Pacesetter Final Report

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Evaluation o PaceSetter

Lean, Senior Leadership &Operational Managementwithin HMRC ProcessingFinal Report September 2007

Dr Zoe Radnor

Giovanni Bucci

AtoZ Business Consultancy


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September 2007

I you would like to know more about the evaluation please email Dr Zoe Radnor [email protected]

Final Report I you are interested in receiving another copy o the report or would like to knowmore about PaceSetter please contact [email protected]


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Table o contents

4.1 Perceptions and Understanding o Pacesetter

4.2 Perceptions and Understanding o Lean4.3 Perceptions and Understanding o OM/SL4.4 Links between Lean and OM/SL4.5 Raising Awareness/Communication4.6 Summary

5.1 Interviewee involvement during the implementation5.2 Impact on Perormance5.3 Positive and Negative Elements

5.3.1 Positive Elements

5.3.2 Negative Elements5.4 Problems and Issues Encountered

5.5 Summary

6.1 Changes in the Duties o Leaders6.2 Process View6.3 Teamworking6.4 Customer Focus6.5 Problem Solving6.6 Summary

7.1 Summary

8.1 Dierence o Pacesetter

8.2 Sustainability8.3 Summary

9.1 Perceptions and Understanding o Pacesetter, Lean and OM/SL9.2 Issues and Successes o Implementation9.3 Impact and Outcomes9.4 OM/ SL9.5 Sustaining Lean and OM/SL

10.1 Summary o Key Findings10.2 Capability Delivery and Lean Thinking

10.2.1 What is Lean?

10.2.2 Is Capability Delivery a Lean approach?10.3 Conclusions and Recommendations

Annex 1 : Biographies

Annex 2 : PaceSetter TimelineFinal Report

Glossary

Executive Summary

1 Introduction

2 The Pacesetter Programme and Capability Delivery in HMRC

3 Methodology

4 Perceptions and Understanding

5 Implementation

6 Outcomes

7 Operational Management/Senior Leadership Programme

8 Sustainability

9 Discussion

10 Implementing Capability Delivery in HMRC: Summary,Conclusions and Recommendations

Annex 3 : Interview Schedules

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Glossary

Collapsed Teams Teams that are disbanded during periods o low work activitye.g. Christmas and other holiday periods, and whose membersare placed on other teams.

Daily Meetings Team meetings held every day that are led by the ront line manager(band O) to discuss perormance, quality, problems and other issuesaecting the team.

Deep Dive An event where leaders prioritise and ocus on a ew perormance

issues.

Exceptions Work that does not t easily into a process and needs to be sitedout and dealt with as a special case.

Flip Teams Teams which are changed rom working in their normal process toworking another process, particular to meet periods o increaseddemand.

Go and See An activity to make senior leaders more visible to ront line stathat requires them to observe what is happening in the oce and seeor themselves how teams are working.

Hot Desking When sta move desks temporarily in order to undertake a dierent

part o the same process, or work in a dierent process altogether.In Flight Checks Quality checks undertaken by band O quality managers on current

work being done in the teams. Feedback is provided immediately tosta and errors are resolved beore the work leaves the team.

Kick O Event An event which aims to establish an operational perormance ocuswith leadership teams.

Management An event where senior leaders launch their own programmeLaunch or ront line managers driven by local needs.

Perormance The boards that every Lean team has, that outlines the team targetBoards or the day, the resources available and progress towards the target.

Perormance Events or rontline sta where leaders engage rontlineImprovement sta in activities to address issues and nd solutions.Event (PIE)

PIE Training A programme to develop in-house capability to run local PIE events.

Standard This is the standard solution or undertaking the process across allProcess teams and sites which are responsible or undertaking a process.

Standard Work These are the physical instructions that sta have on their Instructions desks that enables them to undertake their work to the same

standard as other sta on dierent teams or dierent sites.

Stretch Target A target set higher than the normal operating output, designed tochallenge perormance.

Visual This is the whole concept o using visible inormation via theManagement perormance boards and workplace assessment to manage the work.

Final Report Throughout the report, the term senior leaders reers to HMRC sta rom Higher Ofcer grade, SeniorSeptember 2007 Ofcer grade and Senior Manager grade.


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Executive Summary

This report highlights the ndings rom the evaluation o Capability DeliveryProjects in HM Revenue and Customs (HMRC) Processing Directorate undertakenby AtoZ Business Consultancy between January and June 2007. The remit o theevaluation was to ocus on Lean implementation, Operational Management andSenior Leadership (OM/SL). The report highlights opinions obtained rom HMRCsta and provides discussion ocusing on:

Sta understanding o the main elements o Lean and OM/SL.

The impact and outcomes o the Lean implementation and the OM/SL events.

The views o sta on benets obtained rom the OM/SL events.

How the changes are being embedded and sustained over the longer term.

The method o data capture used during the evaluation was site visits to tenHMRC sites, which had undertaken a combination o Lean implementation anddelivery o OM/SL events. The sites included ve large processing oces (LPOs),two distributed processing oces (DPOs) and three national processing centres.There was also a visit to the PaceSetter Programme Oce in London. Datagathering methods included semi-structured interviews and ocus groups with abroad range o individuals using an interview schedule that was tailored to the

dierent grades o sta and the collection o documentation and material. Atthe end o each site visit, a site report was prepared which summarised the mainndings o the interviews and ocus groups. These reports were amalgamatedand common issues grouped together to develop emergent ndings rom whichconclusions and recommendations were generated.

The main ndings rom the evaluation are:

There was a direct correlation between the engagement o the Senior Managerand Management Teams and the attitude o sta towards capability, deliveryand Lean in particular.

Capability Delivery through Lean and OM/SL has impacted upon tools,structure, practices and behaviours. This has improved quality and productivity,

made processes and practices clearer and led to new ways o working. Howeverit has also generated uncertainty and anxiety amongst some sta.

Senior managers had a better understanding o PaceSetter, Lean andOperational Management, compared to ront line sta. The perception o Leanamongst ront line sta was infuenced by union documentation, which uelledtheir concern.

Sta, at all levels, appreciated the engagement associated with OM/SL events.There was a huge dierence between sites in the amount o time involved inollow up actions rom these events. Additionally the connection betweenOM/SL and Lean was not always understood.

The diagnostic process included the timings o the process and the agreeing oteam targets. The achievement o targets was recorded hourly and the progresso individuals was aggregated to a team status. This led to a concern amongststa that targets would be used to monitor individual perormance.

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Targets were set to drive up productivity, increase quality and reduce leadtimes. Some sta elt the productivity targets were not achievable although inpractice many teams were achieving them. However there was little evidencethat learning on how targets were achieved was being transerred across theteams and sites. The timings were carried out by sta in the teams on theunderstanding that re-timings could occur later.

The main principle o Lean was seen to be customer ocus but ew ront linesta linked this with the improved quality and productivity that had occurred.Also many sta did not associate the people, whom HMRC delivers a service to,to be customers because they had no choice o provider.

It is very clear that Lean has resulted in an increase in the quality o the work

at all sites. Quality has improved in part due to the support by in-fights checks,but in-fight checks are a cost o ailure.

For managers there were more meetings on a daily and weekly basis to reviewthe perormance o the previous day. These meetings ocused on what outputhad been achieved and on why the target had not been achieved, rather than onhow improvement could be made.

There is a more structured approach to problem solving, which waswelcomed by many sta, but was seen to be rustrating when actions werenot ollowed through.

The Lean Academies were seen as useul by both Local and Central LeanExperts but the response to the content was mixed especially or Lean

Academy 2.

It was noted that the roles and tasks o many sta had changed. Whilst somesupport was given to learn the new ways o working, no skills analysis tookplace to evaluate what sta development was needed to support the change.Thus sta did not always have the required skills to perorm the tasks requiredto implement Lean.

The processes in LPOs and DPOs are owned by a strategic site and have aprocess owner, which has rotated over the past 18 months. However, theperception was that processes were owned by the projects oce and theywere dicult to change. However there were examples o where processeshad changed and improved.

AA and AO grades elt that it was more obvious to see who in the team workedwell and who did not. This led in some sites the better perormers in the teamtrying to compensate or their colleagues who did not perorm so well.

People were much more accountable regarding the way that they manage.Managerial sta have become more visible and accountable. Lean has made themanagers manage by collecting statistical inormation, looking at productivityand challenging perormance. There were now more channels than beore thatenabled sta to speak to people at higher levels

Teamworking was generally acknowledged to be better under Lean and therewas a better team spirit. At some sites competition between teams was drivingimprovements rather than demoralising teams.

