How much waste is there in the Service Industry?

Over the weekend a question was posed to me via Twitter (@theleanmanager if you’d like to follow) about the amount of waste (wasted time) in the back office of banks/service/insurance operations. Now I took this to mean the call centres, data processing centres, mail rooms, customer response teams etc.

The guys asking the questions @wisemonkeyash and @channingwalton  wanted to know could it be as high as 90%? (Update: we do know that in some legal firms the time to process matters is being improved by 50%, by using lean thinking, indicating that wasted time could considerable in the professional services sector.)

I decided I should expand upon my 140 character replies, which were based on my experience.

Variation of demand is the first factor to consider i.e. what does the busiest day (for demand, not completed work) look like and what does a quiet day look like and what are the patterns the peaks and troughs for the demand.

What causes this demand, the peaks and troughs? Our experience? it’s normally another part of the business which generates and stokes the demand and therefore changes here can reduce the peaks.

This could be letters with incorrect details, mass direct marketing mailing, customers chasing progress etc

This variation often causes capacity (people) to be 50% more than required to achieve the current results.

The implications here are that you can deliver improvement by changing something outside of the back offices, without changing what many individuals do – making continuous improvement more readily accepted.

Remember that so far we haven’t looked at the waste in the activities undertaken in these departments. Now as a lean person we look for the 7 hidden wastes, yes I know others have 8 or even 9 but we stick to the 7.

To give you just one example, have you rung a call centre, in the last 6 months,  to be told ” I’m sorry the system is a bit slow today”?

Sometimes that is genuine, the system is slow, it may be that the networking is slow or the server needs upgrading or the PC workstation is old. So say you have 50 agents handling 20 calls an hour? how much time are you wasting because the technology isn’t up to speed?

The more common reason for ” I’m sorry the system is a bit slow today”, that we see is that staff have two screens in front of them and they maybe running 4 different programmes at once. As the programmes can’t transfer information directly to one another, the staff take info from one system, send to their own e-mail, cut and paste it into another programme and then have to delete the e-mail.

This is just one example and adding up the rest we often find that 50% of the activity time is wasted.

What does this mean  overall?

If we start with 100% and 50% is waste due to Variation demand, this leaves 50%.

Of the remaining 50%, we reckon 50% is wasted time, so we get to the figure of 25% (50% *50%), or 75% of the work can be classified as waste.

Remember this is based on what we have seen, so not as high as the 90% the guys originally asked.

Within an hour I spotted this article all Aviva shakes up it’s Customer Service  from the FT, which shows the global serving UK based insurance firm Aviva put the waste figure in call centres as 60%.

It’s also worth noting that Aviva thought it was completing work in 5 days, in reality it was taking 39.

How can this happen? well sometime companies split activities into discrete chunks and add up the time each chunk takes, assuming this equals the processing time. They forget the handoffs and delays that each happen between each activity. We’ve definitely seen office work with activities of an hour take over 10 days to complete in reality.

Okay there is a variation in the figures but should we split hairs on whether waste in offices is 50% as in the professional services firms or 60% – 75% for the back offices and call centres, the reality is that the waste appears to be relatively large, though maybe not as large as the 90% that started the question.

Do you have any views on what the waste could be?

About the Author;

Mark Greenhouse has been working on the application of Lean management in Legal and design led Manufacturing companies for the past 5 years. His own Lean journey started back in 1988 when he started study of Production Engineering. He’s applied lean in many organisation types, finance, call centres, banking, FMCG etc. Mark also provides lectures on operational management at Leeds University Business School.


4 responses to “How much waste is there in the Service Industry?

  1. Thanks for this article.

    I have another data point for you: a financial company that offers a service which, until recently, took 12 people a week, full time, to deliver the core product. After some work at eliminating manual work the same job is done by 1 person in 3 days. We reckon we can get it down to less than 1 with some more automation.

    So, 60 person days reduced to 3 (95% waste), and possibly to 1 (98% waste) shortly.

  2. Channing,

    can you elaborate, confirm any further? did your improvement focus on improving the activities within the process or did you do something to remove, reduce or steady the demand first?

    We have a spread here of 50-98% of wasted effort in service & office based functions and sectors. Some of which is based on removing or smoothing the demand, others appear to be based on vast improvement of the activities within the processes.

    Does anyone have any other insights to add?

    What could you do in your department if you freed up 60-98% of the time of your people?

  3. The main thing that was done was to automate much of the process and eliminate unnecessary steps – there was a great deal of manual work.

    This work was the core business which delivered ‘stuff’ weekly, so the fact that it could be processed in 3 days gave us a great deal more reliability. We can now take on many more clients – big win.

    Its interesting to note that whilst the automation was going on, many people resisted as they feared they would lose the jobs. In reality, they can now deliver something that really uses their knowledge rather than waste their time on tedious manual work.

  4. Hi Mark,

    Here is a simple table of the sources of waste once the agent picks up the phone:

    Process Defect: Steps (in tools) or what needs to be said are skipped or done incorrectly.

    Extra Motion: Agent inconsistency – based on mood, preference, Too many words, Customer providing too much information, agents repeat themselves because of accents or poor explanations.

    Over Processing: having agents gather and enter information during call that is never mined or leveraged

    Waiting: Customer placed on hold, Customer waits for agent to complete task, Agent waits for systems to process, Agent performs after-call summary work

    Transfer: Unresolved call transfered to another department.

    Automation driven by the agents can fix almost all of these sources of waste. You can learn more here:

    iSixSigma – June, 2007
    Cutting-Edge Methods Help Target Real Call Center Waste

    and here:

    iSixSigma – May, 2010
    Fixing Between-Agent Variation Can Make All the Difference

    I looked through a lot of your Twitter posts. It could be me, but I didn’t learn anything from them. But your blog looks very promising. I will follow this for awhile.

    I am especially interested in your call center work. Most talk a good game, but when push comes to shove they have no way to drive sustained improvement because they have no way to establish a process for agents to follow. They try to reduce variation through monitoring and coaching…perhaps the two largest NVA activities in call centers today (if you are a propeller head, check out this mathematical model of the effects of coaching: )



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