Pundits are fond of pontificating that “government should be run like a business.” What they are really saying is that since businesses answer to shareholders and must squeeze out every cent of profit, those who run a successful business must constantly keep their eye on the bottom line. From there, it’s an easy leap to the conclusion that every decision made by a business or government entity should be viewed through a fiscal lens.
Like all simplifications, the pundits’ manifesto has some grain of truth, but upon closer inspection one realizes that the real world is much more complex.
First, running an entity “like a business” is not a recipe for success. Remember Borders? People Express? Enron?
Like running a government, running a business requires the use of continually improving tools and techniques. But tools in and of themselves are not the answer.
Take, for example, Lieutenant Governor Kim Guadagno’s “Red Tape Commission.” No one can argue that the elimination of red tape is a good thing. Or can they? Some so-called red tape provides the checks and balances necessary to ensure that promoting a good business climate does not have the side effect of destroying the environment or putting unsafe products in the hands of consumers. So while the elimination of unnecessary red tape is a desirable goal, one must wonder if that’s the real impetus behind this commission. The Guadagno Commission is a Band-Aid, not a long-term solution. As we will describe later, the real goal is the elimination of waste, not red tape. There’s a difference.
This memo will outline a proven approach to improving government services while reducing expenses and enhancing the quality and quantity of those services to the New Jersey taxpayer.
While incremental change to the way the state government operates may be beneficial, a more aggressive approach is needed to react to, and eventually assume a proactive approach to, external factors.
The Bush Recession and accompanying financial meltdown are the main external factors that have had a significant impact on the state’s ability to provide the services that our citizens deserve. Additionally, weather-related calamities induced by global climate change, our century-old crumbling infrastructure, and technology advances are moving at a much faster pace than our present approach to running the state can react to.
Yet, change for the sake of change is a road to disaster. Any modifications to the way state government operates must be quick, methodical, and justified by facts and figures, not “feelings.”
The problem with the way the Christie Administration has changed the way the state operates is that its mantra is “doing less with less.” Lower revenue to Christie means laying off thousands of employees, slashing assistance to those who need it most, and exacerbating the problem by limiting “shared sacrifice” to the poor and middle class.
“Doing less with less” in the business world is the road to loss of market share and eventual oblivion. Those businesses that thrive adopt a different mantra: “doing more with less.” They provide better services or products through the systematic (as opposed to the opportunistic) reduction in waste and inefficiency. And there’s an inexorable benefit to these systematic methods – quality of the product or service goes up as the cost of those products or services goes down. “Quality is free.”
It’s not magic. It’s hard work. But with several decades of experience around the world, it is proven. What is “it”?
Processes to improve outcomes in business have been around for decades. Throughout the last century, “efficiency experts” have been employed by businesses and governments to increase performance and reduce expenses. In the second half of the 20th century, the work pioneered by an American, W. Edwards Deming, was adopted in Japan as exemplified by Toyota Motors Corporation. Over time, that automobile manufacturer was able to change from an organization associated with cheap, unreliable products to one that epitomized quality and reliability. Deming’s work was eventually repatriated to the United States and is the genesis of what we today call “Lean.”
While the implementation of Lean processes started in the manufacturing industry, over the years these techniques have migrated to the services industry, the Federal government, and elsewhere.
Six Sigma is a companion approach to Lean. It started as a measure of quality, but it promotes consistency and predictability of business processes and outcomes.
Lean is a proven methodical technique to identify and eliminate waste from a process, whether manufacturing widgets, providing police and fire services, or handling caseloads in the Division of Youth and Family Services. It involves all of the stakeholders. Success is not measured by intuitive feeling but rather by a rigorous set of metrics. Perfection is the goal – one that will never be reached, but will always be approached by continuous, rather than intermittent, process improvement. When properly applied, these techniques can achieve performance improvements in double-digit percentage ranges. Application of Lean and Six-Sigma techniques is a culture change in the way an organization does its business.
These techniques are not new to other state governments. They’ve been proven time and time again. For example:
- Michigan Department of Environmental Quality (DEQ) decreased the time needed to process major air construction permits from 422 days to 98 days. Quality improved, with initial application administrative completeness rising from 82 to 95 percent.
- The Iowa Alcoholic Beverages Division reduced delays in its invoice and taxation process by 81%
- The Ohio Bureau of Workers’ Compensation reduced the time required to process a protest from 169 days to 66 days and is continuing to reduce that number.
