Why Forced Ranking Doesn’t Make Sense

Like there isn’t enough politics in the workplace . . .  command and control managers love to rank employees.  There needs to be forced ranking by assessment of performance to be a good manager and have a well-run company.

Some rank to give bonuses or incentives and others rank to RIF employees (have to get rid of the bad ones).  I never have found good reason to rank and always advise against it.  It is a bad practice that leads to waste and sub-optimization.

I won’t dispute that there is always someone at the top and the bottom in performance of any entity.  But the waste of performance appraisals, competition, back-stabbing and manipulation far outweighs any conceivable benefit.  Money and morale is lost with these activities.

The distribution of people and there performance is typically bell-shaped:

The diagram above indicates that the winners get the bonuses and the losers get cut.  But what if we take a different approach and instead of focusing on forced distribution, we  focus on improving the design and management of the work.

Instead of a select few we make the work better for everyone and all benefit including the company.  A small shift in a system improvement of performance always outweighs moving a few of the “high performers.”

In working with a client recently that “ranked and rated” employees, I was told that this ranking is what made the company so great.  The first thing is that when we looked at actual performance it was atrocious and customers we spoke with told us so.  They didn’t know how bad their performance was until we started studying customer demand.

But this organization swore by the ranking and rating that “made their company great.”  In fact, they were successful in spite of the ranking and rating, not because of it.

You see there are three scenarios that typically separate employee’s performance:

  1. They really have a better method or are a better match for the job.  In this case, why would you want to have forced rating where competition for incentives and bonuses keeps employees from sharing with each other.  The end result is individual wins and company loses.  If the person is a better fit than others organizations need to learn this and  feed it back to the hiring process.  Personality (Myers-Briggs Assessment) might be helpful in assessing difference
  2. There is manipulation at play.  Employees learn to game the system by cutting corners and cheating.  When rewards or your job is at stake all is fair.
  3. There is no difference in performance.  Over the past 20 years I have found this is usually the case.  Very few times do I find better method.  And when the incentive to manipulate is taken away, I usually find very little difference in performance.

So how do we know if we have a difference?  We chart there performance if data is collected.  If no data, then your ranking is subjective and political and a huge waste of resources.  There is no objective performance appraisal system despite all the consultants that sell software to do so.

In my most read post Service Metrics: What You Need to Understand I outline how to analyze data.  You can do the same thing with employees performance when data is present.  It may look something like this:

Any data within the limits (44 and 155), and performance is attributable to the system.  This means that working on the system is your biggest opportunity for improvement.  The system is comprised of the work design, structure, technology, management thinking, etc.

Our greatest opportunity to improve is to design better work and learn better ways to manage.  The old thinking of command and control, ranking and rating is flawed thinking and too many organizations have succumbed to this thinking.  If you are looking for a competitive advantage, this may be the one opportunity not to miss.

Leave me a comment. . . share your opinion!  Click on comments below.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to make the work work.  Download free from www.newsystemsthinking.com “Understanding Your Organization as a System” and gain knowledge of systems thinking or contact us about our intervention services at [email protected].  Reach him on Twitter at www.twitter.com/TriBabbitt or LinkedIn at www.linkedin.com/in/trippbabbitt.

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Forms of “Copying” that Lose You Money

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I mean seriously, what organization or government wouldn’t want to copy what another is having success with in the marketplace.  It is the right thing to do and after all . . . everybody does it.  This has to be right approach.

The problem is, it is not the right approach.  Yet we are inundated with those that advocate and perpetuate things like tools, benchmarking and best practices.  All are forms of copying and can get your organization to lose grown quickly.

Systems thinking begins with understanding that no two systems are alike.  The translation is that all organizations are different.  Think about it, different people, different customer demands, different processes, different technology and the list goes on.

So why is it that consultants, technology companies and others always want to copy?  Usually because they weren’t the ones that came up with the method, but anyone can copy.  This approach doesn’t teach people in organizations how to develop new methods and what I find with tools is no one seems to be discovering new ones.

And so it goes with systems thinking, we teach that all organizations are different.  Three good questions to ask before copying: Who invented the tool? What problem were they trying to solve? Do I have that problem?  In service industry this is constantly abused by lean practitioners as they apply lean manufacturing tools to service (never a good idea to blindly apply).

As for best practices, the issue is that this is usually applied by software development firms that want to sell the standard software package.  There is no “one best way” and this approach totally discounts that there is always a better way.  I start to hear things like “everyone uses an IVR” (Interactive Voice Response) for their call center and you should have one too.

