Question: What is the best way to incorporate continuous improvement practices in a service company?

We are a large professional services firm offering a wide range of transactional and higher-value outsourced services in accounting, finance, IT, analytics, HR to small and medium sized businesses.

We want to roll-out a "continuous improvement" program which is ultimately linked to "gross margin per operations employee" or another similar metric. In fact, in the long term we envision this to be a pillar in our company culture along with Integrity, Customer centricity, etc.

Our concern- it is easy to track weekly or monthly transactional improves in terms of error rates , volume, etc... not so, for more complex services.

How should we approach designing a metric... and value?


3 Expert Insights

In our firm, we often talk about "the math of the business" as a way to describe an organization's business model.  We try to encourage our clients to create a fairly simple equation of words that describes how a company makes money.  For example it might start with the sales funnel:  "Initial leads generated x our percentage turned into face-to-face meetings x our percentage turned into demo or proposal to the customer x our percentage closed into actual bsuiness".  Obviously each business will have a slightly different sales funnel.  Then we would move to the cost structure: current number of employees (fixed and variable) x average salaries x benefits + fixed admin costs + etc., etc.  The cost side can end up being as simple or elaborate as desired, but it almost always opens people's eyes to complex relationships within the business model that they may not have realized.

Although this may seem like a simplistic excercise, you can see that once you have identified all of the components of the business model, you can begin to zero in on those metrics which not only drive profitability, but which ones can be improved.  

This approach might be helpful in your drive to find the right metrics to monitor and incentivize within your firm.  

I found Dave Galanis' email quite helpful in terms of defining metrics that might be useful for measuring the results of the continuous improvement efforts.  What I am not sure about is whether you have engaged in a process internally to identify those processes and systems that you believe would benefit from attention.

Typically client/customer feedback is helpful in thinking about where to put your energy.  Also, frank and open discussion with staff can surface areas of frustration and difficulties in improving satisfaction and delighting customers.

Once you have identified a few areas to focus on, it is helpful to bring together a multi-disciplinary team to engage in three steps  

-The first is to describe the current system
-The second is to describe the ideal system, and
-The third is to identify the gaps between the current system and the ideal system.  

Following that it is possible to think about what changes to the system will bring you the best results. There are many resources for process improvement activities and you may already be familiar with them.  The bottom line is that you cannot improve a system that you do not understand solely by encouraging staff to "do better."  I wish you well and if I can be of further assistance, please let me know.  Best, Deborah

Let's start with the premise that continuous process improvement (CPI), to be sustainably successful, must be ingrained in the corporate culture. It is not a transaction. This means is must be linked to the corporate Vision (where we are going), Mission (how we are getting there) & Values (what we stand for) first. From these you can craft you SMARTER Goals, the relative metrics & tie everything together in a spreadsheet (like a soft Balanced Scorecard).

Product & service businesses are effectively the same when it comes to CPI. OK, now your ready to covert you Goals into measurable action plans. Linking your CPI initiative to "gross margin per operations employee" or something similar is fine as long as you have a defined, consistent, objective & fair metric. You also want to prove it measures the actions you want taken rather than something else.

One way to do this is to Build It Backwards. Start with your desired "ideal state" and what the expected outcomes are. Do they meet the above criteria? If so, write them down. Then create the steps to take you from you "current state" to this ideal one.