Friday, November 27, 2009 10:33
Reducing the cost of living – the Lean way
In Guest Writers, Main Stories • 2,219 views • 31 Comments
Jeisilan Sivalingam
How can we become more efficient and effective while at the same time reduce costs?
In these incredibly tough budget times, you would think government agencies would be trying to emulate private enterprises and be working extra hard to find ways of doing things more efficiently.
Unfortunately, politicians are grabbing the same old playbook — retrenchements, hiring freezes, paycuts, travel restrictions, delaying much needed programs and so on. They’re not examining the actual work being done — the operations remain fundamentally the same. Instead, they’re left with tired, overworked employees trying to do the same operations with fewer resources. This approach creates an illusion of efficiency.
Real efficiency is about looking at the systems — the way work itself is designed — and finding ways to streamline the work so that we do our important tasks well in less time and with less hassle. Systems are where the costs are incurred. Systems are where the value of the agency is created.
And systems appear to be the last thing anyone is focusing on.
Nevertheless, recently there’s been a new exciting development . The new Obama administration has given commitment to a new government policy of pushing for increased accountability and government performance.
Performance Management is taking center stage for all government organizations and the pressure to become more efficient, effective and transparent through embedded Performance Management and strategic improvement. Optimal delivery of increased performance results for less money, has been made the number one priority for all government organizations.
Continuous improvement tools like Lean & Six Sigma (formerly used by business organizations to drive down costs and improve efficiency & productivity) are now increasingly used to help government agencies achieve theses same goals. Some of the government organizations that are using Lean Six Sigma in the U.S. are; the Department of Agriculture, Department of Defence, Missile Defense Agency, US Navy, Federal Prison Industries, City Government Councils, LAPD , just to name a few.
What is Lean Six Sigma?
So what is this thing called Lean Six Sigma? Lean and Six Sigma are actually 2 different process improvement concepts, that have only in recent times been increasingly used together to help businesses improve and cut costs. Lean started in the manufacturing industry. In fact, it’s often referred to as Lean Manufacturing. Based on the system Toyota used for producing high-quality low-cost vehicles, Lean focuses on reducing waste. In this case, that means any activity that does not add value to the customer. A good example is Toyota itself, a typical ‘Lean’ organization, admired worldwide for its Efficient Production System and the millions of dollars of cost savings it has since achieved.
Six Sigma, on the other hand, was developed at Motorola in the ‘80s and is still widely used today in many industries. The basis of determining Six Sigma performance capability is measuring performance around specifications set by the customer using a data-driven process. The quantitative focus of the method insures objectivity and accuracy.
In other words, this approach allows you to determine the factors that significantly contribute to process variation, or the deviation between what you want and what you have. Once you have narrowed this list of factors, your change efforts are targeted at the areas that will do the most good. It is common knowledge that most organizations run at a three-sigma quality level and that they lose between 20 and 40 cents of every operating dollar to poor quality. At Six-Sigma quality level, less than 1 cent is lost! Besides being a model of efficiency, it has been calculated that Motorola itself, over the last 25 years, has achieved over 16 billion dollars of cost savings! Now, hundreds of MNCs like GE, Honeywell, Caterpillar, and an ever growing list of smaller companies worldwide, are turning to Lean Six Sigma to help them become more profitable.
Singapore context
So what now for Singapore? What can we learn from this? How can we translate the benefits of Performance Management and continuous improvement tools like Lean Six Sigma, to our Government and its agencies? How can we become more efficient and effective while at the same time reduce costs?
Imagine a day when the people of Singapore have a more ‘Lean’ Government which is able to provide its people with better services at reduced costs. Imagine a ‘Lean Government’ which is continuously improving itself in the services it provides to its people, while at the same time, achieving cost savings. Imagine these cost savings then being passed on to Singaporeans as tax breaks, reduction in GST, restoration of employer CPF cuts, reduction in cost of basic necessities like healthcare, transportation, education, housing services, etc. etc.
However, at present, this is not the case in Singapore. We have ‘BIG’ government with all the trappings of bureaucracy. The civil service has grown into a sea of agencies and departments, with related responsibilities parceled out among several agencies. This inevitably leads to complications as organizations need to coordinate policy implementation. But as things stand, it takes too much of our resources, or to put it plainly, too much money, to get even the clearest policy implemented. There are just too many decision makers, too much central clearance, too many bases to touch, and too many overseers with conflicting agendas.