No, you shouldn’t and other blog posts will tell you why.  It is to assume that this will make things better and we know that assumptions are bad to make.  This is true especially when dealing with systems as complex as service organizations.

Organizations spend a pretty penny benchmarking against each other to compare, what a waste of resources.  It is difficult enough to compare (and expensive), but in comparing to a different organization in the same industry we ignore the fact that all organizations are different.  So save your money and invest in your own organization.  The truth is every organization has what it needs within it to improve.

Another reason for not copying is that you will never catch up.  Manufacturers for years have been trying to “catch-up” to Japanese Manufacturers.  The problem with this approach is that you never catch-up, unless of course you are Toyota that has left the door wide open.  The Toyota problem is copying the US investment community and has left Toyota with the same short-term thinking that has infected the US for so long.

For me, it is the thinkng that develops good ideas to improve systems.  To improve performance we have to change our systems (and no this is not just processes), we have to change our thinking about the design and management of work.  No copying in the form of tools and best practices, but the mindset to create the improvement.

Leave me a comment. . . share your opinion!  Click on comments below.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to make the work work.  Download free from www.newsystemsthinking.com “Understanding Your Organization as a System” and gain knowledge of systems thinking or contact us about our intervention services at [email protected].  Reach him on Twitter at www.twitter.com/TriBabbittor LinkedIn at www.linkedin.com/in/trippbabbitt.

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Systems Thinking and The “Flop”

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To win in the Olympics it takes perfection and practice of a certain event in which you train for most of your life . . . or does it?  Nothing more controversial then in 1968 when Dick Fosbury broke tradition and method with a better way.  So, if you went to the Olympics that year having perfected the Straddle technique, Western Roll, Eastern cut-off Scissors jump you would have lost . . . no matter how good you were.

You see Dick Fosbury was the inventor of a new method and better way called the Fosbury Flop.  The controversy he started had athletes, commisions and countries trying to ban his method.  An unfair advantage and call  for protecting the high jump was the case.

When W. Edwards Deming met with business leaders in Japan on July 13th, 1950 he told them that if they would follow his teaching and method that manufacturers the world over would be screaming for protection in five years (they did it in four).  Dr. Deming new that in manufacturing a better way than the productivity mentality existed and had exhausted himself in America trying to prove it to disinterested Americans.  The rest is history, manufacturing has been on a decline since 1968 (according to Dr. Deming).

Why?  Because the new method Dr. Deming taught has never been fully accepted by Americans.  Sure we have had our run in lean, TQM, etc. but the thinking never changed.  All of these efforts have been focused on the front-line while Dr. Deming focused his System of Profound Knowledge on management.  American management unwilling to change has led us to our current state.

Americans have become masters of manipulation with the wrong-headed ideas that attention to financial and productivity measures is the key.  Nothing could be further from the truth and each time there is a promise to manage costs better . . . costs go up and productivity goes down.  Ignorance is killing us.

I have found that service organizations and governments are still managing in the old style – doing the wrong thing, righter.  Doing things the old way is not only ineffective, but damaging.  Stuck in the re-frame of “Hey, Jude.”

Maybe these service industries have no pressure, but performance is poor.  We have seen it in banking, HVAC industry, auto repair and many others.  Management believing there is only one way to manage and continuing to make things worse in the eyes of their customers.  Soon a reckoning is coming to every service industry in the same manner that manufacturing was rolled.

Just as with the Fosbury Flop, service industry faces new method in the coming years.  Where the old ways are being replaced with new method in the design and management of work.  The size or current stature of an organization matters little as large service companies operating under old method will fall to those with new and better methods no matter there size.

The good news is that thin service change is rapid, there are no machines or inventory like manufacturing.  Organizations adopting better methods containing  the thinking of Dr. Deming and Taiichi Ohno can capture market share quickly while reducing costs (without a focus on costs).  But remember, it is the thinking and not the tools that will make things better.

Change is coming to America, will you have your company ready for the next Fosbury Flop?

Leave me a comment. . . share your opinion!  Click on comments below.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to make the work work.  Download free from www.newsystemsthinking.com “Understanding Your Organization as a System” and gain knowledge of systems thinking or contact us about our intervention services at [email protected].  Reach him on Twitter at www.twitter.com/TriBabbittor LinkedIn at www.linkedin.com/in/trippbabbitt.

