KaizenProof

Lesson 2 of 23 · 6 min read

Value-added vs non-value-added work: the customer decides

In Lean: value, value-adding and non-value-adding, internal customer

Builds on: Small improvements, every week

In one minute

Value, in Lean, is what the customer of a piece of work would happily pay for, decided by whoever receives the work rather than by how much effort it took. Everything you do at work is a process: a series of steps that turns something that arrives (a request, an invoice, a ticket) into something that customer uses. In an office the customer is often internal: the next person who uses your work. Split a task into its steps, ask which ones that person would happily pay for, and the rest becomes visible.

The idea

People usually describe their work as a role: "I do accounts payable", "I run onboarding". Lean asks you to see it as a process instead: a sequence of steps, each with an input and an output, that you could draw on a whiteboard. A role cannot be improved one piece at a time; a step can.

What the customer would pay for (in Lean: value) is the test you apply to each step. Value is defined from outside, by whoever receives the work, not from inside by whoever does it. A step adds value when three things are true:

  1. The customer cares about it: if asked, they would want it done.
  2. It changes the work in a way they need, such as turning a request into an approved order, or raw figures into a summary someone can decide from.
  3. It is done right the first time. Correcting a mistake changes the work too, but nobody wants to pay for the mistake.

A step that passes all three adds value (in Lean: value-adding). One that fails any of them does not (in Lean: non-value-adding).

Which steps add value?One process, step by step. A step adds value when the customer wants it, it changes the work, and it is done right first time.

Illustrative example, not real data

Value-adding steps and waste in one processSix steps of paying a supplier invoice, in order, each marked as adding value or as a kind of waste. Step 1, Match invoice to the order: adds value. Step 2, Wait for approval: waste, Waiting. Step 3, Forward to finance: waste, Handoffs. Step 4, Re-type into payment tool: waste, Extra steps. Step 5, Chase missing bank details: waste, Errors and rework. Step 6, Pay the supplier: adds value. Only the first and last steps change the work in a way the supplier needs.Step 1Match invoiceto the orderAdds valueStep 2Wait forapprovalWaste:WaitingStep 3Forward tofinanceWaste:HandoffsStep 4Re-type intopayment toolWaste:Extra stepsStep 5Chase missingbank detailsWaste:Errors and reworkStep 6Pay thesupplierAdds valueValue-adding steps and waste in one processSix steps of paying a supplier invoice, in order, each marked as adding value or as a kind of waste. Step 1, Match invoice to the order: adds value. Step 2, Wait for approval: waste, Waiting. Step 3, Forward to finance: waste, Handoffs. Step 4, Re-type into payment tool: waste, Extra steps. Step 5, Chase missing bank details: waste, Errors and rework. Step 6, Pay the supplier: adds value. Only the first and last steps change the work in a way the supplier needs.Match invoice to the orderAdds valueWait for approvalWaste: WaitingForward to financeWaste: HandoffsRe-type into payment toolWaste: Extra stepsChase missing bank detailsWaste: Errors and reworkPay the supplierAdds value
  • Solid boxes add value; dashed boxes are waste, each named by its kind.
  • In many office processes, most of the time an item spends goes on steps like the dashed ones.

Some steps that add no value still cannot simply be dropped, because a law, an audit rule or a contract requires them. Call them needed for now (in Lean: necessary non-value-adding). Keep them as light as possible, and check now and then that the requirement is real and still current. Everything else that adds no value is waste, and lessons 3 and 4 name its eight forms.

The next person who uses your work (in Lean: internal customer) matters because many office processes never touch an outside customer. Payroll is the customer of the timesheet; a manager is the customer of the monthly report; a support agent is the customer of the help article. Asking "who uses what I produce, and what do they do with it?" often reveals output nobody needs in that form, or information they need that never arrives.

In many office processes the value-adding steps take only a small part of the total elapsed time. The rest goes on waiting, passing work along, re-entering and checking. That is not a judgement on anyone. It is where the opportunity is.

Example

Illustrative example, not a real company.

A buyer asks accounts payable to set up a new supplier. As it really happens:

  1. The buyer emails the supplier's details.
  2. A clerk copies them from the email into the supplier form.
  3. The bank details are missing, so the clerk emails the supplier.
  4. The request waits for the reply.
  5. A second clerk phones the supplier to confirm the bank details.
  6. A team lead approves the new supplier in the finance system.
  7. The clerk tells the buyer the supplier is ready.

The customer is the buyer, who needs a correct supplier record so an order can be placed. Creating that record correctly, and telling the buyer it is ready, add value. The phone check is a control against payment fraud: needed for now, so it stays, kept short. Chasing the bank details (3 and 4) exists only because the request arrived incomplete. Copying from email into the form (2) would disappear if the buyer filled in the form directly. Whether the approval (6) adds anything is a question for lesson 6.

Common mistakes

  • Judging value by effort. A step is not valuable because it took an hour. Ask the person who receives it.
  • Calling every control waste. Audit and legal steps are often needed for now. Make them light; do not drop them quietly.
  • Describing the process as it should be. Write down what actually happens, chasing and workarounds included. The official version hides the waste.

Words to know

  • What the customer would pay for (in Lean: value): what the receiver of the work needs, done right the first time.
  • Steps that add value, and steps that do not (in Lean: value-adding and non-value-adding).
  • Needed for now (in Lean: necessary non-value-adding): adds no value but is required, for example by law or audit.
  • The next person who uses your work (in Lean: internal customer).

Check your understanding

3 questions. Answer them all, then check. You can try again as often as you like; nothing about your attempts is kept.

Question 1 of 3Sales operations prepares a weekly pipeline summary that regional sales managers use to decide which deals to support. Who should decide what in the summary is valuable?
Question 2 of 3A support agent handles a refund. Which steps add value from the customer's point of view? Select all that apply.

Choose all that apply.

Question 3 of 3Auditors require a record of who approved each payment above a set amount. How should keeping that record be treated?

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Try it on your own work

Describe one recurring task that wastes your time, and see these ideas applied to it.

Report a friction (opens in a new tab)

Where this comes from

Defining value from the customer's side and separating value-adding from non-value-adding steps are core ideas of the Lean tradition that grew from the Toyota Production System; the internal customer is a long-standing idea in quality management.