Rotorua District Council

Adopting the Kaizen Institute’s lean management approach has reduced debt and kept rates low.

“Lean Thinking” makes the difference

Rotorua District Council logoOver the years, Rotorua District Council has made several attempts to find a continuous improvement process (CIP) that “clicked” but, after adopting the Kaizen Institute’s lean management approach one year ago, it has become clear that the involvement of all staff will ultimately lead to reduced debt and rates kept low.

Chief Executive, Peter Guerin, says the Council has, during the past decade, trialled other management systems such as TQM and ISO accreditation. “’Lean Thinking’ has been the most effective to date with its core beliefs around empowerment and engagement of all stakeholders, from customers to those front-line staff that carry out all the work,” he says.

Although originally from the manufacturing sector, the Lean Thinking approach was still appropriate for the service industry. “The concept of eliminating waste and adding value to the community fits well with us,” he says. “We need to be as effective and efficient as we can be, and we needed to embed this concept from the top down, while engaging all staff from the bottom up. Our focus is to cut costs out of the business to keep rates low.”

The Council was also determined to help grow the local economy. “We have great facilities here but our unemployment rate is higher than most and a low income base,” says Mr Guerin. “Local government does need to demonstrate it is providing value to the economy by not being a hand brake on development through our regulatory processes.”

Following on from a conference, the Council invited a lecturer from Auckland University, Brian Travers, to come to talk to the Council’s managers two years ago about “being the best you can” – a return to the roots of Lean Thinking. The Council then engaged the Kaizen Institute to facilitate the development of its implementation strategy and train key staff.

Business Improvement and Innovation Manager, Mijo Katavic, recalls that one of the first obstacles faced with introducing the Kaizen approach was some of the negative connotations around “Lean Thinking”. It was important for staff to realise that “Lean” was not mean, and not about cutting.

“Continuous improvement philosophies have been around for a while and we wanted staff to know it was about working smarter, and doing more with less,” he says.

To ensure that Lean Thinking was embedded in the organisation, and also aligned with its strategic direction, the Council created Mr Katavic’s role, established a governance group and a steering group, and identified a “vanguard” of 22 practitioner-level “champions”. The idea was to introduce the new philosophy on a small scale throughout the Council and let the results speak for themselves.

The team at the aquatic centre have been one of the earliest and most enthusiastic adopters of the new CIP, particularly the use of visual tools to identify goals and record progress. “Everyone is now on the same page,” says Mr Guerin. “Within 10 feet of anywhere, you can see what’s going on.” Spin-offs range from reducing staff meeting times by 30% to improving the banking system. In addition to inspiring other council teams, the results have been so spectacular that other service providers in the district, including those in the tourism and health sectors, have been visiting the aquatic centre to learn from their experiences.

A key part of the Kaizen philosophy is leading by example and communication. Once a month, Mr Guerin and his executive team work on the front line (“Gemba” – where value is created) in a different part of the organisation to meet staff, get a hands-on understanding of the work they are doing, and show Lean Thinking in action. The Kaizen approach is also reinforced through weekly newsletters to all staff and through the adoption of Lean Thinking Basics such as Visual Management, stand-up meetings, and the “5Ss” of Lean Thinking – sorting, straightening, systematic cleaning, standardising, and sustaining.

Effective is customer value with respect to quality, cost, and delivery. Efficiency is delivery of the service that the customer wants, in the correct amount, at the correct time, with the minimum resources.

Mr Katavic says this has been fundamental to changing how staff think about what they do each day and identifying new ways of delivering services. “We are getting to the point now that everything we do addresses the question ‘What adds value for the customer?’” says Mr Katavic.

One example Mr Katavic cites is the change made to providing council services to the central business district (CBD). Previously, a contractor was responsible for doing maintenance and a team of council staff for removing rubbish at different times of the day or week, often impacting on each other. Now that the services are co-ordinated, disruption to the CBD has been minimised and the Council has saved $470,000.

Embracing Lean Thinking has also contributed to reducing the turnaround time for producing Land Information Memorandum reports. With an average of seven days, the Council was well within the legislative requirements of 10 days, but staff elected to aim for three days. Making the regulatory environment more responsive to customer needs is one of the ways in which local government can help in growing the local economy, says Mr Guerin.

A lesson the Council has learned is ensuring that enough IT resources are available to support business systems and changes to processes. “A number of the improvements we have made have required changes to our IT, and our staff have been snowed under,” says Mr Guerin. “We are currently using another Lean Tool called the ‘X Matrix’ to identify the various expectations so that the internal service providers can prioritise their work based on what is important to the business.”

However, Mr Guerin is more than satisfied with the investment that the Council has made in the Lean Thinking approach. In the first financial year, some $600,000 in savings were made and the outlay on consultant fees and the salary for the new position was less than a third of that. Combined with the Council’s participation in joint procurement and purchasing arrangements with other Councils, the district’s rate increases have been minimal – 2.9% for 2012/13. The Council’s debt has moved from $151 million in 2012/13 to $183 million in 10 years’ time, which includes $21 million expenditure on sewage treatment to improve the lakes’ water quality and $23 million for a new arterial road.

Based on an interview with Peter Guerin, Chief Executive, and Mijo Katavic, Business Improvement and Innovation Manager, on 29 June 2012.

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