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Michael Rubin – You Invented the System

 

Whenever I walk into an organization and start to hear blame placed on the worker, I become skeptical.  Representative of this was Michael Rubin, CEO of GSI Commerce.  In the show Undercover Boss, Michael Rubin sits with “Danielle” an employee of his company in the Escalations Department to discover (undercover) how his organization performs.

Danielle in handling escalations has to listen to customers that are presenting failure demand (demand caused by a failure to do something or do something right for a customer).  And the fact there is an Escalations Department is evidence that they have plenty of failure demand.  Dissatisfied customers calling in after failure occurs from any number of points in the system that produce failure.

Like most service organizations, failure demand exists at GSI because of the design and management of the work.  The system that hired, trained and caused the failure demand was designed by management.  Danielle may or may not be the right person for Escalations, but the system in place is not her fault.

In fact, Michael Rubin is more to blame than Danielle as management is responsible for the system in place.  The sad part is that the company is losing millions of dollars in potential revenue and costs as errors are addressed through Escalation Departments and not systemically.  Could you imagine if the design and management of the work were better and there wasn’t a need to pacify customers?

Other questions arise; why couldn’t the person that took the call handle it?  Why do we need more waste in the system to have another hand-off to another group?  Waste begets waste in systems that are poorly designed and with flawed thinking such as GSI.

I am yet to see a call center with less than 25% failure demand and some have as much as 90+%.  This offers us our greatest opportunity to improve in systems that call centers are a part.  Reduce the amount of failure demand (a systemic issue caused by all areas and not just the call center) and profit gets better.

For Danielle she is a victim a system that is poorly designed.  Either by allowing her to be in a job that she is not suited or by creating a work design that is so horrific that no one could be successful.  Regardless, Michael Rubin you invented it.

Leave me a comment. . . share your opinion!  Click on comments below.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to make the work work.  Download free from www.newsystemsthinking.com “Understanding Your Organization as a System” and gain knowledge of systems thinking or contact us about our intervention services at [email protected].  Reach him on Twitter at www.twitter.com/TriBabbitt or LinkedIn at www.linkedin.com/in/trippbabbitt.

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“The Maintainers”

Every industry has them. ” The Maintainers” are those individuals in companies that have never done front-line work in a company, but have come in to professionally manage a service organization.  The role of “Maintainers” is to manage risk, budgets, balance sheet, income statement, etc. through command and control methods.

“Maintainers” love to set targets, manage by productivity numbers and the forementioned financial measures.  Many have an MBA where they learned their “skill.”  Formal procedures, scripts, rules and regulations keep order in the businesses under their leadership.

When revenue is falling and the financial statements are looking bad, they know just what to do.  They cut people and expenses as the fix to a poor bottom-line.  This helps in achieving financial targets for which they are handsomely rewarded.

Decisions are made top-down away from the work  using reports, best practices, technology, benchmarking.  With little understanding of the work, they promote outsourcing and shared services as a panacea to most problems.

They treat customers with a facade of importance, but behind closed doors they form “get tough” policies.  This usually means that the customer must be managed to a contract.  The underlying belief is that a customer that is completely happy must one that is hurting the financial statements.

“Maintainers” know how to play the blame game.  They have a hierarchy of folks reporting to them so when things go wrong they can blame someone.  They come to budget meetings with a litany of excuses of why they didn’t hit their numbers.

Do you know a “Maintainer” in your organization?

An systems thinking intervention with a “Maintainer” is always interesting.  They say the right things and really slick ones can even pretend to think long-term.  The truth is that they are short-term command and control thinkers.

The ability for a “Maintainer” to create value for an organization is thwarted by their inability to understand where value is created.  Because value is created with an understanding of customer demand and the work . . . “Maintainers” would rather not get their hands dirty.

Leave me a comment. . . share your opinion!  Click on comments below.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to make the work work.  Download free from www.newsystemsthinking.com “Understanding Your Organization as a System” and gain knowledge of systems thinking or contact us about our intervention services at [email protected].  Reach him on Twitter at www.twitter.com/TriBabbitt or LinkedIn at www.linkedin.com/in/trippbabbitt.

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A Different Look at Health Care Fraud

Doing my weekly review of articles at Governing.com, I came across an article written by Jonathon Walters.  Titled “The Right Way to Fight Fraud” Mr. Walters does a pretty good assessment of the problems and perks of fighting fraud.  The perks he describes under the heading of “the three horsemen of the public-sector apocalypse ‘waste, fraud and abuse’” that leaves us short a horseman (there are four), but we are talking about government where perfect is the enemy of good enough.  My personal four horsemen of the apocalypse are benchmarking, outsourcing, shared services and command and control thinking.

