When You Think of Lean Six Sigma—What Comes to Mind?
Jack Donaghy meeting personified Six Sigmas at the Retreat to Move Forward convention? (Maybe that’s just me.)
Chances are, “improving firm procedures” isn’t where your mind lands.
However, Lean Six Sigma methodologies have an incredibly effective positive impact on how a firm operates.
Not only do both methods keep the customer (or client) at the center of every process improvement, they are strategies built to empower the ground-level employees in charge of completing the actual work.
Every business should be practicing (or at least influenced by) the concepts of Lean Six Sigma, especially at an accounting firm. In the following post, I’ll share exactly why.
Read through the following article to learn:
- The components of Lean Six Sigma (LSS) accounting
- The critical differences between firms that practice LSS vs. those who don’t
- One easy way to start practicing process improvements today
Lean Six Sigma Basics for Accounting
Lean is a business strategy built on five principles¹:
- Creating customer value
- Organizing the business around its value streams
- Creating flow and pull
- Empowering employees
- Continuous improvement
“Six Sigma is a method that provides organizations tools to improve the capability of their business processes. This increase in performance and decrease in process variation helps lead to defect reduction and improvement in profits, employee morale, and quality of products or services.” ²
Lean Accounting must be a part of an organization’s strategy for maximum operational alignment.
Why? Because accounting (both internal and external) provides the information and financial data necessary for executing a strategy, then growing as a result of that strategy.
Lean Six Sigma Firms vs. Firms
It’s easy to see how Lean, Six Sigma and accounting work together to the benefit of the firm:
- Lean Six Sigma firms improve data accuracy (by eliminating excess data flow processes)
- Lean Six Sigma firms save time and money (by continuously improving technology and procedures)
- Lean Six Sigma firms have happier clients and employees (by creating customer value and empowering staff)
There is no question that firms who adopt Lean Six Sigma into their operations achieve more day-to-day, earn more year-over-year, and boast higher client and employee retention rates.
In the example from GoLeanSixSigma.com, agents were able to process 3x the amount of loans per month after beginning to practice Lean Sig Sigma:
In another example, also from GoLeanSixSigma.com, there was a 50% chance the output of an application was incorrect pre-Lean Six Sigma. After identifying that this 50% defect was creating unhappy customers (obviously) and approaching the same procedure in a new way, the chance of a defective application went down to nearly zero.
Get Started by Identifying Risk
Procedures that invite risk require multiple programs, human intervention, or live in both a digital and physical paper format.
How firms should identify the process to improve first? Look for risk.
Because the chance that a multistep, multi-program, multimedia process (that involves more than one person) goes from start to finish as planned every time is … unlikely. Even if the process completes without hiccups, it takes way longer than it needs to. And if the process completes quickly, it’s not built to repeat easily.
One great example of a process that looks simple from the outside yet invites an immense amount of risk is contact management.
To find out just how ~risky~ your firm’s contact management process is, ask every member of your firm two questions:
- What happens when a client’s contact information changes?
- Where do you look for a client’s contact information?
Unless there is already a defined process, everyone will respond differently. That’s not good.
Example: If Mr. Bob Client sends his change of address confirmation to Ms. Roberta CPA, but Ms. Roberta CPA only updates it in her client file folder that lives on her desktop, what happens when Mr. Fred Intern mails out documents to Mr. Bob Client?
Do you think he’s checking Ms. Roberta CPA’s laptop?
Or, do you think he’ll use the company directory to address the envelope, and Mr. Bob Client’s confidential paperwork will be floating around at USPS…going back and forth between the ADDRESS FORWARDING and RETURN TO SENDER bins.
Ms. Roberta CPA’s desktop file folder “process” may have worked when she was the sole practitioner, but keeping a process the same just because it’s what people are used to is not indicative of the process’s strength.
Learn how the contact management process can be remedied in Roman Kepczyk’s webinar: Lean Six Sigma Administration.
Out with the Old; In with the New
More things get done accurately by challenging antiquated and old routines with Lean Six Sigma approaches.
Clients keep asking for more services from their trusted CPA. Employees feel empowered to keep achieving.
And a firm grows.
Dive deeper into Roman Kepczyk’s series on Lean Six Sigma Accounting in the Road to Productivity series, now available on-demand.