How cost-effective has the Lean initiative been in Saskatchewan? Well, depending on what you read, reports range from nine-figure savings to horrifying eight-figure losses.
The government says Lean is “a business technique used to improve the way we work.” However, Lean doesn’t live under just one roof. Its cost and implementation has been handled differently in the health sector than in the rest of government.
The John Black and Associates Lean consultancy, along with its costs, were under the ministry of health. However, Lean practices similar to those used in the health sector have been implemented across other government ministries and agencies without costs incurred by John Black and Associates.
The provincial auditor’s 2015 report examined Lean outside the ministry of health. It concluded that sufficient information is not available to know whether the Lean initiative is demonstrating a return on investment.
Judy Ferguson, the provincial auditor, said one of the goals government set out for the Lean program was to save money. “Because they had articulated that as an objective of Lean, we expected that they would track that,” said Ferguson.
“The cost saving aspect – the way that they framed it – was a return on the investment,” said Ferguson. “Return on investment, for most users, means you know how much it costs to deliver it and that you’re getting a benefit that matches that or in surplus of that. It’s that aspect they weren’t collecting information on.”
“Specifically, we found that they didn’t know the cost on the implementation of Lean,” said Ferguson. “In the report we conducted a survey, we collected some of that information on costing, and we found they hadn’t done that. They weren’t tracking the cost.”
As for Lean in the health sector, the government released a document in February 2015 that projected a total savings of over $125 million – a document that the auditor says contains figures that tie into an earlier 2014 audit of Lean in the health sector done by her office.
“They were capturing information on anticipated savings, and they had a good regime that they expected organizations and the health authorities to do. Then they expected them to go back and figure out, ‘Now, is it actually happening?’” she said.
“What we discovered is that the database for Health Quality Council was very incomplete in that area. So they didn’t know whether or not what they had anticipated to save was really happening.”
However, the auditor’s 2014 report did not conduct a full analysis on the cost of Lean across the health sector.
Meanwhile, a recent report from the University of Saskatchewan’s School of Public Health concludes that $1,511 is spent on Lean for every dollar saved.
“That’s money spent on health and money saved on health,” said Mark Lemstra, one of the report’s authors.
The expenditure on the John Black and Associates consultancy is a major contributing factor to the $1,511-to-$1 ratio reported by the U of S study. However the savings realized by other ministries that use an adaptation of the program implemented under John Black and Associates makes the return on the cost of the consultancy difficult to measure, according to Ferguson.
Despite the U of S claims of losses in the health sector and the auditor’s reports indicating insufficient cost information, the government still estimates positive returns from the initiative.
“For the 2008-09 to 2014-15 time period we estimate the total savings resulting from lean to be approximately $130 million with total direct costs estimated to be approximately $42 million for a net savings of approximately $88 million. This includes ministries, and the health and education sectors,” said Kent Campbell, deputy minister of intergovernmental affairs, in an email.
Campbell did not comment on how those estimates were reached.