Some sta elt that working in a process was a negative aspect o Lean leadingto deskilling and infexibility.

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Conclusions and RecommendationsThe main conclusions and recommendations rom the evaluation are:

The OM/SL element o Capability Delivery engaged and challenged peoplebut it was not the oundation or Lean it was designed to be. However thereis potential or it to re-engage and achieve some o its initial aims.

HMRC currently is not applying all the principles o Lean and still has along way to go beore it can describe itsel as a Lean organisation. However,this does not mean that Lean is not working, but that there is some way togo on the journey with the evidence indicating that HMRC is moving in theright direction.

The Lean element o Capability Delivery is driving a process view, improvingquality and productivity, removing waste and addressing problems through astructured approach. Time, support and commitment or culture and behavioursto be embedded is required, with better communication and the benchmarkingo practices in other process and service organisations. Only when culture andbehaviours are signicantly more customer ocused can HMRC truly become aLean organisation.

Other recommendations which would develop and embed the approachurther include:

Developing an understanding o capacity planning and control, and demandamongst the experts through the Lean Academies.

Continuing to investigate and develop the idea o runners, repeaters andstrangers where appropriate.

Developing quality in the process through better awareness o the impacto poor quality and the introduction o Statistical Process Control andpokayoke. There is also the need to develop a plan which removes thereliance on inspection.

Creating a better understanding o the tools used in problem solving, supportedby monitoring the outcomes to illustrate that the changes have taken place.

Reassessing how the time is spent in meetings and developing clearer guidelinesand training on how to use the meetings to look at improvement.

Consider introducing core hours at sites so that work schedules and meetingscan be managed more proactively.

Creating a better understanding o the customer (external and internal) andwhat they require. This implies asking the customer what their requirements areand publicising the results.

Developing stronger links between HR/Learning and Lean, supported by skillsmatrices or all levels o sta to ensure the required skills are present.

Developing training or ront line sta that is more relevant to their situation.

Managing the communication better and the spreading o rumours throughdisseminating some o the success stories.

Dening and better understanding cycle time, takt time, end to end time andlead time by the wider implementation and use o the lead time KPI.


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Know how long customer requirements have been in the process and howlong they take to process, so that work load and customer expectations canbe managed.

Develop robust stable processes which have the fexibility to absorb variety.

Creating more ormal processes or Lean Experts to meet and discussexperiences and spread good practice across and outside HMRC.

Thereore, to develop and sustain Lean, Capability Delivery and even PaceSetter,there is a need or; greater senior management commitment, developing anunderstanding o the process, linking the improvements to strategy, developing astronger link and understanding the customer view. Importantly Lean should notbe seen as a quick x with resources and nances committed only in the short to

medium term. There is a need to continue the support over the longer term, untilbehaviours are more rmly embedded and stable processes have been created.

Lean should not be seen as a

quick x with resources andnances committed only in theshort to medium term



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Introduction

This nal report highlights the main ndings rom the evaluation o CapabilityDelivery Projects in HM Revenue and Customs (HMRC) Processing Directorateundertaken by AtoZ Business Consultancy between January and June 2007.The evaluation was carried out by experts rom AtoZ Business Consultancy,one o whom is associated with Warwick Business School2. Both are independent,external organisations.

HMRC Processing Directorate is in the process o implementing Capability

Delivery Projects, as part o the Pacesetter Programme, which aims to achieve5 million o eciency gains by March 2008. As part o these projects, HMRCis ocusing on Lean implementation, Operational Management (OM), SeniorLeadership (SL) and the Model Oce. The remit o the evaluation was to ocuson Lean implementation, OM and SL (OM/SL). The aim o this report is to outlinethe main ndings rom site visits to National Processing Centres, Sel AssessmentCentres and the Capability Delivery Projects Oce. The report will presentthe ollowing:

The evaluators understanding o the aims o Capability Delivery and itsvarious elements.

The methodology employed or the evaluation including site tours, semi

structured interviews, ocus groups and the collection o relevant dataand documentation.

Sta understanding o the aims o Pacesetter and their understanding o themain elements o Lean and OM/SL.

The impact o the Lean implementation and the OM/SL events highlightingwhat was seen as good and not so good, as well as highlighting any problemsencountered and how these were resolved.

The outcomes o the implementation and events including changes in the roleso dierent grades o sta, perormance and quality improvements, the impacto process working and teamworking and the understanding o the customerand their requirements.

The views o sta on the OM/SL events that they were involved in and thebenets they obtained rom being involved in these.

How the changes brought about as a result are being embedded and acrossHMRC and how they can be sustained over the longer term.

Discussion summarising the above sections and bringing together commonissues and comments rom across the ndings.

A concluding section drawing out the key ndings and recommendations orimplementing and sustaining Capability Delivery in HMRC.

2 The evaluation team were supported in the evaluation by two employees o HMRC, a central lean expertand a member o the operational management/senior leadership team. They helped to organise the sitevisits and accompanied the evaluation team on many site visits. Their assistance was very useul and ismuch appreciated.

HMRC Processing Directorate will be reerred to as HMRC rom hereon in. Final Report The Capability Delivery Projects Ofce will be reerred to as the Programme Ofce rom hereon in. September 2007


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2 The Pacesetter Programme andCapability Delivery in HMRC

The Pacesetter Programme has been developed by HMRC in response to thechallenges that its Processing Directorate aces over the next ew years. Thesechallenges are:

Improving eciency and customer service by delivering a 30% improvementin productivity.

Reducing backlogs and the level o inconsistency across Processing.

Ensuring that Processing in HMRC is amongst the best UK processors andbecomes the UK Governments Processor o choice.

The our main elements o Pacesetter, which are being rolled our across Processingbetween April 2006 and March 2008, are:

Leadership Development.

Operational Management.

Lean.

Workorce Strategy and Capacity Management.

The objectives o Pacesetter are directly related to the challenges aced and are to:

Deliver 30% eciencies in terms o headcount by the end o the2007/2008 nancial year, whilst improving the customer experience,quality and eectiveness.

Capture inormation, use it consistently and produce correct and intelligibleoutputs or customers quickly and cheaply.

Meet agreed targets or unit cost, customer experience and qualityeectiveness across the dierent HMRC oces and locations.

Ensure that HMRC becomes the Governments processor o choice.

The programme aims to achieve its objectives by:

Articulating clearly what results are expected to be delivered and tocommit to these.

Engaging sta in the changes at all levels throughout the organisation.

Fostering new leadership behaviours and developing newmanagement capability.

Carrying out detailed redesign o processes using Lean principles.

Developing a perormance management culture and embedding

business improvement into the culture o the organisation. Sharing good practice across the organisation.

0 Final Report September 2007 Inormation or this section has been taken rom internal HMRC Pacesetter presentations and documents.


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Capability Delivery is one o the two main themes

o Pacesetter. It includes threeo the elements o Pacesetter mentioned; Lean, Operational Management and SeniorLeadership (OM/SL). The rst o these, Lean is a three pronged approach that willenable a transormation o HMRC by:

Redesigning service delivery processes so as to eliminate waste and variabilityand maximise fexibility. This will improve productivity, quality and reducelead time.

Changing current management processes to create appropriate managementinrastructure to sustain improvements.

Changing mindsets and behaviours o leaders and ront line sta to supportthe new systems and deliver continuous improvement.

Lean is currently being implemented in all HMRC Processing strategic sites.These are the larger sites that will incorporate the work o the smaller sites overa period o time and will use Lean as the way o working. In order to implementLean across these sites, there are a number o dedicated Local Lean Expertsbased in local oces. These are supported by dedicated Central Lean Expertswho generally rotate over three-month periods between sites. In addition, theseinternal HMRC sta have been supported by external consultants since Lean wasoriginally trialled and implemented in 2004. Consultants involved with the Leanimplementation have included McKinsey Consultants, PA Consulting and sinceJanuary 2006, the Unipart Group7. During the period o the evaluation, manysites still had Unipart consultants on site working with the Central and LocalLean experts in order to transer learning and good practice.

OM/SL aims to ensure leadership successully address cultural and behaviouralchallenges as a key to the ongoing sustainability o Lean. It ocuses on perormanceimprovement through developing management capability, ostering new leadershipbehaviours and engaging sta. Ideally OM/SL events are planned and undertakenas pre elements prior to the Lean implementation. The key components o OM/SLinclude the ollowing events:

Kick o Events: to establish an operational perormance ocus withleadership teams.

