Tuesday 17 December 2013

Lean Non-Profits?!

In a slight departure from my usual blog content, I am going to look at an application of lean start-up techniques to the rarely considered third sector. I must warn you, whist I try to only use the bare minimum, I make heavy use of statistics and without an understanding of that, you may find that part pretty hard to follow.

I am assuming you know enough about Lean Startup to follow the process through and identify the key concepts. Also, this is a 'change programme', as all lean processes technically are.

My Volunteering Side

Those that know me well are aware that as well as a hectic working life, I also typically have a voluntary sideline which takes upwards of 20 extra hours a week out of my spare time. I like to joke that it is my 'b**t**d offset', so I can be as nasty as I like about development practices without incurring the wrath of my conscience. Although it is on my CV, I don't tell many people that, since it doesn't exactly do much for my 'street cred' ;-)


A bit of background. For 6 years and 8 month I was an active trustee on the board of a Citizens Advice Bureau office. My UK audience will know this as probably the UK's biggest walk-in advice brand and provides all manner of help to individuals, couples, families, business and vulnerable people.

Topics range from consumer advice, finance and debt advice, welfare benefits and workplace conflict through to patient support and advocacy in primary care organisations, utility bill support and sometimes tribunal representation.

What UK residents often don't know, is that Citizen's Advice is a federated charity organisation which is completely independent from public or private sector affiliation. Back in 2011, it was made up of 432 bureau, each of which is a separate, individual charity in its own right, with a membership commitment to central Citizens Advice. Each is usually set up as a company limited by guarantee (Just like every UK limited company, reporting to Company's House) and an official charity with a registration number (registered with the Charity Commission). So there are not one but two sets of trustee and directors reports to submit and the accounts have to be submitted twice. Once as per the usual limited company requirement and the other typically using SORP.

On top of all this, being members of a federated, membership organisation, just like a franchise, brings with it audit requirements on quality of service and brand promotion. Plus, we have to still maintain the usual standards of health and safety, manage staff according to employment regulations, health and safety, dignity at work, equality and diversity etc.

We also have to look at developing the service, staff and volunteers, reviewing policy documents, promoting the service, business strategy, locating sources of funding and development strategies, both internal and external to the 20 person office. So as you can see, there is a significant amount of regulatory and compliance work, much more than a standard limited company and that is often appreciated by one or two man consultancies and contractors. Plus, we take on the risk of trustee liability, meaning that any negligent activity on behalf of the trustees which cannot be covered on insurance means that despite the limited company status, we could be chased for any liability. Finally, the crust on top is we do this and endure this risk for absolutely no pay at all. Horror stories of trustees losing their homes through joint liability when something has gone wrong can be particularly scary. If that isn't truly doing it for the cause, I don't know what is :-)

My role, as well as the role of others on the board, was to decide on bureau direction and then steer the bureau through what in late 2007 and early 2008 became uncertain and unprecedented economic times.

What Was The Problem?

In early 2010 we got invited to a trustee conference. I and the chair went along and there was a presentation from Mike Dixon, where he outlined local authority funding cuts that had hit a lot of bureau and also that 80% of the cuts to funding were yet to come. We were all aware of it and some of us were even aware of the scale of further cuts that were coming.

We knew by that point that the loss of major contracts and grants was a huge blow to some of the 432 organisations. Some had been closed or had to merge with nearby bureau. Central Manchester CAB in particular had merged with two fellow network organisations and had seen a cut in it's revenue stream of £1.5 million. 33% of it's total revenue.

Our much smaller bureau was not that big at all and our total revenue stream was half what central Manchester had lost. If we only had a single contract and lost that value, then given the outgoings in both overheads and staff salaries (yes, some charities pay trained staff for specialist skills) we'd have had no option but to close. Being aware that further, substantial local authority funding cuts were coming meant that we also had to take a good, honest, internal look at our service and streamline where necessary.

How Was It Solved?

In 2011 we kicked off the new year by starting a change programme to look at the efficiency of the service as well as investigate how we could de-risk our current operations and explore other sources of grant and contract funding, which for us, was less traditional. We involved everyone in the organisation, top to bottom in this activity and out of that, we conducted many smaller tasks and developed a measured baseline of the company (putting my enterprise architecture hat on, this is effectively a baseline architecture) and hence, a number of elements we could look at.

In mid-2012, we conducted a culture review, asking how staff felt the organisation was. As part of the programme of operational review, we looked at the usual change factors of culture, people and processes.

We made a point of asking directly, since there had been concerns about the trustees not seeing the operations on the ground floor and only seeing what Lean Startup calls 'vanity metrics' through the reports of the chief executive. When we started to measure our personnel's view of the organisation directly, it became apparent that people weren't actually happy and some staff were even stressed, due to unfair targets set by the contracting authorities which we had to meet.