I certainly agree with Mr. Walters that the amounts of fraud are great in Medicaid, Medicare, TANF, and SCHIP and the amounts of $27 billion in “leakage” is staggering.  But to me this is a political red herring as politicians build programs to avoid waste . . . only to add more cost and waste to the system.  The State of Indiana and FSSA can serve as an example.

Indiana set out to modernize Indiana Welfare Eligibility where the Secretary of FSSA was out to eliminate abuse through technology.  What we got instead was a lesson that I am not sure anybody has learned (after all, Indiana is the not invented here state).  The modernization took functions of the work and separated them believing that more separation of function would reduce fraud and with technology all the pieces would work together with checks and balances at each step.

The result was recipients, legislators, providers and special interest groups coming together to complain about processing times in one of the most bi-partisan efforts I have ever seen in government that . . . this modernization wasn’t working.   Billions of dollars wasted on bad theory that will take years to recover from the mess.  Politically the heat is off as Governor Daniels killed the contract with IBM, but the waste continues.

The current secretary is stuck with a 30% increase in personnel from this debacle.  But no lessons have been learned I fear as the pilot program running today includes even more people.  The reason is more checking because the secretary says that $1 million of fraud has been committed over four years in the old system and so we spend millions more to prevent this in eligibility (read Indiana Welfare Modernization, Costs and Cynicism).  Politically correct . . . maybe, hugely wasteful . . . definitely.

Part of the problem is the belief that any system with paper is antiquated and needs technology to automate.  But this is to ignore our biggest opportunity to improve . . . the design and management of work.  Poor work design is at fault for fraud, not people.

In fact, technology only makes things worse.  Technology locks in the waste of a poor work design and management thinking that technology is the answer continues the downward spiral.  Just because we can automate something doesn’t mean we should.

Further, with all the checks and balances and separation of the work into functional specialties, we lose who is responsible and accountable for the work.  More hand-offs through technology or paper always increases waste in a system.  The work loses context as it moves from person to person and the queues it creates increases service time on a large scale.

There is one other thing that functional separation of work and technology creates and it is called fraud.  People bent on committing fraud learn that when no one is responsible that it is easier to game the system.  I see algorithms in technology to catch people committing fraud, edits, audits, etc. where the answer is really much simpler.

The answer is to design the work by getting knowledge about the what and why of current performance.  Understanding customer demands, deriving measures from these demands and experimentation with method.  This means government management must first understand the actual work without technology (either ignore it or turn it off). 

Additionally, this means decisions about the work have to be made with the work and not top-down.  Workers can only be made accountable when decisions are made with them, not to them.  For the political hacks out there with their preconceived notions about fraud prevention, my suggestion is to get knowledge for your ignorance.

The answer is in the work with the people that perform the work and not in the inspection, monitoring, technology, etc that sounds promising but continues to add fraud and waste.

Leave me a comment. . . share your opinion!  Click on comments below.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to make the work work.  Download free from www.newsystemsthinking.com “Understanding Your Organization as a System” and gain knowledge of systems thinking or contact us about our intervention services at [email protected].  For government please link to www.thesystemsthinkingreview.com.  Reach him on Twitter at www.twitter.com/TriBabbittor LinkedIn at www.linkedin.com/in/trippbabbitt.

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The Delusion of Mystery Shopping in Healthcare and Service

Mystery shopping originally began in the 1940s as a way to assess the integrity of employes of banks and retail stores.  In recent years, the industry has morphed into other areas like customer satisfaction, compliance and improvement for many different service industries including hospitals, car dealerships, restaurants, theaters, gyms and the list goes on.

I first encountered mystery shopping while working with bank call centers and for the most part it was used as a compliance tool to be sure that agents were being friendly, answering the phone correctly and offering other products during the call.  Most call center agents would tell me that they usually could tell when a mystery shopper called because “they just don’t sound or act the same as a real customer.”

In hopspitals, mystery shoppers are used as “fake” patients or a friend going through the process with a patient.  The customer experience is noted by what they see in the process of checking in a patient, delivery of services and/or the payment process.  The idea is completely plausible but the premise is faulty.

Whether mystery shopping is used  for compliance, market research and/or improvement it is the wrong approach.  Compliance typically means that we have some standard process, script or procedure that we are trying to catch someone doing something right or wrong.  It is a sneaky way of doing monitoring or inspection on employees of service organizations.