Perormance Improvement Event (PIE): two day events or ront line gradeso sta, reerred to as PIEs, where leaders engage ront line sta in activities

to address ront line issues, with solution being implemented within 90 dayso the PIE.

Deep Dive Events: leaders prioritise and ocus on a ew perormance issues.

Launch Events: leaders launch their own programme driven by local needs.

PIE training: a programme to develop capability to run local PIE events.

There have also been two leadership workshops or senior managers; Leading ina Lean Environment and Learning to Lead in a Lean Environment. In these eventssenior managers have spent time away rom their respective sites ocusing on processmapping, problem solving, coaching skills and a competence ramework or leaders.

The other theme o Pacesetter is Business Change, which is beyond the scope o this evaluation.7 Background inormation on Uniparts Lean Philosophy (The Unipart Way) was obtained rom a Case Study

undertaken by Warwick Business School. This inormation was very useul in understanding the Lean Final Report implementation that had taken place at HMRC sites. September 2007


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In addition to this and in order to stimulate urther senior leadership in HMRC, avisit was organised to the Unipart site in Cowley or grade 7 sta and above to lookat the Unipart Way in action and the way that senior leaders engage in this process.

In order to acilitate OM/SL across HMRC sites, there are a number o Advocates,who receive training and then acilitate local PIEs at sites other than the one inwhich they are based. The number o Advocates varied across the sites visited, withsome sites have one or two Advocates while others developed teams o Advocates.The Advocates are not solely dedicated to this role, but undertake their unctionsin addition to other duties they have.

Pacesetter has a top-down and bottom up approach to improving perormanceand the Lean and OM/SL elements are very much linked together. Lean drives

perormance rom the processes up into the wider organisation. It ocuses onimprovements through reducing the waste in key processes and supporting theindividual leaders in addressing the challenges o driving ongoing improvements,setting motivating targets and giving eective eedback. OM/SL drives perormancerom the leadership team down into the wider organisation. It ocuses on theleaderships perormance agenda in addressing the challenges o improving theperormance o the leadership teams, re-engaging with ront line sta and leadingin a manner that sustains the improvements generated by Lean.

A timeline o the Pacesetter programme, in particular the Lean implementationsis outlined at Annex 1.

Pacesetter has a top-down and bottom up approachto improving perormance



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MethodologyIn order to undertake the evaluation o Capability Delivery projects, ten HMRCstrategic sites were identied by the Pacesetter Programme Oce, as appropriatesites, having undertaken a combination o Lean implementation and delivery oOM/SL events. The ten sites included ve large processing oces (LPO), twodistributed processing oces (DPOs) and three national processing centres. Therewas also a visit to the Pacesetter Programme Oce in London, prior to startingthe site visits. In the majority o the site visits, the evaluation team wereaccompanied by HMRC sta rom the Pacesetter Programme.

The site visits were undertaken between January and May 2007 (See Table 1 below).There were ve LPOs visited across the country and two DPOs visited. DPOs dealwith the same work as LPOs but in smaller management units. These site visits,with one exception were undertaken over a two day period. As well as collectingdata and material rom the sites, semi-structured interviews and ocus groups wereundertaken with a broad range o individuals using an interview schedule that wastailored to the dierent grades o sta. The actual numbers and proles o thoseinterviewed across the sites varied due to the dierent size and nature o thespecic sites.

The LPO and DPO sites visited were in various stages o implementing Lean anddelivering OM/SL events. Some o the LPOs had trialled Lean in 2004 and 2005,

prior to embarking upon the OM/SL events. Across all sites with one exception,the key processes that were going through the Lean implementation were SelAssessment, Employee Maintenance, Open Cases/Customer Reviews and Post/Customer Correspondence. The aim was to implement a standard solution acrossall sites or each o these processes. The three national processing centres hadtheir own site specic processes that were going through the Lean implementationand they were also at dierent stages o the implementation. All sites, with oneexception had also undertaken OM/SL events (See Table 2 below).

The purpose o the site visits was to gain an understanding o the ollowing aspectso Capability Delivery:

1. When did the Lean implementation start and what proportion o the site had

been aected by it?2. What OM/SL events had taken place and how many people had been involved?

3. What was the understanding by sta o Pacesetter, Lean and OM/SL and thelinks between them?

4. The qualitative and quantitative impact o the Lean implementation and theOM/SL events?

5. What problems had been incurred or what had worked well during theimplementation or the events?

6. What had changed as a result o the implementation or the OM/SL in termso individual roles, the processes, the interaction with the customer and theworking o individual teams?

The terms Customer Reviews and Customer correspondence are being tested in the Model Ofce inPortsmouth. The aim is to determine whether or not these alternative terms help team members better Final Report understand the impact on the customer o how they do their work. September 2007


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7. What aspects o the Lean implementation and OM/SL events would or wouldnot be sustained over the longer period and why?

The personnel interviewed at every site included the senior managers (SMs), seniorocers (SOs), higher ocers (HOs), band Os (Os) and team members consistingo admin ocers (AOs) and admin assistants (AAs). In addition, to support theevaluation, interviews were also carried out with HMRC sta including onenational PCS rep and several Local Lean Experts, OM/SL Advocates and StrandLeaders. Finally an interview was conducted with two Unipart consultants, whohad been involved in aspects o the implementation o Lean at HMRC sites.

Four semi-structured interview schedules were prepared depending on the interviewbeing undertaken (See Annex 2). As a result separate schedules were prepared or

the senior managers (HO and above), or the ocus groups (band Os and below),Lean Experts/Advocates and Strand Leaders. Each schedule was divided into keytopic headings with key questions to be asked. The schedules also highlighted ollowup topics or the evaluation team to pick up on as key words were mentioned. Noteswere taken o all interviews and the majority were recorded on a digital recorderand then transcribed so a ull record was available.

Secondary data was also collected rom the sites and the Programme Oces toaid the evaluation including Pacesetter Programme documents and Lean Academyhandbook. Data was also collected rom the sites including the organisationchart or the site, current and uture state maps or the processes concerned0

and inormation on perormance collated over a period o time to identiy trends.In addition, there was also correspondence rom a PCS national rep.

At the end o each site visit, a site report was prepared by the visiting evaluatoror the sole purpose o the evaluation team. This report summarised the mainresponses to the questions asked during the interviews and ocus groups andhighlighted the site specic refective notes o the visiting evaluator. These reportswere amalgamated at the end o the evaluation and common issues were chunkedtogether and coded so that the evaluation team were aware o which sites hadraised the issues. The chunked data was used to develop emergent ndings. Thesendings are presented in this report under the specic topics discussed during theinterviews and ocus groups. The ndings are supported by anonymous quotes romindividuals and ocus groups.

It is important to highlight that sections 4 to 8 o the report are based solely on the

inormation provided to the evaluators during the visits to the ten strategic sites.These sections do not reect the view o the evaluators. Sections 9 and 10 outliningthe discussion, conclusions and recommendations reect the views o the evaluators.

The evaluation team would like to acknowledge Unipart or this contr ibution and thank theconsultants interviewed.

Final Report 0 The uture state maps were similar across LPOS and DPOs but diered across the national processingSeptember 2007 centres visited.


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Table Overview o HMRC Site VisitsSite

DateVisited 2007

SiteType

Noo Sta

StaInterviewed

Chapel Wharf 22nd January26th January

LPO ~970 Senior ManagerSenior Ofcer3 Higher OfcersLocal Lean Expert4 Band Os8 Admin Ofcers8 Admin Assistants

NOSWolverhampton

8th February9th February

NationalProcessing

~250 Senior ManagerSenior Ofcer2 Higher OfcersLocal Lean Expert2 Band Os6 Admin Ofcers9 Admin Assistants

Child BenetOfce

27th February28th February

NationalProcessing

~1,200 Senior Manager3 Senior Ofcers3 Higher OfcersLocal Lean ExpertOM/SL AdvocateStrand Leader8 Band Os4 Admin Ofcers9 Admin Assistants

Ipswich 13th March DPO ~120 Senior Manager2 Higher Ofcers2 Local Lean ExpertsOM/SL Advocate3 Ofcers5 Admin Ofcers2 Admin Assistants

Birmingham 14th March15th March

DPO ~300 Senior Manager3 Higher OfcersLocal Lean ExpertStrand Leader

5 Band Os12 Admin Ofcers6 Admin Assistants

Lothians 21st March22nd March


continued >



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East Hampshire and Wight

Table Overview o HMRC Site Visits continuedDate Site No Sta

Site Visited 2007 Type o Sta Interviewed

South Wales 27th March28th March

LPO ~900 Senior ManagerSenior Ofcer3 Higher OfcersLocal Lean ExpertStrand Leader8 Band Os8 Admin Ofcers8 Admin Assistants

East Hampshireand Wight

25th April26th April

LPO ~650 Senior Ofcer3 Higher OfcersLocal Lean ExpertTrade UnionRepresentative10 Band Os10 Admin Ofcers7 Admin Assistants

West Yorkshireand Craven

8th May16th May


NationalInsuranceContributions

29th May30th May

NationalProcessing

~3,500 Senior DirectorAssistant DirectorLead Advocate

Ofce Lean Coordinator2 Senior Ofcers2 Local Lean Experts9 Band Os12 Admin Ofcers7 Admin Assistants

Final Repor t This is the Pacesetter Model Ofce. Some o the processes at this site had dierent names. Open Cases wasSeptember 2007 reerred to as Customer Reviews and Post was reerred to as Customer Correspondence.


