The Service Company Diet

 

Ken Sim used to think that efficiency-obsessed manufacturers such as Toyota had an exclusive hold on lean operating processes. But then he realized that running lean could transform his service business into an industry leader.


Sim, co-founder of Nurse Next Door, and his partner John DeHart had until then been waging an unwinnable battle. "We were growing really quickly, and it was clear that if we continued on our current path, the wheels would fall off the bus," says Sim of the Vancouver-based franchisor of home health care and other support services for seniors. "We had a pretty eager crew who were really excited about the stuff we were doing, but we were all burning out."


The partners had their "eureka" moment in 2005 at a seminar on lean systems for service providers. They then saw that Nurse Next Door lacked standard procedures for a long list of repetitive tasks, such as processing time sheets. This bred inefficiencies serious enough to thwart their plans to scale up the business massively. The duo were so intrigued by lean ideas, they flew to Japan to see them in action at Toyota and Mitsubishi, and to Texas to visit Dell. Sim and DeHart then adapted these ideas to their firm.


The result? "Three years ago we had one location, and now we have 37," says Sim, who credits the nationwide expansion largely to lean initiatives. Even as system­wide sales jumped from $3 million in 2007 to $13 million today, Nurse Next Door became so efficient it shrank its head-office staff from 35 to 23, all through attrition.


Nurse Next Door is among a small but growing band of service firms going lean. Pascal Dennis, a Toronto-based lean business consultant, says any kind of service business can apply lean principles to eliminate operating inefficiencies and ensure that every resource used to create a product or service provides value to the client. The rewards can include lower costs that allow you to reduce your prices, and enhanced customer service and employee engagement.


Toyota pioneered lean processes after the Second World War, and many North American manufacturers followed suit in the 1980s. But not until the late 1990s did lean practices trickle into the service sector. Dennis says fewer than 5% of service firms have gone lean; but more are now doing so to gain an edge in an uncertain economy.
He admits it's easier to apply lean ideas to tangible processes in, say, auto production than to abstract ones common in service businesses, such as forecasting and scheduling. But the key task is the same: identify and analyze repetitive business processes, eliminate any unnecessary steps and work continuously to perform the necessary steps more efficiently.


Guy Parsons, president of Value Stream Solutions, a Boston-based lean consultancy, says business owners invariably ask why going lean is worth the effort. He can't point to any definitive studies quantifying lean's ROI. But based on his firm's work with its clients, Parsons estimates companies that snub lean approaches will miss out on about 30% of their potential revenue growth.


Parsons says some companies botch going lean because they misconceive it as merely cutting head counts or miscellaneous costs. Instead, he says, "It's about CEOs creating a safe place to let their team reinvent their work environment."


When Nurse Next Door introduced the philosophy, says Sim, "Lean became a four-letter word here. But we learned that if you have all your people thinking in terms of cultural improvement-and that has to be everyone from the CEO to the front-line staff-then you win." Securing this buy-in took two years and repeated promises of no layoffs due to lean initiatives-a promise Nurse Next Door has kept.


Sim and DeHart kicked off their lean initiative at the hiring stage. They had their HR people ask job candidates to confirm not just that they could do the advertised job, but how they would improve specific processes.


Next, Nurse Next Door incentivized lean thinking, rewarding employees with one "flower buck" (a nod to the firm's flowery logo) per dollar saved from a new, lean idea, which staff spend at auctions of prizes such as iPads. Sim says the program-which has yielded ideas as simple as automatically offering an alternative caregiver rather than rebooking home visits when a scheduled caregiver falls ill-has saved $70,000 this year alone.


The firm also has formed a staff-driven kaizen club ("kaizen" is Japanese for "change for the better") that aims to introduce one new idea per month to ease operational bottlenecks. Sim says lean-inspired workflow improvements have reduced stress among staff, despite rapid growth, reducing voluntary turnover to just two people over the past three years.


Nurse Next Door has based the core of its lean initiative on easing workloads to free up employees' time so they could focus on tasks yielding immediate value for clients. A case in point: the firm's overworked accountant, who regularly worked nights and weekends. Analyzing her tasks revealed vast scope for efficiency gains. For instance, it took her 22 steps totalling 686 minutes twice monthly to process billings and payroll. After assessing which steps provided value to clients, the firm has slashed the process to 11 steps taking 240 minutes.


Reinventing such processes created a problem: one bored accountant. "She stood up in front of our employee huddle and said, ‘My biggest challenge now is there are about 20 hours a week where I don't have anything to do,'" says Sim. The accountant now fills that time with higher-level analysis to help franchisees run more efficiently.


The firm has used lean ideas to solve another challenge: a mountain of caregiver time sheets that cost $300,000 a year to process. Nurse Next Door has fixed this by having caregivers call an automated 800 number from a client's home phone at the start and end of a visit. This $50,000 investment-part of a $1 million-plus outlay on a scheduling and phone system-not only has cut costs but has boosted customer service.


"In real time, we could figure out if someone was late for their shift," Sim says. "And, if so, we could call the client to make sure they were safe. That has really made our franchise partners supercompetitive."


Sim says his only regret about going lean is not having done so sooner. As his firm gears up to award 30 U.S. franchises by next fall, Sim is confident the lean approach will drive success in that hypercompetitive market.