Forced compliance is not a good idea, in most industries I have found that agents are up against compliance to things that really don’t matter to the customer or patient.  Most standards used for compliance come top-down in command and control fashion and not from an understanding of customer demands or the work.  This leads to mystery shopping that looks for the wrong things as service organizations force compliance inside-out rather than outside-in.

Market research to me is just another way of finding out what matters to customers.  This is best done as an internal exercise as surveys and observation by outside agents winds up as a report that no one takes action on.  Further, the knowledge of market research is best gained by those interacting customers (front-line employees) as they have knowledge of both the work and the customer or patient.  I have seen many good ideas from employees never get tapped into or worse ignored.

In the improvement arena, I don’t need a mystery shopper to pretend to be a patient or customer.  Service organizations have plenty of these every day that we can learn from.  And for hospitals who has time to deal with artificial demand (patients)?

If improvement is to happen in service organizations mystery shopping is not the way to go.  Service organizations need to understand that the biggest opportunity for improvement is the design and management of the work.  This is best improved by understanding customer purpose and demand, deriving customer measures from this understanding and experimenting with with method that leads to improved work design and innovation.

So save your mystery shopping money and invest in performing check on your organization to understand the what and why of current performance.  By understanding how you perform today your service organization will be on the way to improving service.

Leave me a comment. . . share your opinion!  Click on comments below.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to make the work work.  Download free from www.newsystemsthinking.com “Understanding Your Organization as a System” and gain knowledge of systems thinking or contact us about our intervention services at [email protected].  Reach him on Twitter at www.twitter.com/TriBabbitt or LinkedIn at www.linkedin.com/in/trippbabbitt.

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A Trip to My BMW Dealership

Springtime . . . birds, sun, warmer weather and a chance to get the “Z” out for a spin.  I have driven it at every opportunity during the winter which hasn’t been many (rough winter).  As I sat in the cockpit of my machine and put the key in the ignition and turned it, I heard an unfamiliar click and dying of sound and light.

BMW Logo in Düsseldorf Hellerhof: Hans Branden...
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The next moment I found myself strapping the jumper cables to the Infiniti and charging up my mid-life crisis.  No problem instant gratification and took her out for a drive. 

The next day the same (now familiar) click of the engine and a no go.  The next move was to call my Dreyer and Reinbold BMW dealership for battery replacement.  I informed them of my problem and was put through to Parts to see if they had my battery.  I was asked if I wanted to install the battery myself and knowing my mechanical capability and not sure if the battery was the only problem I replied “no.”

Next came the scheduling and appointment set for 10:30 AM next day.  The next day came and I arrived at 10:25 AM for my diagnosis and battery replacement.  15 minutes later I was greeted by my service advisor and informed me the battery would cost $230 plus $120 for the diagnosis.  Although the price seemed high, I felt that this matter had to be settled and off my BMW went to be fixed.

I was told that the car would be done in about an hour.  I took advantage of the lovely waiting area complete with free coffee and soft drinks.  I decided to follow the events of the service desk, so I sat close by and listened as customers walked in and out.

During that time it became painfully clear that calling on the phone to ask a question was not popular among the service agents.  After some firm talk from the receptionist an advisor would pick up.  I suspect (as I listened to the phone calls) that part of the problem was the inability of the service advisor to actually answer questions that required a technician’s expertise.

I proceeded to listen as I took a couple of phone calls.  Checking my watch I realized 90 minutes had gone by and still no sign of my car.  I submitted an inquiry to the receptionist who would get back to me.  She did and I was told 5-10 more minutes.

35 minutes later my car shows up and I follow the keys to the cashier.  Getting my credit card out to pay I was told the paperwork had not arrived and I would also need to talk to the service advisor.  I walked over to the service advisor who was on the phone (but on-hold) and was informed that I might consider something to extend the battery warranty for two years.

I was surprised that the battery wasn’t under warranty, but at this point I wanted to pay and get out.  I could have played nine holes of golf had I known that this was to be an event.  End-to-end time was 134 minutes from the time I arrived to the time I left.  The dealership had badly missed its promise time.

And so it is with service in auto dealerships.  Little (if any) concept of promise times and commitments or that maybe customers do have something else to do that day.  The answer isn’t just making a nice waiting room, but eliminating the wait.

