changing a public sector agency

Changing a public sector agency:The Dutch Alimony Agency (LBIO)By: Mr. Leo D. de Bakker RA

Director of LBIODrs. René L.M.C. AernoudtsSentary Coaching & Consulting

Wednesday, June 23, 2004Lean Service Summit, Noordwijk aan Zee

BiographyLeo D. de Bakker RA (1958)Registered accountantIn central government since 1980Tax authorities and Customs controlSince 1997 Director of the LBIOStarted to work with Lean in 2000Leading question: are we able to succeed to introduce a lean approach into a governmentalorganisation?

In this presentationWhat is the LBIO - The National Alimony Agency A bit of history…What to do? LEAN!What where the problems faced: the first mapIntroduction of Lean principlesThe chosen way of transformationThe Lean Development ProcessResults

The Dutch Alimony Agency (LBIO)

LBIO was founded in 1993 by the Ministry of Justice and the Ministry of Social AffairsLocated in Gouda, 75 full time equivalentsIndependent Governmental OfficeTasks:1. Collection of child support

(alimony)2. Decide and collect contribution in case of placing a child in care 3. International collection of child support4. A possible new task: establishing the amount of alimony that has

to be paid

1.Collection of child supportWhen child support (also called alimony) has been decided (by court) LBIO can collect the amount when someone doesn’t pay his support. We do this by writing a letter asking for payment voluntarily. People can pay directly to their ex partner or via LBIO (they pay 10% extra). If someone is not willing to cooperate, we can go to their employer and collect the money there. If this is not possible we can seize goods or take someone hostage...65% of the people pay voluntarily to their ex partner after the first letter they get from us, without LBIO taking further action

Amounts in 2003: 6.736 requestsCollected in 2003: € 10.3 million

Processing application

Agreement on payments

Execution:distraint on wages

Execution:Bailiff-actions

Imprisonment-procedure

Termination

2. Contribution in case of outplacement

When a child is placed outside the home in case of child aid the parents have to pay for that care. The LBIO decides the amount that has to be paid and collects it for the Ministry of Justice or the Ministry of Social Care.

Amounts in 2003 : 12.428 requestsCollected in 2003: € 8.6 million

3. International collection

When one parent lives abroad the LBIO can still collect child support and alimony for the ex partner. This has mainly been arranged internationally in the Trade of New York of 1956.

Amounts in 2003 : 242 requestsCollected in 2003: € 0.5 million (in the Netherlands)

4. Establish the amount of alimony

Thanks to the good work of recent years we mightnow get an extra task by the Ministries of Justice and Social CareWe used all the knowledge of recent years in setting up a lean work process where we can deliver the newproduct within just a few days (instead of 2 to 3 months it used to be) at a low costWe can do this new task with 15 people instead of 100 it used to takeWe thus save € 10 million per year

So dear audience…How many Dutchman do you think we know as our customer???

So dear audience…How many Dutchman do you think we know as our customer?!?!?!

A bit of history: foundation of the LBIOUntill 1993 there were 19 financial departments at 19 regionaloffices of the Child Care and Protection BoardProcess of centralisation went very slowly and was accompaniedby altering law and regulationsThis resulted in unmotivated employees, ICT-problems and growingbacklogs (running up to 10 months!)In 1997 we started a privatisation process which also included a reorganisation aimed to improve clarity on tasks, powers, responsibilitiesProduct process in a single department and set up of a staffdepartment (43/120 FTEs)Conditions of employment remained

The situation at the end of 1997I became the Managing DirectorState of the organisation:

A problematic work processGreat turmoil and uncertaintyComplete lack of professionalismA delayed computer systemEnormous backlogsCritics of customers, ministry, colleagues

First actions:Improving stabilityIntroduction of computer systemTackling backlogsCreating transparency through a new cost price system (OPK)

Old organization structure 1997

Managing director

Child support Staff

team2

Int. Alimony Alimony

team 1 team 3 Admin Financeteam 1 team2 ICT

senior senior senior senior senior senior senior senior

employees

team 1

But…I wasn’t satisfied…A lot of complaints by customersLong leadtimesDemotivated personnel (high illness rate)Distrust in management by personnelHigh amount of work in processToo much bureaucracyToo much “talking about” in stead of “just doing”Court cases and bad press (even National Television)Seen as a badly functioning organisationThe improvements seemed to be to minor and took too longThe altered organisation structure wasn’t doing what was hoped forMain argument from team leaders was: “we need more people”Management wasn’t able to deal with the problems faced

What to do???I spoke to my Management TeamI spoke to colleagues and MinistriesI spoke to a couple of consulting firmsThis finally gave me a vision to solve the faced problems: go LEAN!I asked René Aernoudts (Sentary Consulting) as my sparring partner and consultantWe made our first mapWe cleared out the first problems…

The first mapVivid picture of the futureLean Team

Illustrative examples

Key questions

Leading lean principles

?

Objectives (measurable

results)

Lean Team: four process owners, consultant, director

How can we improve our processes radically?

Leading lean principles

?

120 to 60 fte

What is the fitting structure?

