Lean production techniques are routinely applied in the manufacture of cars from Detroit to Beijing, but could they be applied to the processing of self-assessment tax returns? That was the gauntlet thrown down to PA Consulting Group by HM Revenue & Customs (HMRC), which had been told in 2004 that it needed to reduce its headcount while achieving efficiency gains of £507m by 2008.
Some 25 million self-assessment tax returns are sent out each year, but error rates were high and processing times lengthy. After conducting a trial of lean techniques at a site in the Lothian regions of Scotland, PA was asked to extend it into HMRC's 'large processing organisation' at sites in Portsmouth and Cardiff. Lean thinking - more focus on the customer and cutting waste and operational snags - was on the march.
A team of 13 consultants worked with about 200 HMRC staff, many of whom lacked the experience or skills to run a lean process and didn't see productivity improvement as a priority. Some even needed convincing that lean techniques could be applied in the public sector. Managers and supervisors had to be trained in the theory and practice of lean processes, and PA devised a game to put lean principles into a context.
Three teams were assigned to work off-site to redesign processes, and within three days the job had been done, reducing process steps from 62 to 12 and creating a standardised way of working. Staff were trained in the lean way of thinking, and although HMRC's front-line managers ran the trials, PA consultants acted as coaches to prompt and guide employees.
The success of the trials was dramatic: productivity rose by more than 30%, errors were reduced by 75% and the time taken to process a tax return slashed from 36 days to just five. And the trials showed that these types of process improvement could help collect more tax. HMRC now has a strong business case for rolling out lean techniques across the organisation.
Based on the results from the trials, PA reckons that HMRC could save up to £99m by introducing the approach to 7,000 of its staff.
PA's 'lean' trials ushered in productivity improvements of 30% at HMRC, enabling tax returns to be processed in five days instead 36.
- Gain efficiencies through greater precision and control.
- Practise a continuous improvement culture by involving managers in daily operations.
- Engage staff at all levels to overcome scepticism and resistance to change.
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