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Table 2 Lean Implementation and OM/SL Events at Sites2

Site

Lean and % Sta Involved OM/SL and % Sta Involved

Processes Sta Events Sta

ChapelWharf

Self Assessment(March 2006)Employee Maintenance(May 2006)Open Cases (June 2006)Post (August 2006)

~75% Kick Off Event(June 2006)Deep Dive(September 2006)Band O Launch(October 2006)3 PIEs (July, December2006, January 2007)

~20%

NOSWolverhampton Deregistration(June 2006)Registration(November 2006)

~50% None at time of visit N/A

ChildBenetOfce

Claims Receipt(August 2006)Post (ProportionNovember 2006)

~10% Kick Off Event(April 2006)Deep Dive (May 2006)Band O Launch(September 2006)3 PIEs (May, October andNovember 2006)

~15%

Ipswich Self Assessment(June 2006)

~50% Kick Off Event(October 2005)

Deep Dive(November 2005)Band O Launch(December 2005)1 PIE (December 2005)12 mini PIE events (2006)

~100%

Birmingham Self AssessmentEmployee MaintenancePost (July 2006)

~80% Kick Off EventDeep DiveBand O Launch2 PIEs

~20%

Lothians Self Assessment(December 2004)Post (June 2005)Open Cases (June 2005)Employee Maintenance(December 2005)

~60% Kick Off Event(June 2006)Deep Dive (July 2006)Band O Launch(September 2006)2 PIEs (September 2006)

~10%

South Wales Self Assessment(December 2005)Employee Maintenance(March 2006)Open Cases (April 2006)Post (May 2006)Death Team (January2007)

~80% Kick Off Event (April2006)Deep Dive (June 2006)Band O Launch (July2006)1 PIE (June 2006)

2 These were the processes which had gone through the Lean implementation and the OM/SL events that Final Report 7had taken place at the time o the site visit. September 2007


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Table 2 Lean Implementation and OM/SL Events at Sites continuedSite

EastHampshireand Wight

Lean and % Sta Involved OM/SL and % Sta Involved

Processes

Self Assessment(November 2005)Employee Maintenance(December 2005)Customer Reviews(January 2006)Customer Correspondence(May 2006)

Sta

~85%

Events

Kick Off Event(May 2006)Deep Dive (August 2006)Band O Launch(September 2006)3 PIEs (June, September,December 2006)

Sta

~20%

WestYorkshireand Craven

Self Assessment(December 2005)Employee Maintenance(March 2006)Open Cases(March 2006)Post (September 2006)

~60% Kick Off Event(May 2006)Deep Dive(December 2006)Band O Launch(February 2007)2 PIEs (July 2006)

~25%

NationalInsuranceContributionsOfce

Refunds (January 2006) ~20% Deep Dive11 PIEs (2006 and 2007)

~10%



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Perceptions and Understanding

The views o sta were obtained regarding their understanding and perceptionso the overall aims and objective o the Pacesetter Programme, as well as theirunderstanding and perceptions o what was meant by Lean and OM/SL. The termPacesetter was used instead o Capability Delivery as it was believed that stawould be more amiliar with this term. Sta were asked to name the main elementso Lean and to highlight which they considered to be the most important element,as well as identiying the key events associated with OM/SL. Sta were then askedto outline whether they saw a link between Pacesetter, the Lean implementation

and the OM/SL events. As part o these questions, sta opinions on communicationregarding the Lean implementation and the OM/SL events were also sought.

. Perceptions and Understanding o PacesetterGenerally the SMs, with two exceptions, were amiliar with the overall programme,its aims and objectives and could see the link between OM/SL and Lean. GenerallyPacesetter was seen as the programme to take HMRC orward to meet its 5 yearchallenges o achieving capacity, improving customer service and developingleadership potential.

Pacesetter to my mind is the umbrella organisation that is driving orward thebusiness change programmes across HMRC, with the emphasis on development,particularly with the senior managers then working through to provide skills tokey managers all the way down the line

At one site, there was no knowledge o Pacesetter and at another site, Pacesetterwas associated only with OM/SL. This site saw Lean as having come along andreplaced Pacesetter.

There was not such a clear understanding o Pacesetter rom the HOs and SO,who seemed to link Pacesetter only with Lean. In some cases, this reerred to theeciency savings associated with Lean i.e. removing waste, delivering serviceswith less sta and to improving customer service. Only at one national processingsite and one LPO, was there a good understanding o what this programme was atHO and SO level as well as SM level. They could make the link between the aims

o the programme and the improvements required in HMRC.

Pacesetter is helping us achieve where we need to be in the uture and particularlyaround the 5-year ambition, the changes we need to get to were we want to be. Towork more eciently, achieve the 30% eciency savings, give the managers thecapability to manage and lead in the new environment, using the new Lean tool

The Pacesetter programme was recognised by a small proportion o the band Os,but hardly any AAs and AOs. Some sta had read inormation on the intranet ornewsletters but admitted to not paying too much attention, except in preparation orthe ocus groups. Generally band Os, AAs and AOs associated Pacesetter with Lean.

There were some dierences in the timerame o when sta had rst heard o

Pacesetter through an ocial meeting. In the majority o sites the SM heard viaan ocial communication between one and two years ago. In the ve LPOs, theimplementation o Lean had started beore the development o the Pacesetterprogramme and was then integrated into this programme. As a result, Lean wasoten blamed or everything bad even i these were not Lean or Pacesetter related.



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.2 Perceptions and Understanding o LeanThere was a very good understanding o the background to Lean and to manyo its principles across all sites and across all grades o sta. The most commonlycited principles o Lean are listed in Table 3.

Table Lean Principles Cited by Sites

Principle

Improving productivity and quality

Removing waste

Customer focus

Developing and Improving the Standard Process

Increasing efciency

Added Value

No o Sites

9

8

7

7

4

1

For a long time [in HMRC] we have been ocused on sta and things like hours oattendance and when people want leave, we have always looked at it rom the staperspective, whereas under Lean we are looking at it rom the customers ocus

There were dierences across sites with regard to which o the Lean principles wasseen as the most important. The most important principle o Lean, as highlightedby sites is shown in Table 4.

Table The Most Important Principles o Lean Cited by Sites

Principle

Customer focus

Standard process

Increasing efciency

Removing waste

Increasing productivity and quality

All principles are equally important under Lean

No o Sites

9

2

2

1

1

1

In all sites, at least one member o sta mentioned that customer ocus was themain element o Lean. This was usually the senior manager or sta rom thesenior management team. In our sites, the AAs and AOs understood the principleo customer ocus but did not associate it with the way that they were workingthe Lean processes or believed that the site had lost the ocus on the customer,sometimes as a result o Lean.

Customer service is supposed to improve under Lean, but it hasnt here, not withwhat we are doing

Also in some sites, where customer ocus was considered the most important aspecto Lean, this was believed to be achieved i the site was hitting its productivity and

quality targets.

We keep being told that by increasing our productivity and removing the waste,the applications are done quicker. This means improved customer service

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Other views o Lean included: Change in culture rom top down mentioned by three sites

Creating headroom/capacity mentioned by two sites

Hands on management/go and see mentioned by two sites

Uniting sta against the management mentioned by one site

Deskilling and a breakdown in the process mentioned by one site

Lean develops sta/improves the workorce mentioned by one site

Better job satisaction mentioned by one site

Producing cost savings mentioned by one site

Collecting statistical inormation mentioned by one site

Transparency o inormation mentioned by one site

In the majority o sites (generally at AO and AA level) the background to Leanand its development was seen as purely relevant to a manuacturing environmentand irrelevant to an oce based environment.

