IPAC Case Study Program Implementing Lean at Export Development Canada. Yvonne Latta

Transcription

1 IPAC Case Study Program Implementing Lean at Export Development Canada Yvonne Latta

2 IPAC Case Study Program Case Study Program Editor: Andrew Graham, Queen s University andrew.graham@queensu.ca This case study has been developed as part of an organizational learning series through the IPAC Case Study program. These cases are prepared in conjunction with partners across a variety of governments, with a strong focus on the many activities of the federal government. We thank all those departments and ministries that have agreed to share their insights and experiences for the benefit of others. Each case will consist of the case itself and a short teaching note with ideas for uses and themes that the case suggests. Within the body of the case will be a set of lessons learned, based on the observations of those interviewed, written material and the insights of the case author and editor. All cases are prepared by a researcher/writer and then edited. Interviews with those who had been involved with the case are treated as confidential; quotations are not attributed to an identified individual. Website for all IPAC cases: and Implementing Lean at Export Development Canada Author, Yvonne Latta This case was sponsored by Export Development Canada for use in the IPAC Case Study Program Inventory. Export Development Canada (EDC) is Canada s export credit agency, offering innovative commercial solutions to help Canadian exporters and investors expand their international business. EDC s knowledge and partnerships are used by more than 7,700 Canadian companies and their global customers in up to 200 markets worldwide each year. EDC is financially self-sustaining and a recognized leader in financial reporting and economic analysis. To learn more about EDC visit Abstract This case study traces how Export Development Canada (EDC) successfully implemented the lean methodology of process and organizational change in a financial services sector setting. It recounts EDC s lean transformation from planning and implementation to the results stage. The EDC case study demonstrates the lessons learned in the lean process and how they can be adapted to other organizations confronting similar challenges to their core business streams. The case also shows how to translate this approach into the public context by proactively shifting the mindsets and behaviours of employees to embrace change through the use of targeted communication strategies. There is a Teaching Note for this case. Date of Publication: 2012 Cover photo: Bernie Kasper, Madison Indiana Photography Page 1

3 Implementing Lean at Export Development Canada Background EDC was created in 1944 as Canada s official export credit agency. In 1969 it was transformed into a Crown Corporation governed by a Board of Directors whose members have experience in business, trade, investment and risk management. Its mandate is to support and develop, directly and indirectly, Canada's export trade and Canadian capacity to engage in that trade as well as respond to international business opportunities. In practice, this entails offering financing, insurance, risk management solutions and advice to help Canadian exporters and investors expand their international business. On the senior management side, EDC is currently led by President and Chief Executive Officer, Stephen Poloz. The former CEO, and initiator of EDC s lean transformation, Eric Siegel, retired in Mr. Poloz is supported by eight senior vice-presidents and 29 vice-presidents. By any measure, EDC is a success story. In 2011, the Corporation facilitated $102.8 billion in business volume and served 7,787 customers, 79% of them small and medium-sized businesses. It supported business in close to 200 markets, a significant portion ($31.2 billion) in emerging markets. The business EDC facilitated in 2011 helped generate $71 billion of Canadian GDP, about 5.2% of the total, representing 707,000 jobs or approximately 4% of national employment. The corporation is self-sustaining and operates on commercial principles, earning a profit by charging fees for its services and interest on its loans. In 2011 alone, EDC paid a $350 million dividend to the Government of Canada. With its headquarters in Ottawa, 17 offices across Canada and 16 in key foreign markets, the corporation offers a range of products, including the following: Accounts Receivable Insurance: underwriting insurance policies that protect policyholders against foreign buyers failure to pay. Foreign Buyer Financing (Loans): providing financing solutions to Canadian exporters and their foreign customers, to Canadian investors, and to financial institutions in support of Canadian exports and foreign investments. EDC assumes risk for non-payment. Export Guarantee Program: guaranteeing loans granted by other financial institutions to finance a company s export contract. Bonding Services: providing a backstop guaranty to a company s bank so that the bank can issue guarantees to the company s customers and suppliers. Political Risk Insurance: providing companies with insurance to protect them from political risks i.e. expropriation, transfer and inconvertibility, political violence in countries to which they export products or services. Page 2

