Corruption free processes

Kepler Consulting

®

2013 Dr. Maher Salam - all rights reserved

Anti-corruption processes- Kanban technique

Dr. Maher Salam DMIT, BA

Sunday, March 24, 2013

Kepler Consulting ® 1

Section

1 Introduction

2 Traditional approach -operational controls

3 Anti- corruption organization culture

4 Organization culture impact on potential corruption

5 Anti- corruption techniques

Agenda


Kepler Consulting ®

Introduction

According to BusinessDictionary.com corruption is wrongdoing on the part of

an authority or powerful party through means that are illegitimate, immoral, or

incompatible with ethical standards. Corruption often results from patronage and

is associated with bribery.

Organizations usually prevent corruption by adopting an ethical code of conduct

with a set of internal controls based on internet controls framework e.g. COSO. The

aim of COSO is to evaluate the effectiveness of the implemented internal controls.

COSO five components are 1) control environment, 2) risk assessment, 3) control

activities, 4) information and communications, and 5) ongoing monitoring. Also they

conduct a periodic audit on the controls components.

Because of the cost associated with designing and implementing controls,

management go through risk assessment to prioritize risk and select limited number of

controls.

In this presentation we propose a cost effective approach for corruption

prevention. This approach tackle the corruption by adopting specific organization

culture and operational and process optimization techniques.

2 2013 Dr. Maher Salam - all rights reserved


Traditional approach- operational controls

Operational controls are designed and implemented to ensure that the

potential wrongdoing is minimized.

Operational Controls describe specific operations for controlling and

managing the activities, processes, products, and services associated with

specific objective

Operational Controls should:

Prevent wrongdoing

Comply with legislation and regulations

Continually improve

Inline with objectives and targets

Operational controls drawbacks

Delays process activities and limits productivity

Adds extra cost

decrease the effectiveness of a process and limit innovation

3 2013 Dr. Maher Salam - all rights reserved


Corruption influencing factors Section 2

4


Corruption and centralization

Empirically it is noticed that the more decentralized the organization it gets the

less chances it will have corruption incidents (A. Matei , F. Popa. 2010)

In such a decentralized system, there is no single centralized authority that makes

decisions on behalf of all the parties. Instead each party, also called a peer, makes

local autonomous decisions towards its individual goals which may possibly conflict

with those of other peers.

Decentralized systems has several techniques such as Kanban , limited work in

progress (WIP), and management by results philosophy

The word "decentralization" came into usage in the 1820s."Centralization" entered written English in the first

third of the 1800s;mentions of decentralization also first appear during those years.

Decentralization (or decentralization) is the process of redistributing or dispersing functions, powers, people or

things away from a central location or authority



Corruption and organization culture

Empirically it is noticed that under competitive culture, when peer

relationships are strong, a flat organizational pyramid is less prone to

collusion and less prone to bribe extortion compared to a steep pyramid.

However, under cooperative culture, the opposite is true. When peer

relationships are strong, a steep organizational pyramid is less prone to both

collusion and bribe extortion compared to a flat pyramid E. Duggar (2004)



Corruption and the unstructured processes

Unstructured processes, are human processes where a framework for getting

the work done exists, but actor judgment and experience is used to adjust the

process flow and outcome.

Analysts estimate that 60-80 percent of the processes that make a business

run are unstructured

Example of unstructured processes are negotiation and decisions processes,

for which gets managed by emails and documentations

The unstructured process is more vulnerable and more prone to both

collusion and bribe extortion because of the lack of controls, the dependence in

process actors judgment, the uncertainty about the cycle time, and black box

where only one person knows how a certain case can be completed.


Anti- corruption process guidelines

Section 2

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1. Adopt an operational excellence principles (Shingo)

2. Enforce operational excellence by 1)Establish practice, 2)develop methods,

and 3) Coach the team.

3. Run the organization by leaders not managers

4. Adopt cost effective techniques such as,

Limited Work in Progress

Kanban cards

Pull instead of push system

Apply methods, practices and coaching

5. Establish decentralized organization

6. Establish a learning and continuance improvement environment

Cost effective anti- corruption guidelines


Kepler Consulting ® 10 Adopted from Shingo Prize

Shingo operational excellence principles


The cornerstones for operational excellence

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Managers and Leaders

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People has to do it themselves as a second nature

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WIP , Kanban, and CONWIP

Work in Process (WIP) is goods in process, or in-process inventory are a

company's partially finished goods waiting for completion and eventual sale or

the value of these items. These items are either just being fabricated or waiting

for further processing in a queue or a buffer storage. Optimal production

management aims to limit WIP.

Kanban is a production authorization cards. They are used to control and limit

the releases of parts into each production stage.

CONWIP system uses a single card type to control the total amount of Work In

Process (WIP) permitted in the entire production system. When a job order

arrives to a CONWIP system, a card is attached to the job, provided cards are

available at the beginning of the production system.



Kanban A Kanban is used in Toyota Production System (TPS) to support decentralized

"pull" production control. Kanban has a simple control mechanism, for which a

set of limits for:

Inventory: There cannot be any more than x WIP transaction.

Space: If each unit takes up x square foot of space, the maximum space

tied up is x * number of units sq. ft.

Lead time: If we assume that operation section can process x unit(s) per

hour, the longest that any unit will wait in queue is x hours, and,

Potential Defects: If we are utilizing sequential inspection techniques, if

operation 1 should slip out of control and produce defective units, the

number of defects in process will be limited to four.

Kanban mechanism provides a simple, powerful, mechanism to force continuous

improvement.

Think of the Kanban quantity as a buffer that allows (hides) problems to

exist.



Kanban and corruption prevention Kanban limits the potential corruption by its nature Even though it was not

developed as a corruption prevention technique,

1. Lack of controls in the unstructured processes, Even though unstructured

processes can’t be eliminated, the Limited work in progress, decentralized

visual cards and the pull system improve the effectiveness of the processes

because of the strong peer to peer relationship.

2. The dependence in process actors judgment, process actors shares the

responsibility and decisions for the processes end to end.

3. The uncertainty about the cycle time, WIP has a better management for

average cycle time for structured and unstructured processes.

4. only certain actor knows certain activities, All process actors able to do all

activities in the process.

5. Designation of duty, duties are not fixed and applied differently on each

transaction.


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