We went to the workshop where we did stickle bricks and that was quite goodin terms o getting to the end result. It was good in the workshop but didnt workwhen we came back to the desks. We do our jobs dierently because every returnis dierent. We cant see the principles working in here

Lean cant work in a tax oce. The consultants have come in rom a carmanuacturer or a hospital, but not a tax oce

. Perceptions and Understanding o OM/SLThere was a lot o dierence between sites and within sites regarding theirunderstanding o the OM/SL events o Pacesetter. The main denitions givenor OM/SL are provided in Table 5.

Table The Understanding o OM/SL

Defnition o OM/SLEnhance skills of managers and staff further down

Improve leadership beyond just management

Change the behaviour/way the managers need to work in thenew environment

Top down approach to support Lean or Pacesetter

Enable managers to take responsibility/challenge

Being able to mange together

No o Sites8

4

4

3

1

1

OM/SL was only really understood by the senior managers or sta rom the seniormanagement team. In the ve LPOs, sta had to be prompted by mentioning thekick o, deep dive and management launch events beore they were able to commentupon them. Only one national processing centre had a consistent view acrossthe organisation o what OM/SL meant, stating that it was about realising anddeveloping managerial capability across all levels o sta.

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.


[OM/SL] looks at the way that we lead, the dierent behaviours that we need inour new business to support the managers. In terms o Pacesetter, it is aimed atGrades 6 and 7, but then it is my job to support and coach my people here, in mysenior team, and or them to support downwards throughout the management, allthe way down to the ront line sta

There was also a signicant number o sta at three sites at HO and SO levelwho appeared uncertain about what OM/SL meant. At one national processingsite, OM/SL was not understood by the SM in the context o what it really meantbecause this senior manager had had very little involvement in these aspects oPacesetter. As a result, attempts to answer this question were in relation to generalleadership regarding Lean i.e. making work more ecient. At another site the termsOM/SL meant nothing. Most people saw this element as the Pacesetter Programme.

When speaking to sta rom urther down the site hierarchy in the LPOS sites,this term was associated only with PIEs. At all sites, the sta that had attendedthe PIE events had enjoyed the two day events very much. The events were seenas very useul or encouraging all sta to highlight problems, research issues,present ndings and implement changes. Some ront line sta had developed morecondence in presenting and talking to their peers as a result o attending PIEs.

I enjoyed [the PIE] and I learnt lots o new things. A ew changes that werepicked up did go ahead and were actually implemented

The number o PIE events undertaken had been limited by Union work to ruleaction at three sites. At some sites, even those where PIE events had been viewedpositively, many o the improvements suggested at the PIEs had not been implementedand the reasons or not doing so were reasons that should have been identied atthe PIE stage i.e. nancial or IT reasons.

The improvements envisaged through the PIE were supposedly going to bemassive and everybody in the senior management team took a step back, andthought this is going to be dicult to implement based on what we know o howthe business works and thereore [the improvement] didnt actually come o in theend. Then you get the situation where sta say that it wasnt ever going to happenand you get negativity creeping in

Links between Lean and OM/SL

At all sites that had been involved in OM/SL events, the senior managers couldsee the link between OM/SL and Lean and recognise the role that OM/SL hadin changing the way that HMRC needed to work.

OM/SL is crucial or the long term sustainability o Lean. It is linked toimproving the capability o managers and sta to deliver a better customer service.Without OM/SL Lean does not have a chance

Lean requires behavioural changes to make it work and there is a lot o sta stillmanaging the old way. Managers need to drive change by changing their behaviour

HMRC cannot achieve the new targets the way it used to manage so thereorethere needs to be a change. [This site] originally started Lean without the OMevents and it was hard to implement Lean in this environment

However at ve LPOs and DPOs, there was no understanding o how these twoaspects o Pacesetter linked together rom some o the HOs and SOs on the seniormanagement team. In most o these cases, these individuals appeared to see theOM/SL events as part o Lean leading to increased eciency and productivity.


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. Raising Awareness/CommunicationCommunication rom the Pacesetter Programme Oce was mentioned as anissue by many sites.

Four LPOs highlighted that there was mixed messages comingrom the programme oce and rom the central lean experts in theearly days o the implementation, but this support had improved as theimplementation progressed.

In our sites it was perceived that the responses rom the programme oce tosuggested changes were too slow. This had got better but there was still roomor improvement. The impact was that sta elt discouraged rom seeking wayso making improvements.

In three sites senior managers stated that they had very little contact with theprogramme oce and there had been varying contact with the dierent centrallean experts that had been assigned to these sites.

At one national processing site, the OM/SL advocate highlighted thatcommunication with the programme oce had been mainly rom the siteto the oce and not the other way.

There isnt much support rom the programme oce. The sites pass inormationto the programme oce about the events that have been undertaken butinormation is not always proactively orthcoming. There is a shared drive whereAdvocates can access inormation on events that have taken place in other oces,

but there is no proactive sharing o inormation rom the programme oceThe issue o internal communication within the sites was also raised.Inormation about the Lean implementation that all sites were to undergo wasormally communicated to the respective senior managers rom the programmeoce. The senior manager was responsible or cascading this throughout the sitethrough a combination o meetings, workshops and email. At all sites the O bandmanagers were responsible or telling teams about the proposed implementation.

However in all sites, the general opinion was that inormation was communicatedpoorly, mostly via email and some meetings. As a result, many teams had heard oor seen teams on their foor going through the implementation and knew they wouldbe going through a similar process beore they had been ormally told. In addition,

sta had heard rumours rom other sites regarding Lean and these were generallyquite negative. Only at one national processing centre was this process managedto dispel any rumours and make assurances to sta, acilitated by the sharing oexperiences between teams. AAs and AOs rom non Lean other processes wereable to visit teams on the Lean process to get inormation on their experiences.

We heard the horror stories rom Lothians, we were told that it was going to bea good thing, and i we wanted to stay in work here, and have a uture, then theywere going to bring Lean in and that was it basically

There were dierences with regard to communication between processes in themajority o LPOs/DPOs. Communication regarding Lean happened more ormallyin Sel Assessment as the other Sel Assessment teams were all made aware o thepilot team. There was less ormal communication in other processes, but all staknew that they would be going through the Lean implementation. In addition, theteams in the post process in the LPOs and DPOs that were going through the lean

There is a undamental misunderstanding at these sites. The programme did not design the new standardprocesses, the Business did. The our standard processes in Sel Assessment PAYE are each owned by a Final Report 2specifc strategic site. September 2007


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process did not learn anything rom teams in other processes. Sta elt that therecould have been better communication about this Learning process at all LPOsand DPOs, with one exception. One impact o this was that teams elt they wereunprepared or Lean. Many sta believed that the senior managers did not knowwhat worked and what did not work under Lean as it was being implemented.

In addition, there was a eeling that not only could sta on teams have learnt romother teams in other processes who had gone through the lean process but also thatthere were lessons to be learnt rom other LPOs who had gone through Lean. Staelt they had had no ocial HMRC communication o the positives that Lean hadbrought to some sites. They only heard o the negatives rom the Unions.

. SummaryThere was a good understanding o the term Pacesetter by the majority o seniormanagers at the sites but this understanding became less clear urther down the sitehierarchy. In some sites SOs and HOs were also unclear about Pacesetter and couldrelate it only to Lean. This was also true o the OM/SL events. Some SOs and HOscould only discuss OM/SL when the specic events (Kick O, Deep Dive, Band Olaunch, PIEs) were mentioned. AAs and AOs sta were also unamiliar with OM/SLuntil PIEs were discussed. Even then many o them could not distinguish PIEs romLean. However the majority o views regarding PIE events were very positive bythose that had attended. Only two LPOs elt they had not been productive. Therewere many examples o where an improvement had been made as a result o aPIE event.

There was a good understanding o Lean across all sites and across all grades osta. Sta were amiliar with the principles o waste, developing standard processesand improving productivity and quality. When rating which o the elements oLean was the most important, nine sites saw customer ocus as the most importantelement o Lean. However eight o these sites did not associate how Lean was beingimplemented at the site with improving the customer service. Only one site couldcategorically state that Lean had improved customer service.

Generally it was only the senior managers at the sites who could see the connectionbetween Lean and OM/SL. Other grades o sta could not distinguish the OM/SLevents rom Lean.