We started a change programme which I headed up. Now, I have run many a change programme in my time in the IT sphere. Indeed, if you are running a truly lean organisation, you should always be changing. In a non-IT sphere, this was comparatively new. I was very aware of the Lean Startup method and thought that there wasn't any reason not to apply it here. Indeed, given we had a baseline of the organisation through our culture review, we had what was effectively our 'B' scenario. So in true LS style, the process went:

  • Find a problem
  • Form a hypothesis
  • A/B-test
  • Evaluate and Pivot if applicable

I'll focus on one of the problems that was solved through the applicaiton of LS, but we did this a few times in all of people (roles and responsibilities), process and culture.

Can you Run LS in Not-For-Profit Companies?

I can categorically say Yes!

The main difference in using LS in a not-for-profit organisation is that your aim isn't simply to work lean to make money. You balance a number of forces which pull you in different directions, including conducting trade-off analyses on benefiting individual service versus supporting the good of the service and by proxy, wider service users; Staff and volunteer needs versus organisational and service user needs; Internal needs versus KPIs; Processes versus human morale; Availability versus efficiency; Waste versus service promotion etc. etc.

However, you'll notice that this is the classic uncertain environment in which Lean Startup thrives. In solving this, I nurtured LS across the programme by slowly using LS to introduce LS itself into operations, through different but receptive members of the organisation, who themselves became part of 'A' and 'B' teams. With an understanding of the questionnaire results and with a nod to Maslow's Hierarchy, I presented the reasons for the change to each change advocate in a way I hoped they would be receptive to and it was the analysis of the number that showed me where to focus.

I'm Not A Number, I'm a Human Being!

People have measurable characteristics assigned, such as height, weight, age etc. and this was actually more an opportunity for the individuals to allocate measurable characteristics to us as an organisation. How much they felt part of the team? How well they felt the organisation was respected? Did they enjoy their job?

As it happens, this is the bit I relished. I get told by non-experts that you can't quantify humans in numbers, which is true and that's not what I sought to do. There are many things you can get from people, especially in the form of questionnaires, using what statisticians call multivariate analysis. You are not going to get a perfect answer, but what you are looking for in cultural analysis, is trends in the organisation which present as 'clusters' around particular areas.

The questionnaires asked staff to rate out of 10 a number of factors across the organisation. The questionnaire composed 66 questions in following 16 high-level groupings.
  1. Working Environment
  2. Health and Safety 
  3. Satisfaction at Work
  4. Clarity of Roles and Responsibilities
  5. Environmental Sustainability
  6. Equality and Diversity
  7. Quality of Service
  8. Immediate Management and Supervision
  9. Peer and Organisational Support
  10. Change Management
  11. Workload and Bureaucracy 
  12. Work Related Stress
  13. Intra-organisational Communication
  14. Self-Involvement
  15. Retaining Staff
  16. Dignity at Work
This questionnaire was our cultural baseline. A measure of the health of the organisation from the people's perspective. 

Once the questionnaires were in, the next step was to identify key, root factors from the analysis which formed high level themes. This is where the correlation matrix came in.

A Coral... What?

A correlation matrix is used in factor analysis to find high level factors which seem linked and give you a place to look. It is simply a matrix plot of all Pearson correlations between the distribution of the scale answer of one question against the others. Note, as the saying goes, "correlation is not causation" and as such each individual link doesn't give you an absolute decision, but something you can use to find out if there is a decision that needs to be made. The more factors that lean in a particular direction, the more the variables are linked and as such, the more the correlation hints at some causality. It's a zero knowledge game.

For example, one of the questions we had was:

"Do you feel your satisfaction at work is generally high?" 

This was correlated 85% with the question

"Do you feel you have an appropriate level of control over how you carry out your work?"

This is a good correlation. Anything over 70% is regarded as strong and should be considered a candidate factor. 

We also made a point of asking variants of questions, so that we could account for some confounding variables in interpreting questions. For example:

"Do you feel you have an appropriate level of control over how you carry out your work?"

Was repeated with the variant:

"Do you have enough autonomy in your work?"

Autonomy and control are not the same thing, but the purpose of this question was to determine if people answered one question by considering the other and thus, accounts for it in the correlation matrix, since we can compare the two correlations and we'd hope they would be similar.

In the end, the correlation matrix looked as follows. Don't worry too much about not being able to read the text, the key is the clustering of the red and brown colours. The pink colours are simply blanks, as they don't give us correlations strong enough to want to trace. As a general rule, the absolute thresholds (positive or negative) should always be:

Less than 50% - Weak correlation. Ignore it

50% <= Correlation  < 70% - Moderate correlation. Only really useful in a supporting capacity or if a number of factors have similar correlations.