Leadership responsibilities often fall in the awkward gap between inexperienced political appointees and unsupported career managers. Too many of our most talented people in our civil service hate the constraints that keep them from serving their country with their full measure of talent and energy. Too many of the most talented leave public service early; too many of the least talented stay too long. Compounded over the decades, we have a management structure that is top-heavy, cumbersome and contrary to the goals of effective leadership and meaningful accountability.
As a result of an inefficient big government, the quality of policy making and implementing has declined, while costs have steadily gone up. To cope with this problem of costs, time and again, the government and its agencies and by extension, government-linked companies as well, have simply taken the easy way out by raising the costs of their services, everything from basic necessities like housing services, healthcare, education, transportation, etc., to essentials like water and electricity prices, food prices and household provision prices (direct result of ever increasing HDB rents and business costs), car park fees, taxi fares, etc. The list goes on. Another quick fix that comes naturally to these organizations to cope with rising costs is by cutting wages, reducing employer contribution rates, hiring freezes, burdening their workers with more work but giving them less resources and so on and so forth.
Solutions for improvement
I believe that it’s essential for the government and all its agencies (including government-Linked companies) to move towards a fundamental shift in mindset and embrace and embed the Lean Six Sigma Culture into their organizations. We need to work better, faster and at lower costs without compromising on quality, be it to provide better but cheaper services to Singaporeans or to be more able to compete effectively in a globalized world. We also need to mobilize all our talent, our ideas and creativity, while at the same time being data driven, so as to be better able to make the right decisions at the right time; be it at the policy level or business level.
P.S. – In the Next Article, I will present specific solutions and cost cutting improvement ideas that can be implemented in Singapore in areas such as Healthcare, Education, Transport, HDB Town Councils, etc.
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31 Comments
The Singapore Daily » Blog Archive » Daily SG: 27 Nov 2009
The Singapore Daily » Blog Archive » Daily SG: 27 Nov 2009
[...] A jobless recovery? – TOC: Reducing the cost of living – the Lean way [...]
Hustino Bualakau
u think 6 sigma is magic pill?
wuahaha!
Not So Dumb
Don’t waste time lah. Do you think the PAP will want to reduce cost of living?
With PM Lee HL’s “Economic Progress AT All Costs”, what does that mean? What was his intention/motive behind this policy?
The whole purpose is to jack up the GDP. Why? Because Ministers’ special bonuses are linked to the growth of the GDP.
Get it?
mustafaofjalanbesar
in ordxer to reduce the cost of livins..1 must do 1 deem fit
the 1st thing 1 can do is to reduce gst/vat rate same as big mainland china
the next thinggie is the erp poles/carpark charges/public transports
in this way it will have a domino effects in trimmims costins for ALL
this is all we seek and BEGGED of you our prince your royal highness
p.s. if you think it too complicated or don’t know how to start…don’t asked your father or laugoh…just asked any of our toc contributors here includin yours trueLEE…we can worked adhoc basis..just $4999/month nia…no need limousines or bodyguards…
DuraiKiller
Changed the present extremely cOSTLY Government
I thought our hokkien ministar from NTUC had a slogan “cheaper, better & faster”
All fixed already, so what the problem. Costs must come down rite
I believe contrary to what is written in the article above, the civil service has shrunk and rather than expanded over the years.
Just Another Singaporean
8) KopitiamApek on November 27th, 2009 2.58 pm
It would be more appropriate to give breakdown as to the different scales, cost per position and overall positions & costs with comparatives of past years.
It is hard to ignore the ministerial positions both in numbers and cost with the skrinkage that you have written about. Please do not count the recent & still prevailing crisis which has a downward pressure on wages across the board.
Ali Baba
<<<<>>>>>>>>>
Can you provide any evidence to support your assertion?
On the whole, I find your article WORTHWHILE reading……….good observations.
New Citizen
While you may or may not like the payscale of civil servants and political office holders, the reality is that the tax burden in Singapore is relatively low. The efficiency of Government is relatively high compared to most Western countries. Therefore the whole arguments here appears to be flawed.
prettyplace
Thanks J Sivalingam…good article.