"I don't think we'd be in business today if it weren't for [going] lean," he says. "It has allowed us to make some pretty big investments in the future that we wouldn't have been able to do otherwise." -CHRIS ATCHISON

Ken Sim used to think that efficiency-obsessed manufacturers such as Toyota had an exclusive hold on lean operating processes. But then he realized that running lean could transform his service business into an industry leader.


Sim, co-founder of Nurse Next Door, and his partner John DeHart had until then been waging an unwinnable battle. "We were growing really quickly, and it was clear that if we continued on our current path, the wheels would fall off the bus," says Sim of the Vancouver-based franchisor of home health care and other support services for seniors. "We had a pretty eager crew who were really excited about the stuff we were doing, but we were all burning out."


The partners had their "eureka" moment in 2005 at a seminar on lean systems for service providers. They then saw that Nurse Next Door lacked standard procedures for a long list of repetitive tasks, such as processing time sheets. This bred inefficiencies serious enough to thwart their plans to scale up the business massively. The duo were so intrigued by lean ideas, they flew to Japan to see them in action at Toyota and Mitsubishi, and to Texas to visit Dell. Sim and DeHart then adapted these ideas to their firm.


The result? "Three years ago we had one location, and now we have 37," says Sim, who credits the nationwide expansion largely to lean initiatives. Even as system­wide sales jumped from $3 million in 2007 to $13 million today, Nurse Next Door became so efficient it shrank its head-office staff from 35 to 23, all through attrition.


Nurse Next Door is among a small but growing band of service firms going lean. Pascal Dennis, a Toronto-based lean business consultant, says any kind of service business can apply lean principles to eliminate operating inefficiencies and ensure that every resource used to create a product or service provides value to the client. The rewards can include lower costs that allow you to reduce your prices, and enhanced customer service and employee engagement.


Toyota pioneered lean processes after the Second World War, and many North American manufacturers followed suit in the 1980s. But not until the late 1990s did lean practices trickle into the service sector. Dennis says fewer than 5% of service firms have gone lean; but more are now doing so to gain an edge in an uncertain economy.
He admits it's easier to apply lean ideas to tangible processes in, say, auto production than to abstract ones common in service businesses, such as forecasting and scheduling. But the key task is the same: identify and analyze repetitive business processes, eliminate any unnecessary steps and work continuously to perform the necessary steps more efficiently.


Guy Parsons, president of Value Stream Solutions, a Boston-based lean consultancy, says business owners invariably ask why going lean is worth the effort. He can't point to any definitive studies quantifying lean's ROI. But based on his firm's work with its clients, Parsons estimates companies that snub lean approaches will miss out on about 30% of their potential revenue growth.


Parsons says some companies botch going lean because they misconceive it as merely cutting head counts or miscellaneous costs. Instead, he says, "It's about CEOs creating a safe place to let their team reinvent their work environment."


When Nurse Next Door introduced the philosophy, says Sim, "Lean became a four-letter word here. But we learned that if you have all your people thinking in terms of cultural improvement-and that has to be everyone from the CEO to the front-line staff-then you win." Securing this buy-in took two years and repeated promises of no layoffs due to lean initiatives-a promise Nurse Next Door has kept.


Sim and DeHart kicked off their lean initiative at the hiring stage. They had their HR people ask job candidates to confirm not just that they could do the advertised job, but how they would improve specific processes.


Next, Nurse Next Door incentivized lean thinking, rewarding employees with one "flower buck" (a nod to the firm's flowery logo) per dollar saved from a new, lean idea, which staff spend at auctions of prizes such as iPads. Sim says the program-which has yielded ideas as simple as automatically offering an alternative caregiver rather than rebooking home visits when a scheduled caregiver falls ill-has saved $70,000 this year alone.


The firm also has formed a staff-driven kaizen club ("kaizen" is Japanese for "change for the better") that aims to introduce one new idea per month to ease operational bottlenecks. Sim says lean-inspired workflow improvements have reduced stress among staff, despite rapid growth, reducing voluntary turnover to just two people over the past three years.


Nurse Next Door has based the core of its lean initiative on easing workloads to free up employees' time so they could focus on tasks yielding immediate value for clients. A case in point: the firm's overworked accountant, who regularly worked nights and weekends. Analyzing her tasks revealed vast scope for efficiency gains. For instance, it took her 22 steps totalling 686 minutes twice monthly to process billings and payroll. After assessing which steps provided value to clients, the firm has slashed the process to 11 steps taking 240 minutes.


Reinventing such processes created a problem: one bored accountant. "She stood up in front of our employee huddle and said, ‘My biggest challenge now is there are about 20 hours a week where I don't have anything to do,'" says Sim. The accountant now fills that time with higher-level analysis to help franchisees run more efficiently.


The firm has used lean ideas to solve another challenge: a mountain of caregiver time sheets that cost $300,000 a year to process. Nurse Next Door has fixed this by having caregivers call an automated 800 number from a client's home phone at the start and end of a visit. This $50,000 investment-part of a $1 million-plus outlay on a scheduling and phone system-not only has cut costs but has boosted customer service.


"In real time, we could figure out if someone was late for their shift," Sim says. "And, if so, we could call the client to make sure they were safe. That has really made our franchise partners supercompetitive."


Sim says his only regret about going lean is not having done so sooner. As his firm gears up to award 30 U.S. franchises by next fall, Sim is confident the lean approach will drive success in that hypercompetitive market.


"I don't think we'd be in business today if it weren't for [going] lean," he says. "It has allowed us to make some pretty big investments in the future that we wouldn't have been able to do otherwise." -CHRIS ATCHISON