Greater than 70% - Strong correlation. Follow this up!!

fig 1 - Correlation matrix of  organisational culture review 

These rows and columns are grouped by area of investigation. Red shows strong correlations, dark orange/brown shows moderate correlations. What was interesting is the clustering in certain groups of questions, which mean that the questions were regarded as related and may even have been the same factor in the minds of personnel.

How Do You Find Anything in That?

The next step for us was to conduct a factor analysis, to find the main themes that came out of the review.

The purpose of a factor analysis is to look at the distribution of all the above statistics, by forming conjectures around the independent variables in the distribution and identifying a set of coefficients which match the distribution as closely as possible. If you can't make it match, then the independent variables are wrong. Pick others. The problem, as the question that begins this section implies, is trying to find a set of factors to form that basis.

Luckily, the more questions you have, the easier it gets. The factors typically show up as very related 'clusters' in analyses such as the above, when the questionnaire is well designed. For example, pay and conditions in the above list is the biggest 'block' on the grid, and in the end, when accounting for other correlations elsewhere, we found that this really represented one factor.

We found several themes that came out of the analysis. Namely (in no particular order);

  • Staff Workload
  • Supporting Personnel
  • Managing Performance & Change
  • Staff Identity
  • Employer Responsibility
  • Bureau Image  
  • Corporate Social Responsibility

When the changes then started, they addressed one or more of these themes. Anything not satisfying an organisational need present in the theme was ignored, since it didn't contribute to the value of the service.

This task was eventually automated so that the health of the organisation could be obtained by simply assessing people again. We looked to introduce a Survey Monkey survey into the company to get the raw data, but the uptake of this wasn't high. People seemed to prefer paper and given it wasn't directly adding business value, we dumped the idea and focussed on the paper questionnaire, but seting up a template Excel sheet for the analysis.

Not too Lean so far!

True. Less the 'startup' as well. However, we were running our existing organisation and we were looking to improve our efficiency through improving morale and engagement, facilitating staff's preferred roles and building their identity. We already had our 'B' scenario in what were driving and as mentioned, we ran the 'A' scenario in parallel with this traditional 'B' scenario.

Note, in a commercial organisation, the aim is to improve financial metrics. For this part of the change programme, the aim was to improve staff morale, efficiency and thus, service provision. After inviting staff to participate in interviews to corroborate the strong correlation (in red in the above matrix), we found one of the factors in low staff morale was that that staff preferred helping service users instead of reporting on progress. They felt that since the introduction of targets by the contracting authority to justify our existence, it has made their lives very difficult.

On further investigation, we found that the reporting process was hugely wasteful. Every quarter, for our management meetings, staff were required to report progress against each location to their operations manager, who would then filter and report that to the chief executive who would then filter and report that to us on the board. We had all the reports from the staff in our pack and our board pack would take the best part of a day to read for each of the 7 board members. The pack was huge, the quality of the strategic information was low and repetitive and it wasted lot of paper and time all round.

Additionally, the filtering process meant that all staff had to deliver their reports to the operations managers no later than 10 days after the end of the quarter, reporting statistics from the system which is processed manually. The statistics gathering process took 10 man-hours to process them due to a lack of Excel skills in-house and all in all, each individual member had to find 13 hours of time for their reports, whilst simultaneously maintaining the contracted 50% face-to-face contact time with service users. Every quarter, this hit part-time staff much more than full-time staff and this led to a massive hit in morale amongst that group, which then spread, given a correlated reliance on peer-support over management and supervisor support found in the correlation matrix, especially in satellite offices.

Also, operations managers never got to manage internal and external operations effectively, since they spent a lot of time dealing with filtering reports and reporting progress on metrics which rarely change (for example, who was employed doing what in which project). This had a knock on effect on the chief executive, who could never look outside the bureau for sources of funding whilst looking inside the bureau at staffing and management issues.

After a bit of analysis, this became my first target for a change in process.

fig 2 - Leaner Reports Hypothesis  

The hypothesis became:

"If we streamline and automate the reporting process, we'd give staff more time back to face-to-face activities which they enjoy most"

By our calculations, if we decoupled the reporting filter chain and automating the production of statistics, we'd give all staff, trustees and volunteers an average of 10 hours back a quarter. For part-time staff that is half a week's work. Graphs would improve the communication of information and when combined with historical automatic information would allow us to find trends to take action faster.

So here's the LS?

Yep.  I drafted the help of one of the two operations managers for this task. I introduced LS to them, explained the role of A/B-testing in that and asked them to choose some members to form the 'A-team' and ask them to produce less narrative and the operations manager was to produce no duplication of information contained in the reports. I also wanted them to produce static information about the contracts they delivered, their contract end dates, value and responsible staff members. I also wanted them to inform the A-team to keep quiet that they had the 20 extra days in the month to produce that new version of the report. I would not be automating the report in this first pass.

I then asked them to time how long the reports took to write and for us, to read. This new method was then run for that quarter. The results were written up and presented to the board. The numbers were very very good.