A better design of work may be in order . . . as this dealership had no less than 6 service agents, hidden away in the back are unknown amount of service technicians.  Service will always need to happen on cars or any other transportation that may come our way this millenium.  Getting started now in improving the service would be a good thing.

Leave me a comment. . . share your opinion!  Click on comments below.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to make the work work.  Download free from www.newsystemsthinking.com “Understanding Your Organization as a System” and gain knowledge of systems thinking or contact us about our intervention services at [email protected].  Reach him on Twitter at www.twitter.com/TriBabbitt or LinkedIn at www.linkedin.com/in/trippbabbitt.

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The Good News – It’s Worse than You Thought

After a few years now working with systems thinking, I have learned that looking at a system with a customer’s perspective can be scary.  I say this especially for those observing from the outside that practice the “hide your problems at all cost” methodology.  A practice I don’t advocate.

The misguided practice of hiding problems can only stand to infuriate customers.  Employees spend wasted time and energy hiding things as this becomes part of their job.  This has to figure into the formula of why $50 billion was spent on customer service and $450 billion on marketing . . . we have to spin our bad service so customers believe we actually provide good service.

Waste causes waste.  Time and energy devoted to hiding things is not cost effective or good business.  The fact is customers already know that your service is bad, the problem is that sometimes your company does not or (worse) pretends not to know.  It is beyond reason to denyand ignore or even blame the customer.

When we go to study the end-to-end performance of a service organization from a customer perspective, eyes are immediately opened.  We see things in a new way that is good news . . . your performance is worse than you thought.

So, how can this be good news?  Because if you didn’t have the guts in the first place to look, you may never have known.  You could have blissfully gone on thinking your performance was spectacular where the reality is your service stinks.

Fortunately or unfortunately, when service organizations (or even government entities) look we will find waste and usually lots of it.  Your perspective on finding this out or willingness to find out has everything to do with how your service organization will perform in the future. 

For systems thinking you have to be curious, but you also have to have the guts to take the step to find out how you are performing service for your customer.  That’s good news . . . in the eyes of the customer . . . because they already know.

Leave me a comment. . . share your opinion!  Click on comments below.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to make the work work.  Download free from www.newsystemsthinking.com “Understanding Your Organization as a System” and gain knowledge of systems thinking or contact us about our intervention services at [email protected].  Reach him on Twitter at www.twitter.com/TriBabbitt or LinkedIn at www.linkedin.com/in/trippbabbitt.

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Service Knowledge and Systems Thinking

It’s not what we don’t know that hurts, it’s what we know that ain’t so.  –Will Rogers

In statistics it is called “naive one” . . . the act of drawing conclusions from one data point.  This is how too many service businesses manage data.  What was last months (days, weeks, years) result and what action are we to take based on it.

The reality is without understanding both variation and context we are learning to make the system worse through tampering.  In terms of what W. Edwards Deming taught us we have information, but not knowledge.  This is why we need to understand the “what and why” of current performance.

But the problems with knowledge play out in other areas.  For instance:

  • Shared Services – Sounds logical, but almost always makes things worse because the motivation is to cut costs.  Without an understanding of customer demand we are increasing costs.
  • Outsourcing – Again, a plausible idea if the aim is to cut costs by focusing on transactions.  The problem is that costs are in the flow and not the transactions.  Service organizations and government wind up outsourcing their waste in the form of failure demand (demand caused by a failure to do something or do something right for a customer).
  • Lean manufacturing tools –  Service is different from manufacturing in variety of demand and other ways.  So for instance, standardization doesn’t allow for absorption of variety in demand and forced compliance follows . . . raising costs and worsening service.
  • Focus on costs – It is a management paradox that the focus to reduce costs increases them.  Yet this is one of the most violated principles.  People are reduced to cut costs ( a visible “improvement”), but the systemic issues that cause costs are not addressed leading to more reductions . . . a death spiral.
  • Economies of scale – Economies of scale is old thinking and still taught in most economic classes, but real improvement comes from economies of flow.  They are end-to-end from a customer perspective.

There are many logical and counter-intuitive thinking associated with systems thinking.  The world is full of unknowns and the truth is we are better off treating them that way or we wind up with knowledge “that ain’t so.”

Leave me a comment. . . share your opinion!  Click on comments below.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to make the work work.  Download free from www.newsystemsthinking.com “Understanding Your Organization as a System” and gain knowledge of systems thinking or contact us about our intervention services at [email protected].  Reach him on Twitter at www.twitter.com/TriBabbitt or LinkedIn at www.linkedin.com/in/trippbabbitt.

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