Communication about the Lean implementation could have been better handled

by HMRC. Many teams had heard o or seen teams on their foor going throughthe implementation and knew they would be going through a similar process, evenbeore they had been ocially told. Similarly inormation about the pilot Lean sitehad ltered down to sta mainly through PCS and many sites had ormed negativeviews o Lean as a result o this. In addition, there was not enough inormationcoming rom HMRC to counteract these views. During the implementation also,there were ew success stories being communicated both within and across sites.



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Implementation

When the discussions moved into obtaining views and evidence on the implementationand impact o the changes, the majority o sta considered these as being part oLean so many o the comments now reer to Lean rather than OM/SL. Howeverthose individuals who had attended OM/SL events did provide eedback on whatthey thought o these events. The majority o the views o sta were obtainedregarding the impact on perormance as a result o implementing Lean. They werealso asked to highlight what they considered to be positive elements and negativeelements o Lean. Finally problems or issues encountered during implementation

were also explained, as well as any solutions made to resolve the problems or issues.

. Interviewee involvement during the implementationWith regard to the Lean implementation, there rst had to be a diagnostic undertakenor each o the processes, in order to dene and plan the Lean implementation. Thediagnostic stage considered the current state o the processes, looked at the set up othe teams, considered the demand at the site and designed the uture state processwhich included the targets to be achieved by the site. Pilot teams were establishedto trial the uture state process. However there was signicant variation betweenthe LPOS/DPOs and the national processing centres, with regard to the diagnostics.For LPOs, DPOs, there was not signicant sta involvement in the diagnostics

development o the processes. This included the Central and Local Lean Experts.As a result many sta at all grades were unable to comment upon this aspect oLean. At the national processing centres however, a greater proportion o sta,including the Central and Local Lean Experts were involved at the diagnostic stage.

Generally sta rom the senior management team (mainly SM and SOs and someHOs), were involved in:

Agreeing site Key Perormance Indicators (KPIs) ater the location andbusiness diagnostic.

Attending the Kick O and Deep Dive events and many were involved in themanagement launch.

Maintaining contact with the programme oce, one o the main elements othis being to communicate elements associated with the Lean implementationthrough the site.

Participating in the PIE events as sponsors, advisors or on the decisionmaking panels.

Maintaining links with the PCS rep and inorming them o what was going onevery step o the way.

Reassuring the sta who were being transerred to Lean that the rumours theyhad heard elsewhere were not true and reassuring sta not on Lean teams thatthey have a uture in HMRC.

On some foors there was panic over going onto the Lean teams. This is the problemwe have had all along trying to win over their hearts and minds, at least a couple opeople were petried o going onto the Lean team. I was trying to reassure them itwas just the same work and trying to give a positive slant on everything



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The HOs were only involved when Lean was being implemented in their processareas. In LPOs and DPOs, HOs had very little involvement in the designing theLean process. The main duties HOs were involved in were:

Communicating inormation about Lean to the teams concerned. In threeLPO sites, this was done in a hostile environment because many sta had heardnegative rumours regarding Lean usually rom the Trade Union. The HOs rolein this case was to allay ears about Lean.

Choosing band O, AAs and AOs to be part o the new Lean teams.

Providing an overview o changes to teams and held meeting with teams directlywithout O band present.

Undergoing the Lean training sessions using stickle bricks.I held meetings with the teams beore they actually went into Lean, just to givethem an overview. In Sel Assessment Lean had got into some disrepute becauseit radically changed the things they did there, and there were some negative aspects.I tried to counter this view beore my teams had their training. I spoke to theteams direct, without their managers just to make sure they were getting theright messages

At all sites, the O bands and AOs ands AAs had been involved:

In working in a Lean team or varying periods rom several weeks to over18 months.

Working on the pilot teams (a minority at some site), where they were involvedin the diagnostic process.

Sharing experience with sta rom other process areas occurred at one site only.

Attending the band O launch and PIEs and taking orward improvements.

Attending training sessions ocusing on the removal o waste using stickle bricks.

The Local Lean Experts had attended the Lean Academies with the majority havingattended all three Lean Academies. They also delivered Lean training, were sometimesinvolved in the location and process site diagnostic, did the timings and planned theimplementation. Following the implementation, many Experts were ocusing onembedding the new tools and techniques, including problem solving.

The OM/SL Advocates had attended advocate training and had been involved inobserving, delivering or shadowing OM/SL events at sites other than the ones inwhich they were based.

.2 Impact on PerormanceOne aim o the Lean implementations was to improve the perormance o sites.The perormance o sites is measured on the basis o number o cases/claimsprocessed per day (productivity), the number o cases/claims processed correctly(quality) and the time taken to process a case/claim (lead time). There was anunderstanding that key perormance indicators i.e. targets, were set or each othese measures and teams were judged in relation to how they perorm against

these targets. Sites had a twenty week period to improve perormance, during

There appears to be a misunderstanding here about how team targets were arrived at. Timing exerciseswere meant to be done several times or each individual team member and then a team average wascalculated. This became the short term goal. The stretch target or the team was what was being actually

Final Report achieved by the better perormers in the teams. However ew sta members actually mentioned thisSeptember 2007 during the interviews or ocus groups.


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which targets were slowly increased towards the desired target. Dierent sites wereat dierent stages o this twenty week period. Whereas LPOs, and DPOs had passedthis twenty week period, some processes in the national processing sites were eitherat the beginning o this period or coming towards the end o it.

The general points to note are that:

Quality had improved because there were now more in fight quality checksbeing undertaken, there were dedicated quality managers undertaking this taskand that eedback was immediate to sta so that they were learning rom theirmistakes. Not all sites were achieving the quality targets or their respectiveprocesses however, but all were making progress towards the target.

From a customer point o view, the one thing that Ive ound rom the start

when we were doing sel-assessment returns is that Lean has produced betterquality work, which has got to be good or the man outside. It has a benet tothe customer because it is done, in this particular site more correctly than itwas pre Lean

Whilst many teams have signicantly improved quality and productivity asignicant proportion o teams across all sites were not achieving their twentyweek productivity, quality or lead time targets. At one particular LPO site, thesenior manager highlighted that the outcomes rom the OM/SL events, whichwere very disappointing, had not resulted in the required change in behaviourto enable teams to work more eciently in a Lean process.

We have got one team that has been averaging about twenty [SA returns per

person per day]. It slips a bit though when we dont have the right product mix.All the other teams average about sixteen to seventeen per day

It is perceived at all LPOs and DPOs, that the targets have been set or theindividual teams. The productivity targets or Sel Assessment vary across sitesbut or many sites this target was between twenty and thirty-ve returns (electronicand paper) processed per person per day. The quality target also varied betweensite with the lowest target highlighted as 85%. The range o lead time targetshighlighted was between 10 days or paper return and 40 days or electronic return.It was highlighted by HO sta across the sites that many teams were achieving thequality targets and a signicant number o teams were achieving the productivitytargets. However the lead time targets were not being achieved. Some sites hadbeen able to take on additional Sel Assessment work rom other HMRC sites as a

result o increased productivity, compared to pre Lean. Other sites had been able tocomplete all their Sel Assessment, capture programme without having to despatchto other sites or processing, as in the past.

For employee maintenance, there was a lot o variety in the perormance o teamsand sites, with regard to the productivity target, which varied between site andteams. At many sites the productivity perormance o teams fuctuated around thetarget. There was also evidence to demonstrate that quality had improved but this wasstill below target in many teams. The main reason given or the better perormingteams was that they were more experienced and had better keyboard skills.

Again there is a possible misunderstanding here. Targets should be set through the diagnostic process Final Report 27by teams. September 2007


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In open cases, there was also variety in the perormance o teams across the sites,with no one site consistently hitting their targets. Generally, it was outlined thatin open cases, the more experienced teams were perorming better and that acrossall the sites, teams had increased their productivity and quality since Lean wasimplemented. The teams working in open cases were usually the rst teams to fipto other processes.

In post, the 20 week productivity target (which as in the other processes variedbetween sites and teams) in many sites was not being achieved, though there wasevidence to highlight that productivity was increasing. The quality targets (rangebetween 85%-90% correct) were also not being achieved by many teams thoughlarge increases in quality had been achieved at some sites. In addition no site wasachieving the minimum lead time target o 3 days and although production lead

time decreased in all sites, it appears that sites were still very ar rom achieving thistarget. In addition to production lead time, the aged lead time (the number o dayssince the oldest piece o post was received) had increased at some sites, who werehaving to allocate resources rom other processes to reduce the volume o work onhand. There did appear to be a large dierence in the perormance o teams, withsome teams perorming better. Where this was the case, HOs described the attitudeor experience o these teams as better than in others.

