also seem to be in quandrants that do not match up with the DISC model.

Overall a very quick read and a quick way to put several noticeable changes in place to help reduce your stress level when managing your virtual teams.