Processing time from 15 to 2 weeks


2003

Value Stream MappingEliminate waste, FLOWQuality at sourceStandardized work5S Teams

Three years for reaching our goals…To:

Altered work-processes and no backlogs anymoreLess work and FTEsAltered organisation structureManagement Information System using the cost price system

With:Input and full involvement from the employees

By:Starting a Lean Change Process with employees as the main change agentsCommunicating and discussing about every step in the processA new organisation structure

The Lean Change ProcessThe distrust of personnel in their team leaders and department heads led me to involve the personnelmassively in the Lean Change ProcessA Lean Team was formed, out of 4 process owners whoformed a team of colleagues themselves and consultants (their role was transfer of lean knowledge in a supporting, motivating role)An advice committee was formed that supported the developmental team in a meeting once a monthDuring this some of the managers decided to leaveI made some promises…

The Lean Change ProcessEach team got the assignment to steer one developmental process,form a group of colleagues and got help from consultantsThey did all kinds of things: started with value stream mapping the basic processes, looked for potential future state solutions at other organisations, read books and articles, organised 5S workshops and gave presentations and so onAfter three months these groups presented their final reports to all employees of LBIO and the Management TeamThe Management Team decided within two weeks which actions were decided on, an action plan was designed and the new processes got implementedImprovements: accessibility for customers by telephone, standardized work, customer quality panel, less inventory, less transport, et cetera After mapping the current and future state maps The Lean Team also introduced supporting features as self steering teams, task profiles and a new organisational structure

Current State Value Stream Map

Post officeOpen mail type in data in the system, application in archive

Processing applicationCheck if all data is available (execution title) and righteous

CollectingAgreement on payments, informing parents and filing

Archive

All files and applications are filed

Execution TerminationDistraint on wages, baillifactions

Inform both parents, close file and filed in archive

Parent 1 Parent 1 and 2

Employer of parent 2

Lead time min: 416-600 daysProcessing time: 75-344 minutes

5 2 9 25 8 5

5 min 3 min 12-16 min 20-180 min 25-120 min 10-20 min4 days 3 days 3-4 months 2 months 2-3 months 6-10 months 2 weeks

Future State Value Stream Map

Post office& Archive

Processing, collecting & executionAll tasks are fulfilled by one employee (digital archive)

TerminationInform both parents, close file and filed in archive

Parent 1 Parent 1 and 2

Employer of parent 2

Applications are scanned

Lead time min: 184 – 310 daysProcessing time: 41 - 216 minutes

4 hours 2 – 10 days 6 months3-4 min 30-200 min 8-12 min

4 30 3

New organization structureAfter redesigning the processes the Lean Team came up with a new structure, eliminating 2 levels

MD

Production I(spec. CS)

Production II(spec. iA)

ICT, Admin & Finance

Office for Management Support

employees employees employees

What has changed?Less hierarchy Doing more with fewer peopleThroughput time from 3 to 4 months to 2 weeksOne employee is responsible for one case from beginning to end– Selection no longer a different division– The amount of stock has decreased and stays that way

2000 2003Managers 16 4Employees 100 75

New managementThree new MT-membersSpecial Lean Education Plan for new managers (one month) where they worked in all the departments and created current and future state mapsValue stream walkthrough for improvements– Improving the request forms (from 40% incorrect forms to only

4%)– Improving the letters for our clients (from 120 to 20 different

standard letters)– More steering on time-lines– Developing targets (for teams & individual)

More Lean ThinkingTeam training in self management and meeting skillsWe went for a one month project eliminating the total inventory through letting every employee process 6 to 8 applications per day next to their normal job: we achieved the result in two weeks time, what was thought of being a problem impossible to solveTeams are self directing– Deciding their own daily work process and planning– Review their teameffort, results and quality

Multiple skilled employees– Employees of different work field learn each others job– Extra support is there when needed

Pull push principal– Production is based on need

Results IFrom backlog of 4 months to work-in-progress of 2 weeksNumber of standard letters down from 120 to 25Decrease of staff-FTEs (43>28) by self-management of the teamsDecrease of number of files (15,000>10,000)No external warehouse needed anymore3 employees of the financial departement do the work of 7 earlierImproved accessibility by telephone for customers from 2 hoursto 7 hours per dayCustomer satisfaction is 8 out of 10Absenteeism from 16% to currently 4%First time right: from 40% rework at applications to under 4%

The new LBIO…

Results IIIndicators 2001 2003 Percentage

improvementCases solved after first letter 50% 66% 32%Number of current files 15.000 10.000 -33%Processing time 15 weeks 2 weeks -87%Number of employees (full-time equivalents) 100 75 -25%Number of executives 16 4 -75%Necessary re-work on application forms 40% 4% -90%Absenteeism 16% 9% -44% (in 2004 below 4%!)FTEs fulfilling more than one task 5% 40% 88%OPK-production (total) 193,757 206,93 7%Productivity per FTE 1937 2,759 42%Total collection results (million euro) 17.5 19.5 12%Results per FTE 185 260 41%Floor space required 2500 2000 -20%Costs per euro child maintenance collected 0.21 0.17 -24%Costs per euro parental contribution collected 0.19 0.16 -16%Leadtime (in days) 416-600 184-310 50-56%Processing time (in minutes) 75-344 41-216 37-45%

ConclusionTransforming a civil-service type organisation into a decisive, flat and customer oriented organisation bymeans of ‘lean thinking principles’ IS POSSIBLE!

But: you really have to believe in it yourself and give the opportunity to employees to explore and redesign… they know it better!

Remarks and Questions?

THANK YOU!