The concept is simple. Use methodical processes (rather than folklore and intuition) to identify and eliminate waste. The execution of the concept is a bit more involved. It requires the investment in training of the stakeholders and the employment of trained facilitators. It involves investment in structured events that will require dedicated attention from stakeholders. But it’s an investment that has proven to pay big dividends in reduced cost and increased quality.
In any organization, those who are best equipped to push for change are the ones least likely to initiate it. After all, the elected and appointed officials who run state government got to where they are by doing things the “old way.” Lobbyists and special interest groups often abet inefficiencies in how tax dollars are spent.
Nevertheless, I’m optimistic that there are a few enlightened public officials who are willing to go out on a limb and start the process.
Successful change must come from the top. In the case of a business, the CEO and his staff are the impetus for applying Lean and Six Sigma throughout the enterprise. In the case of the State of New Jersey, the Governor and his cabinet must be the champions of controlled radical change. Whether or not the current administration is willing to embrace these techniques, it is not too early to plant the seeds of these ideas in Trenton.
These techniques require an open and honest discussion of how things are done today (the “present state”). Some people, whether in government or a commercial enterprise, are reluctant to expose inefficiencies and loathe to applying quantitative measurements to their work products. An aggressive and comprehensive top-down training and indoctrination program is necessary to break down that barrier. Success will come only when top executives “walk the talk.”
Some people will look at any systematic method of process improvement as a vehicle for eliminating their jobs. But the reality is that jobs are already being eliminated today – haphazardly, unfairly, and inefficiently. Lean processes provide the opportunity for workers to enhance the quality of their jobs. After all, who wants to go to work every day doing something wasteful and inefficient? Job satisfaction benefits not just the worker but the end customer as well. Successful implementation of Lean and Six Sigma techniques requires the involvement of all stakeholders – employees, managers, customers, unions, and suppliers – from Day One. Everyone’s voice is not just important, but is critical to success.
Expectations must be set appropriately. Implementation of significant change is neither free nor instantaneous. It will take several years to cement the culture change of continuous improvement. There will be some people who will be willing to sabotage change in order to maintain their comfortable status quo. Senior management must make it clear from the outset that this is unacceptable behavior.
States like Connecticut, Iowa, and others have already embraced these techniques. They have established central administrative groups that provide the training, facilitators, and measurement techniques that are required for success. Here in New Jersey, we don’t have to re-invent the wheel, but should learn from the successes and failures in some of these other states as we plan our approach to Lean and Six Sigma.
While the ultimate goal is to implement these process and quality improvement techniques across the entire spectrum of state government, doing it all at once is neither feasible nor advisable, but doing it quickly is.
One approach would be to find a department or agency with enlightened leadership that is willing to pilot these techniques. Accelerated training could be given to that agency’s employees and stakeholders followed by a six- to nine-month pilot program where several dozen process improvement initiatives are undertaken and measured. Success should be celebrated. Failures should not be looked upon negatively, but rather should be used as learning moments. From that, those employees who are skilled in the techniques can seed other state agencies as the training and implementation is rolled out state-wide. Eventually, this cadre of experts could also be used to help implement Lean and Six Sigma at the county and municipal levels. Standardization of process improvement techniques and measurements across agencies will make it easy for experts to work on the many inter-agency improvement opportunities as well as transfer among different departments. Progress will be evaluated using rigorous statistical measurements and techniques, and must be open and transparent.
Continuing to do business as usual will give us the same results as usual – higher taxes and reduced services. While the measures of success may differ between a commercial business and the state, the proven tools and techniques that have been successful in business can make a big difference in providing the vital services that only the state can provide.
 There can be no debate that global climate change is real. Whether or not it is man-made is a debate beyond the scope of this memo.
 Six Sigma is a statistical technique, which when achieved, results in a limit of 3.4 defects per million. In some industries, this goal may be too aggressive, in others not aggressive enough. For example, in the process of printing a daily newspaper, a larger ratio of defects is not a calamity. But consider commercial air traffic in the United States. There are about 6,000 commercial flights a day in the U.S. If a “defect” is defined as an accident with fatalities, the Six-Sigma goal would be a statistical average of 7 fatal accidents per year. Fortunately, our airline safety systems have been better than that over the past decade. Just considering the cost of a fatal incident to an airline, the money spent on safety nets a positive impact on the bottom line.