4 In March 2007, then CEO Eric Siegel, informed by the experiences of one of his customers, launched EDC s first lean transformation project with a goal to make EDC more efficient, more customer focused and a better place to work, ultimately leading to overall improved corporate performance. By October 2011, lean had been successfully implemented with strong results across most of EDC s core operating value streams. This brief case study describes EDC s lean transformational journey to date, with emphasis on lessons learned, tools developed and practical insights. About Lean The lean methodology of process and organizational change originated from the Toyota Motor Corporation, which over many decades developed and refined its Toyota Production System (TPS). TPS centres on building in quality during the manufacturing process and is committed to continuously striving to eliminate waste, inconsistencies and unreasonable requirements on the production line. For Toyota, TPS has been an overwhelming success, improving efficiencies and reducing costs. In the 1990s, manufacturing companies began to use the terms lean manufacturing or lean production, to describe the concepts and principles embodied in TPS. Today, it is usually just called lean and refers to a production practice that seeks to eliminate all waste while pursuing the most efficient means of production. Waste is defined as any expenditure of resources that does not create value for the customer. This includes time, human effort, materials and defective product. Value is defined as any action or process that a customer would be willing to pay for. By definition it is customer-focused. Put another way, lean manufacturing seeks to eliminate those practices, rules and structures that do not create value for the customer. Lean means producing what is needed, when it is needed with the least amount of waste, whether it is rework, overproduction, motion, processing, inventory, transport, waiting, or not using people s full potential. The short version of any lean action plan is as follows: 1. Determine value in the eyes of the customer 2. Identify the value stream and eliminate waste 3. Make value flow at the pull of the customer 4. Involve and empower employees 5. Continuously improve in the pursuit of excellence Lean has spread from the manufacturing sector into service industries travel, retail, healthcare, government and financial services, not always with breakthrough performance results. Too often, organizations attempting a lean transformation experience initial success in changing some narrowly focused processes only to have their overall transformation effort bog down shortly thereafter. Lean experts agree that real transformation requires major changes to managerial roles; and that transformation efforts must cut to the very heart of an organization s culture, including the mindsets and behaviours of its employees. This interconnection is illustrated in the graphic on the next page. Note that lean leadership occurs where the three elements intersect and only when all elements are present and balanced. Page 3

5 Implementing Lean at EDC In 2007, then CEO Eric Siegel, made the decision to implement lean at EDC. Up until this decision, the corporation had been attempting to employ more traditional methods to elevate its performance. Mr. Siegel later said we knew that meant improving three things: our ability to connect with the customer, our operational efficiency, and our ability to manage people effectively. Lean was a means to tie these three things together and make everything happen. Mr. Siegel s first challenge was to win over his senior management team. He accomplished this through a constant communications effort hoping to create the same level of enthusiasm for lean among them that he had possessed himself. More important than just creating enthusiasm, he eventually got their long-term commitment to make lean work. Getting people to agree isn t enough you have to have people who are engaged. There were times when the executive team was not totally aligned and I had to get everyone back to the table. said Eric Siegel. If the management team hoped to gain the support of EDC s staff, and dispel their fears, it was very important that the first lean project be very successful. In the end, the executive team chose the Loans operation in the Financing Group as the first Lean initiative. It was generally agreed that the Loans value stream offered the greatest potential for improvement. The process was unpredictable and if was often unclear to customers as to when they might get an answer on their loan applications or what that answer might be. This created a high level of frustration and dissatisfaction among both customers and EDC staff. Page 4

6 In the spring of 2007, a project manager and four EDC staff were assigned to form the lean project team. In addition, a team of four consultants with lean experience was hired to assist the project team. To provide further assistance, a Coordinating Committee was established at the VP level to help clear roadblocks across Financing and the organization as a whole. And at the very top, a Steering Committee, consisting of some senior VPs, was appointed to review and analyze diagnostic reports, new designs of the future state, lessons learned, and to make major decisions. With the aid of the consultants, the project team conducted a diagnostic and mapped the Loans value stream those activities and products that bring value to the customer. By thoroughly analyzing the Loans application process, the team identified numerous opportunities to eliminate waste and to improve turnaround time and productivity as illustrated in the following slide below. The team then moved on to the design phase of transforming Loans, which entailed envisioning the future state that would lead to achieving lean targets including faster turnaround on applications, more predictable outcomes and greater capacity for growth. In developing its future states the team consulted with the Coordinating Committee and incorporated the Committee's suggestions into its redesign. In the end, the team submitted an exhaustive diagnostic and design report to the Steering Committee that provided a detailed description and analysis of the current loans process. In addition, it submitted future states for most groups within the Loans process plus detailed proposals to reach these future states. The diagnostic report concluded by recommending to the Steering Committee that EDC launch a prototype project in Loans incorporating its recommendations. Page 5