We have had a backlog or a while and the implementation o Lean hasnt helpedit. We maybe could have planned better in the transition o going Lean. We hada staged role out plan o 3 teams at a time, with 15 teams in total. As the rst 3teams came on, they were pulling the work or the teams. As more and moreteams came online, we werent managing the backlog very well. This didnt

give us a good start

The targets varied across the national processing sites visited because each siteworked dierent processes rom LPOs and DPOs. One o the national processingcentres visited had not long been working Lean methods and as a result wereachieving their targets very easily because these targets had not been increased tothe twenty week gure. However at the other two national processing sites, whichwere approaching or had passed their twenty week trial period, perormancevaried, with some teams achieving their targets, whilst others were not. Howeverboth these sites did have post processes, which had Lean targets and in both cases,it was highlighted that, as in LPOs and DPOs, these processes were the ones thatwere struggling to hit their targets and backlogs were being created. At one nationalprocessing site, the Lean post teams were being backlled with sta rom otherareas o post to help work the post.

. Positive and Negative Elements

5.3.1 Positive Elements

Quality has improved in all sites and this had been recognised by all teams.There were more quality checks being undertaken and eedback was immediate.However at two LPOs it was highlighted that there was some inconsistency betweenthe quality managers, but they were trying to remedy this. This inconsistency waselt to be because quality managers had received no training or guidance on theirnew role and also because in many processes they did not get together to meet and

discuss their work.


A good thing is having quality managers. Some people do things and are notsure i its right or wrong. Now the quality manager will pick up on whetherthings are wrong and i they are, he will show you what to do. Next time itpops up, you know


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At seven o the sites, it was mentioned that teamworking was also better, withteams becoming more sociable or have more o a team spirit. At one nationalprocessing site, there was better sel management within teams. An example othis was the power-hour. One o the elements o the process required extensive/pressurised work or an hour each day. The teams decided that all individuals onthe team would do this work or one hour each day. This beneted team morale.At one site, the ront line managers and quality mangers were working togethermore. At some sites competition between teams was driving improvements ratherthan demoralising teams.

On the two better perorming teams, a good team spirit exists, they are veryengaged, take accountability or things and actually want to do a good job

It was stated particularly by AAs and AOs that it was more obvious to see whoin the team worked well and who did not. This had a dierent impact across thesites. In some sites the better perormers in the team tried to compensate or theircolleagues who did not perorm so well, while in other sites the poorer perormerswere being exposed.

Some people are having to compensate or those that dont work so well. Youare not supposed to pinpoint people who are not working because its a teameort, but when people slack o, it can really annoy other people, in the team

The challenge then becomes identiying the poorer perormers and giving themsupport to improve quality through training

Two sites highlighted that more problem solving was being undertaken. The problem

solving sessions provided improvements that everyone could relate to and that wereshared across teams.

Problem solving has been good but there has not been enough o it

The OM/SL events have had a positive impact, where they have been embraced.They have given some managers the skills to tackle dicult issues. There areexamples o PIEs being used to make real improvements e.g. data entry oemployees. Some sta appear to have become more ocused as a result oattending PIEs.

[As a result o the OM/SL events], I am much more refective now, so ateran event, I will have a look and say, is that the best way I could have done that,could I do it dierently? I am constantly trying to strive to get better ways tocommunicate as well

There was more structure to the working day. The standard work instructionsbrought benets to the way that teams worked. Where there were once dierentpractices across and within sites, there was more o a structure to enable all sitesto undertake the work in the same way.

For me, its simplied the work. I dont think about what cases I have to do.My day is mapped out or me and its structured. I can concentrate on theprocess I am assigned to do at a set time

Some elements associated with Lean worked well, especially where the seniormanager led by example and demonstrated the appropriate action e.g. 5S and

moving desks. Visual management also improved the management o the work,where it was used in the right way. Team members elt very precious about theirboards and in some teams, sta took responsibility or completing the boards.The daily meetings were useul or stimulating communication within teamsacross some sites.



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In the past I had been led by example. However this time I led on 5S in my roomand my desk and it was ne. As a consequence o this my senior management teamis now well on board with 5S. It makes the oce a much better place to work

People are much more accountable regarding the way that they manage. Sta inmanagerial positions have become more visible and accountable. Lean has made themanagers manage by collecting statistical inormation, looking at productivity andchallenging perormance.

The most important o these is managing perormance properly. We didnthave lean to do this beore. The boards are updated every hour so i somethingis wrong, we can identiy it very quickly. Lean has given us the inormation tochallenge perormance

There were now more channels than beore that enabled sta to speak to peopleat higher levels. This value o this consultation with sta was recognised by seniormanagers in one site in particular.

Whether all sta would admit it or not, the value o being spoken to andconsidered and consulted is good. I think we had created a department beore Leanwhere sta were very much told what to do. As part o the LEAN process we havetried to engage and consider them

The removal o waste had been successul in some sites.

I remember when we cut out some o the waste rom the post process. Beore wewere moving the post up and down and looking back I would think - good grie

why were we doing it like thatWe can see where the waste was in the previous process. Most o the waste sawbeore has been removed. We always saw the waste but Lean has enabled us toremove a lot o it

There was some learning associated with Lean. The band Os were makingcomparisons between teams and learning rom one another at one site. Alsounder Lean some AOs were taking ownership o more duties such as supportingtheir Line Manager. Additionally working with Unipart, involved more o a twoway exchange, and provided skills to enable the teams to do the tasks themselvese.g. calculating productivity.

The Unipart Consultant ound out what each o our needs were, in terms

o training, and gave that support., designed training sessions or each o us,supported rather than did, which I think is always the best way o learning

Targets could have a positive impact on teams when they were achieved.Some sta liked the targets, but would have liked more praise when theirteams hit their targets.

Targets are good i they are realistic because they can motivate teams.When the board is green, I now my team eels a lot better

Another positive aspect o Lean, although it was unrelated to the implementationwas that sta on temporary promotion, xed term contracts and those sta whodid not work in HMRC pre Lean were oten described as being more receptive tothe Lean implementation.

Some o the [xed term contract sta] have been here two or three years andhave a great attitude, they are not all young people, but there is a majority oyoung people who really want to work with us

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5.3.2 Negative ElementsThe implementation was elt by some sta to have resulted in the deskilling othe AA and AO workorce in particular at all the LPO and DPO sites.

Like everyone else I eel Ive been deskilled. We used to do dierent work, agood variety o post, but on Lean we do only 6 dierent types and ollow theinstructions. I you dont ollow the instructions you are marked as wrong.Its get monotonous and more you get bored, the more you make mistakes.

This was particularly elt to be the case in Sel Assessment where people wereonly doing one part o the process. However people in open cases in one sitealso elt deskilled.

Because we ocus on one process, we orget specic details about the otherprocesses. But when we are fipped to doing other work [Sel Assessment or post],we eel less able to do this work

Teams elt under pressure all the time to hit targets. This aected team morale.There was general agreement that the ocus was on target hitting rather thanimproving the customer experience. At many LPOs/DPOs, sta believed thatpressure was put on them by the O band (unintentionally), who were themselvesunder pressure to achieve targets rom urther up the hierarchy. However it wasalso recognised that teams were putting pressure on themselves. There was morepressure on over achievers. In order to hit the targets, the good perormers in theteams tried to compensate or the poorer perormers in the team and elt even morepressure to hit targets.

The pressure to achieve comes rom internally as well, we must accept that assoon as people start collecting statistics, people want to achieve, they may pretendthey dont care, but they do. You thereore put pressure on yoursel because youknow that you have been counted

There was a eeling amongst some sta that the stretch targets were too highand sometimes unachievable. Many sta were also unsure how the targets hadbeen calculated. Teams strived to achieve a green gure on the board, but eltdisappointed when they saw that they had achieved a red gure. There was a eelingamongst many sta that the timings that had been used to calculate the targetswere wrong. However it was noted at some sites, that teams were achieving thesestretch targets.

There is a lot o pressure on the managers to put pressure on the teams. I do eelsome pressure. Im supposed to do 8 cases an hour but I never achieve this. I dontthink I ever could even when I try

Targets were not reduced during non-productive time at one site i.e. meetings,problem solving and with IT problems. There was concern over structured problemsolving events.

Some processes have more problem solving sessions than others andpeople are being taken out o the teams to carry them out. This is impactingupon perormance

The standard work instructions were seen as not t or purpose and wereinstructions were considered to be infexible compared to how sta were allowed toundertake their work pre Lean. Additionally suggestions or improvements proposedthrough problem solving sessions took a long time to be approved or not approved.In many cases, they were not approved.