“Compounded over the decades, we have a management structure that is top-heavy,”
Where else to put the PAP supporters. They simply cannot abondon them, can they …so it grows.
Just take a look at the social services or welfare or charity organisations and CDC’s in Singapore. Numerous and what do we still have. People jumping on tracks every now and then.
They do not want to bring it under one umberella and get things organised for people. Umemployed & retrenched go to one corner, the disable to another and the needy to one. These might seem like many problems…but they can be bunched togather and proper statistics on such people can be kept like many western countries.
But Singapore chooses to do otherwise…Why….how to provide employment to their supporters…look at sports..in particular football.
Had an Aussie lament to me lately that 60 years olds who know nothing about football development and management are sitting on the boards. Couldn’t even argue with him on that.
It’s becoming like India…hahaha.
Worst when good people leave.
JW
To reduce cost in ministerial posts.
Get rid of MM Lee Kuan Yew, SM Goh Chok Tong and President Nathan unless they work for free. They are already old, senile and already way past their expiry date.
Reduce the number of MPs to 50; reduce by half the ministers, very senior officers in the civil service. Most of their work can be out-sourced.
Scrap all the GRCs and those who get to parliament must show that they are worthy of the position and that means that they compete one-on-one against candidates from other political parties. As it is, 90% of PAP MPs are quite useless and waste of tax-payers money.
Scrap the posts of Mayors. Close down People’s Association.
Cut away two-thirds of the fat in government institutions, the academic institutions.
Impose a 15% tax on PRs, foreigners and recent male Singaporeans under 40 years old. These taxes can be used to help deserving jobless Singaporeans.
noiseMaker
I disagree that Singapore is not efficient and effective. In fact it is extremely efficient and effective. I hate both her efficiency and effectiveness.
Singapore has a very expensive civil service, the cost of civil servants are so high that it is a burden to the nation. To support the this expensive service, the people must be taxed and made to pay socially and financially. As a matter of fact, this expensive civil service turns out to quite efficient and effective.
The reward on the net result of paying the top money for this expensive civil services are as follows:-
1) The more efficient and effective to tax you – GST, ERP, COE etc.
2) The more efficient and effective to make you pay on time the HDB’s conservancy.
3) The more efficient and effective to get foreign talents to take over Singaporeans’ job.
4) The more efficient and effective to give out PR to PRC.
5) The more efficient and effective to fix the opposition.
6) The more efficient and effective to shut you out with self censorship.
If you crave for efficiency, you get more efficiency.
What we need now is not more efficiency, we have enough of that already, however what we need is more genuine compassion, love and care to add more variety. What we need is to bring the smile back to Singaporean and not made to them work like a robot and machine to pay for more efficiency.
fpc
The govt and the public service are way oversize in terms of pay.
They need to cut down.
All the more when the public service is not producing sufficiently.
mon
We just need to get rid of one or two ministers by elections and the remaining ones will wake up and do what we think they should.
If paying them millions doesn’t get them to do work, then taking away millions will help incentivise them.
OB marker
makes me puke! The govt only jumps on the earliest opportunity to increase, be it direct or indirect taxes.Look at the increment on Hdb property taxes, till now i dun understand why 5-roomers pay $107,while e-flats pay $104…bunch of inconsiderate businessmen’called em’selves ministers! All of you here can oso be one of em’ , not enuff, open mouth and give some stupid reasons only!
Very Sure
Living standard in Taiwan has been stable and prices did not change much over the last 8 years, everything is affordable, including property. It is real democracy at work, unlike in Singapore.
In Singapore, one party, major industries in control of the government, which in turn controls and regulate the prices for maximum profit. The average Singaporeans cannot afford more and more things, according to a survey. But another government survey said everything is becoming affordable, ironical twist.
Anyway, Singaporeans are tightly squeezed, more and more until we are forced into a tight corner. But boy arent they happy and keep voting?
Just remember, $750 peanuts to civil servants but still 12months of discretionary bonuses available to already multi-million dollar pay? What you think? Set by example?
old citizen
new citizen, the tax rate is relatively low but government fee and charges, indirect taxes like gst and bus fares, taxi fares, uni fee, medical and hdb prices etc etc, you will find that you dont have much left
The Singapore Daily » Blog Archive » Weekly Roundup: Week 48
[...] A jobless recovery? – Blowin’ In The Wind: Singapore and other economies compared – TOC: Reducing the cost of living – the Lean way [...]
macam macam
vote for change!
