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More Welfare Waste – And A Lesson For Manufacturers

The post on Welfare Waste a few days ago apparently touched a nerve with many readers.  I've received well over a dozen emails in response, almost all with some common themes:

  • All agreed that welfare waste is a problem.  Not really surprising.
  • Almost all wanted to remain anonymous, which was somewhat surprising and a complete reversal from responses to our other posts.  Are critics of welfare programs more concerned about "welfare hit squads" than those that criticize huge multinational corporations?  Perhaps being a critic of welfare hints at a political persuasion that questions spending rather than blindly accepting that more spending equals more good output.

But several also identified another form of "welfare waste" that I had not thought about:

The waste of delivering a product or service to a customer that does not need it, doesn't desire it, simply doesn't exist, or is an "unintended customer."

As an example, the following is a first-hand account from one of the emails:

Many years ago I had the opportunity to spend some time with the Texas state comptroller, a fella by the name of John Sharp. Well, John was a great story teller and the particular story I wanted to pass on to you from him is about the “Lone Star” card, basically an electronic welfare card.

The way John tells the story is, his office looked at the administration cost of this program and thought they could make some significant reductions in the overhead cost of the program. So, they started talking to the state legislature about going to this “debit” card. The way it worked is for people signed up for welfare they would have to call a toll free number every month and this would activate the designated credit amount. As they started getting serious about trialing or testing this card a bunch of the lobbyist started an opposition front to the effort. John said it took a while to figure out who they were working for but they finally determined that it was a bunch of the organizations involved with the existing supply chain like the printing companies that printed the existing paper welfare stamps, the armored car companies that transported the paper, etc.

Well, he finally gets the legislature to give him the green light to test it on a limited basis. He chose a couple of counties close to Houston to perform this initial testing. They get everything in place, send all of the instructions out, have people in place to help with the transition, etc., and they pull the trigger and wait for people to activate their cards, and they wait, and wait.

After about 3-4 weeks he is really worried, they have significantly less people signed up than what they anticipated. So they start a big investigation on why the numbers were so low for this enrollment / activation. The reasons and the extremely high percentage ran the gamut – person was deceased, could not locate, moved, etc.. As I recall around 25-40% of the total welfare in these initial counties was determined to be fraudulent. In talking to the local governments about this program he quotes one of the police captains telling him that they had noticed something else since implementing the cards, the drug dealers they were arresting didn’t have all of the “welfare money/stamps” on them, i.e. an underground currency had also been eliminated by this card, a benefit they never anticipated.

The Texas welfare system was delivering a service to dead people and drug dealers.  Obviously a waste, and also an opportunity if those funds were instead used to help more deserving folks. 

In the previous post we discussed how lean manufacturing types could help out the charity and welfare community.  Perhaps this story on welfare waste points out an issue that manufacturers need to be aware of.

  • Delivering a product that the customer doesn't desire.  One form is "design creep," the result of overly exhuberant engineers that don't identify their customer's needs.  Basically not focusing on value as perceived by the customer.
  • Delivering a product to a customer that doesn't exist.  This could be a finance department that sends out numerous reports... that go unread. 

Bottom line is that there is obviously a huge opportunity to improve the level of welfare services provided without increasing spending.  Most who emailed me, all of whom had first-hand knowledge of various programs, estimated welfare conversion and administrative waste at around 50%.  Pretty phenomenal.

Now how do we take advantage of this opportunity?

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One Response to "More Welfare Waste – And A Lesson For Manufacturers"

  • John Hunter
    13 November 2006 - 6:15 pm

    If people are interested about trying to improve, I can suggest the ASQ government division – http://www.asq.org/gov/ – (which I helped establish but am no longer involved with). It won’t be easy, there will be frustrations that are different than working with private sector organizations, but the rewards could be great.

    http://www.engr.wisc.edu/centers/cqpi/reports/pdfs/r013.pdf – Doing More With Less in the Public Sector: A Progress Report from Madison, Wisconsin by my father and others may also provide some background. Madison has continued efforts to apply quality management principals to operations for over 2 decades.

    This link might also provide some ideas:

    http://www.rh.edu/~maleyeff/IBM/Survey.htm

    I would be happy to share my ideas if people are interested, please contact me. I suggested to the ASQ Public Sector network they might want to engage in this process and see if their member have suggestions.