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Standard work instructions, make you do the job in the wrong way.You identiy that something is wrong with the standard work instructionsbut you cant resolve them

There was zero tolerance with quality checks and there were more checks. This wasconsidered to be a negative because it exposed those sta who made more mistakes.

Because o the quality checks every day, we sometimes nd that only 3 pieces opost may have been checked. I there is one error, than this has a big impact

Sta elt there was more o a ocus on individual achievements rather than teamachievements or ocus on the customer. The ocus o the daily meetings was onpoor achievements and there was little or no positive messages. In all but a veryew cases, the team meetings started by discussing the previous days perormance.

In addition at some sites the meetings were repetitive and people did not alwayspay attention.

We have a daily meeting, but they dont serve any purpose. We discuss targetsand quality at the meetings. Generally we talk about things we got wrong

. Problems and Issues EncounteredIn many sites, sta interviewed supported the PCS, which has specic issuesrelated to the Lean implementation including:

Hourly monitoring o sta where team members are required to giveinormation to ront line managers regarding their outputs.

What the undamental objection has come to now is the hourly monitoring.The membership does consider this to be totally unnecessary

The deskilling o sta working in Sel Assessment.

There is not a business need or all sta to come in at a certain time.

Because o LEAN sta have to have a meeting at 10.30 every morning [as anexample], so everyone must come in at 10.30. For some o the sta their workingpatterns do not allow them to come in at 10.30, but the managers highlight that thebusiness dictates that they must be there. Well, it is a good thing that people attendthe meeting, but there will never be 100% o people in, so why make an issue o it?The business will not ail i they dont turn up

In discussion with Leaders and managers it was mentioned that they were aware othe points raised above except the last point regarding the customer and, attemptshave been made to address the concerns. The Union action impacted the PIE events,management launch and teamworking at many sites because o the recommendationthat participation rom sta should be voluntary and not compulsory. Seniormanagers in particular highlighted that the action, though it was not highlyintrusive, it was evident.

HMRC has missed a trick regarding the communications strategy. Anycommunication states that Lean is wonderul and been great where introduced,whereas sites know this is not true so there needs to be more honesty

There were issues surrounding sta, with some sta not wanting to move rom thedesks they have occupied or years. Where sta did move, there was a need to cateror sta with specic work related issues e.g. ergonomic keyboards, desk height andother health and saety procedures. In other sites, hot desking was not embraced.



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One o the problems we had in going rom the old way o doing the post to thenew way was the set up. We have changed how people sit at their desks and howthe post gets to their desks

There were skills issues highlighted at some sites. Some O Band managers did noteel too secure with the new duties under Lean e.g. holding daily meetings, eitheror political issues or because they lacked the appropriate skills. Some O grade stacould obtain the skills but the will was not there or there was a general reluctance tochange. AAs could not do AOs work and thereore could not show competences andacquire new skills even i they wanted to.

One team leader was not comortable with talking to people and holding dailymeetings, so this person moved to a quality role. Another team leader also worked

part-time and when [this person] let , the perormance o the team worsened. Thisperson was also moved to a quality role

Some managers eel they do not have the requisite skills to manage in thatenvironment. So when that happens, you revert to what you used to do beore soyou are back in your comort zone

Some senior managers saw Lean as a ad and did not expect it to last, althoughmany have bought into the idea since the implementations. However at one sitethe senior managers were very uncooperative with the local experts and did notparticipate ully in the Lean training sessions or in the OM/SL events. This sitehad not ully engaged with the OM/SL aspect o Pacesetter.

The Lean experts are there to be used by the senior managers. But in act, we

were not consulted, business decisions were made without talking to any o theLean experts. Since the new senior manager came, we have been more involved

Some sta at one site elt let out o the Lean implementation and wondered whetherthey had a uture in HMRC. Some band O sta, at another site, elt a bit detachedrom the process. Lean maybe missed out the process owners when it was rstimplemented and this explained the issues that the LPO had around introducingsome aspects o Lean such as problem solving, which required signicant HO buy-in.

The issue o Fixed Term Appointments (FTAs) was raised as the major problem inmany sites. In theory all FTAs in HMRC will not have their contracts renewed aterSeptember 2007, thereby leading to a large reduction in headcount. Many sta werethereore, not sure where their uture was and this had a big impact on morale. As

these individuals were generally the better perormers, their loss would leave onlythe poorer perormers.

A major problem we had was that sta not on Lean teams were uncertain abouttheir uture. We believed they had a uture here but we could not say or certainwhat that uture would be. Because we could not tell sta that next week theywould be doing this or that, then sta ocused on this element o uncertainty andwere unhappy about it

Lean was seen as time consuming by some HO managers and some things that hadto be done, did not add value e.g. monthly management report, repetitive copyingo inormation and the daily meeting between the HO and band Os. Lean did notalso lean the role o managers. It was time consuming or managers to complete

boards, especially when they had to cover or other band O managers and were notgetting done some o the jobs they were doing beore e.g. sick reports. There werealso too many meetings. As a result o all these additional duties, both the band Osand AAs and AOs elt that the band Os were spending less time with the teams andwere not able to give more individual support to team members.



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They hold more meetings, and they dont have time to be the people managers,which is what we want and we need. The people aspect has gone

You eel as i you are ghting or their time, they are trying to hit their targets,and while you are speaking to them you are not hitting yours either

The ollowing specic sta perceptions were highlighted around the Lean tools:

There were issues around the standardisation o processes. The standardworking instructions were not t or purpose or the teams. Sta recommendedchanges, but the process or change was too bureaucratic and stopped starom expressing an opinion. There was a lack o decision making, because thestandard process meant that there was no thinking on an individual level.

Issues around the perormance boards, with some teams not having boughtinto this concept and ignoring the inormation on the boards. The purpose othe perormance boards was to see how the team was perorming but therewas too much inormation on them and some sta ound this conusing.

On post, it was dicult to identiy exception items o post that requireda longer working time but sta were not given additional time to do thisextra work and were thereore not hitting their targets7.

There was an expectation that improvements would occur aster. Problemsolving should have come in earlier to acilitate improvements.

Sta also highlighted that there were some issues with the external assistancethat some sites received. Some o the diagnostics were consultant rather than

business led and the handover o consultants occurred at a dicult time.

At times, Unipart were inconsistent and their understanding o the businesswas poor

The business has been transormed to t Lean rather than other way around

One LPO was hampered by the lack o a Central Lean Expert or a long time.At some sites the band O on the post process elt that they could have learntrom the experiences o other teams on other processes which had gone throughlean beore them. They elt there was an element o duplication. There shouldhave been more learning between sites, even i there was resistance to this initially.

Someone rom the model oce could have come to talk about problem solving

and mention how it could work here

Some sta, particularly at the LPO/DPOs, believed that the speed o the Leanimplementation made it dicult or people to change and adapt quickly. At onesite there was a loss o momentum on the OM/SL side because o too much pressureto change. The pressure to change overnight (internally rom HMRC and externallyrom Government) was also seen as possibly undermining the sustainment o Lean.

The pace o change elt relentless at times and sometimes elt out o control. Thiswas dicult or people who like to get things right rst time

See comment on Footnote .7 At the interim report stage, the evaluation team suggested undertaking an initial sit o the post into

runners, repeaters and strangers. Whilst the post process should be able to accommodate runners and Final Report repeaters, the exceptions in post should be considered as strangers and sited out o the process to save

September 2007 time. As a result o this, the standard process has been revised and improvements have been made.


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. SummaryIt was evident rom the interviews and ocus groups that a signicant proportiono sta have been involved in both Lean and the OM/SL events. With regard toLean, whereas the ront line sta have seen changes to the process they work in,there has been a signicant amount o management time involved in planning theimplementation, creating teams and trying to reassure sta prior to the actualimplementation. Signicant sta time has also been taken up preparing or andundertaking the OM/SL events. However there has been a huge dierence betweensites in the amount o time involved in ollow up actions rom these events.

The Lean implementation has impacted upon the perormance o teams at sites. It isvery clear that Lean has resulted in an increase in the quality o the work at all sites.

However it is not so clear whether there has been a similar increase in productivityor decrease in lead time across all sites. Some teams do achieve their twenty weekproductivity targets, but a signicant proportion do not. However a majority o siteshave indicated that productivity is increasing under Lean.

There were a lot o positive and negative elements associat

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