MagOO
21) macam macam on November 28th, 2009 1.28 pm vote for change!
Change to what?
I’d rather remain here than there -
http://www.ams.org/membership/develop.html
It’s worse there, right? $16 per household per day.
So hard to be on the other side. Less than 20 countries on the planet of 196!
Use yours brans lah . . . .
mike
SIMPLE!
cut the most redundant craps – MM, SM, President and Mayors first.
cut the monetary awards to the highest in the world level to half across the board for all Satboards esp the Ministers.
cut GST.
taxes or charges hikes for next 5 years.
you dont need a rocket scientist to do sum, DO YOU?
lobo76
11) New Citizen on November 27th, 2009 8.15 pm
While you may or may not like the payscale of civil servants and political office holders, the reality is that the tax burden in Singapore is relatively low. The efficiency of Government is relatively high compared to most Western countries. Therefore the whole arguments here appears to be flawed.
I agree with you. I do not think efficiency is the main issue. Maybe it can be improve, but in the overall scheme of things, nothing too drastic will result.
Personally, I think it is the POLICIES that are the issue. … off hand, I would say the main culprit to be housing policy (how it is priced and how we are allowed to finance the debt). .
Ronaldlct
Reminds me of a BBC World Service radio interview with Jaime Lerner, mayor of Brazilian city Curitiba famous for its low-tech low-cost innovations (Bus Rapid Transit, paying destitute poor for trash, sheep grazing public parks). He said that to be innovative, you need to take one “zero” out of your budget.
We seem to forget about the time when we were capable of our own simple low-cost innovations that have endured because we didn’t have unlimited resources, like parking coupons (printing paper instead of instaling costly parking meters), Area Licensing Scheme, or hooks outside the window of the HDB flat for bamboo poles to dry clothes.
I think we’ve regressed to a point where only high-tech, large capital investment, and some fancy policy initiative that can be reduced to an acronym (like STELLAR, SPRING, SMART, whatever) would work.
R
Sidekick
The problem lies with the absence of check & balance within Singapore’s govt & public service sectors… And where’s the whistle blower?
Chua Ah Loong
6 sigma is only as good as the Data you can Access.
Last time people talk about ISO standard.
Now, its rarely heard.
Oh Holy
This gov is hopeless corrupt and i have proof.
Our balance budget is always 1B to -1B. Yes, they leave only 1B to the national surplus every year even with all the GST, tax increases while siphoning Billions to their salaries and to their private companies.
How can this be possible to achieve? Even in good years, when the economy grows 8%, we have only 1B surpkus? Hello 8% of the GDP is tens of billions ok?
spirited-centred
Its time to send an audit team to parliament in the next elections to check on this government of more than forty years to find out whether they were run according to world standard and good governance principles. Whether there are excessive wastage, pilferage and using public resources to serve their own political interest. This is really long overdue. Wake up from your slumber Singaporeans.
FreO
“The average Singaporeans cannot afford more and more things, according to a survey. But another GOVERNMENT SURVEY said everything is becoming affordable, ironical twist”.
Never believe what its released from government survey. Take everything with a pinch of salt! Have a look at the information released from the Singapore Yearbook of Manpower Statistics, 2006, published by the Manpower Research and Statistics Department, Ministry of Manpower and reflect with the wages from your peers within those occupation.
Hakka Lee
To
24) lobo76 on November 29th, 2009 12.55 am
11) New Citizen on November 27th, 2009 8.15 pm
This is not about efficiency alone, and what ground you think the tax burden is low.
tax burden is a transfer of wealth from people to govt to do good for people, so, let’s see what happiness index Sgp scored, let;s see how many above 70s people work 12 hours daily to earn enough to buy medicine and comoared these to
a) Developed nations like USA and Western Europe
b) Developing countries like China and Vietnam
Their people are happier than Singaporeans in all age groups !
make a tour and u will see by your own eyes
[...] A jobless recovery? – TOC: Reducing the cost of living – the Lean way [...]