Word Count Down 35%
Narrative Writing Time Down 33%
Board Reading Time Down 87%
Staff Reporting Window Up 211%
Operations Management Report Window Up 403%
Bureau Management Reporting Window Up 300%

We decided to pivot on this and this new reporting process was then rolled out across the rest of the team, including through the second operational line. 


In addition to this, I went on to introduce the automated statistics generation process. I also included a screen-cast of the new automated process and attempted to encourage staff to peer-train, since they already had strong peers support shown in the culture review analysis. This is effectively akin to pair programming, or triple programming to be exact. An experienced member of staff oversaw lesser experienced staff who led the training of the least experienced staff member in performing live tasks. That maintained the QC loop as well as solidified the intermediate level member's skills and mentored them and introduced the staff member to the system and their colleagues. The least experienced staff member would then become the intermediate member for the next iteration, with the the current intermediate member becoming the most experienced. When new changes were made to the organisation, this would be repeated  ad infinitum.

The programme had many other facets that were being addressed before I had to retire. This included reorganising the bureau structure through the introduction of 'deputy' roles. Moving administration into cross cutting supporting functions. 

In Summary, What Did You Learn?

You may not believe this, but I kept the article very very short. There was a whole manner of analyses and lessons that went into this set of metrics. There was a lot of the usual change management and control elements that we still had to go through, especially in the early, transitional stages. 

Plus, in order to make this work, we had to make changes at all levels across the three typical domains of change, People, Process and Organisation. This included plans for the organisational structure of the bureau, greater management assistance, empowerment and motivation for managers and staff and even moving into new, flexible, bigger offices, changing the IT landscape to support remote working (especially for outreach sites and to mitigate issues around weather, traffic, childcare etc).

We changed policies at trustee level (i.e. changing governance documents at the level of trustees). We also attached SMART objectives to every person's role and appraised them on it. Which defined specific acceptance criteria, but crucially, they were very simple statements of what had to be done, but not how. There was no dictate as to how it would be done. The way it was done was at the whim of the individual. This wasn't to say KPI's couldn't be measured, just that it had to be achieved with an efficient investment of resources and an awareness of the trade-offs that came with them.

We also had to try to set up a culture where this was encouraged and rewarded. Unfortunately, we were in a place were stress and perceived job insecurity due to the funding cuts meant this wasn't easy. However, eventually, the necessary changes were made.

fig 3 - Snippet from change programme introduction

fig 4 - Change programe elements, which included Lean Startup elements

To start with, it was all driven by us, since an immediate switch from the hierarchical, static structure we previously had was not going to would cause everyone to revert to type. Things won't change overnight and personnel, being human beings, don't regularly like change. It destroys the comfort zones they build up and for some, is a direct attack on their identity. So you have to be somewhat sensitive to those concerns all the way through the process. It doesn't just change the company, it can very definitely change the people within it.

If I had to put together my top 6 tips that helped institute LS, they would be:
  1. Be mindful of natural forces - As with traditional management techniques, be aware of the needs of your staff as human beings and play to their natural 'pull'. It lowers resistance to change and friction as well as maintain and maybe even enhance morale. 
  2. Reward success and learn from failure - Even if you fail at something you've till succeeded at learned that in that space, place and time it doesn't work. I would even go so far as to suggest you remove the word 'failure' from the vocabulary of the workplace. That requires a defined and certain yardstick, which by the principle tenet of LS you don't have (uncertain environments mean moving goalposts).
  3. Empower individuals - Empower and encourage every personnel member to take ownership and make things happen in their sphere.
  4. Foster LS from the ground up - Get individuals involved in the experimentation process and do not leave this as a management concern. Get them to figure out better ways of getting their jobs done. After all, they do this every day. Be aware that you really have to sell it to some people, especially those steeped in traditional management and leadership techniques. Some people can simply be motivated by seeing it working.
  5. Encourage communication - For us, that meant all of the management team were required to keep an open door during the change programme. Encourage staff to come and discuss their concerns and bring their suggestions. That way the leadership know what is going on and the staff members get to understand the rationale behind decisions.
  6. Don't expect step changes overnight - As with all change programmes, there are some elements that can be changed quickly by dictate. If your organisation already is dictating processes, then the last dictate you should ever make is that your staff learn about LS. Slowly migrate and institute LS into your organisation bit-by-bit, after all, like it or not, your organisation is a system too and making small incremental changes to it is the best way to check if it is improving.
Although I have left out a lot of detail, I can definitely say that Lean Startup can be used in charitable organisations. It's a time when this has to be a serious consideration for small and larger not-for-profit organisations alike, as well as the traditional market of entrepreneurial startups, teams and enterprises. I hope this helps encourage others to adopt LS in their organisation, never stop learning and if you try it, I wish you the very best of luck!