Designing Your Service Organization for Profit

Maximizing shareholder wealth has long been stated as the objective for business learned in MBA programs.  To achieve this there must be profit.  The question is always, “By what method?”

Target and financially driven organizations seem to want to achieve profit, but their method of doing it is in question.  The method deployed by investment bankers is to buy and sell whole organizations to achieve profit.  A short-term focus misses whether there is any real value gained in these transactions . . . most of the time not.

Inside organizations we have armies of accountants and management to oversee profit.  These positions create no value in the eyes of the customer.  However, they dictate the design of the system.  Both groups make costly assumptions about how to achieve profit.

The fixation is always on costs.  This had led to a weakening of the operational areas that can actually produce value in the eyes of the customer.  Outsourcing, technology, shared services, cutting budgets and other mindless strategies do nothing but provide immediate relief at best.  Longer term effects are that they kill what customers like in organizations.

The result of bad method based in assumptions around cost cutting activities have a profound effect on customer loyalty.  When service declines customers search for better options or call to complain (and there are real costs associated with complaints and dealing with failure demand).  These costs are hard to see for bean counters as they are not visible.  They focus on headcount and not flow missing the biggest opportunity to both increase revenue and decrease costs.

Management has become more budget focused.  They are given a budget, a target and an incentive.  “No go out there and win one for the Gipper.”  All the focus becomes these three things.  Ask them how to produce value for a customer and they have no idea . . . they have not been programed that way.  Thousands of management reports, but few managers have knowledge or context of the work.  It is pathetic.

I recently was told of a manager who was passed over for a position because they had too much knowledge of the work and not visionary enough.  How can you provide vision without knowledge?  The two are inextricably tied.

The greatest opportunity you have to improve service is the design and management of the work.  But not using the methods management use today.  The management paradox is that to get business improvement you need to design systems that enable the customer to get what they want.  Designing the system outside-in as a system, not inside-out based on assumptions, target, budgets and incentives.  The result is dramatic improvement to profit.

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.  Read his articles at Quality Digest and his column for CustomermanagementIQ.com  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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The Mutual Mystification Factor

It came up very naturally while working with a client.  No one knew why, but knowledge had disappeared.  The users of a software application didn’t know why they had to fill in certain information and the technology folks didn’t understand anything about the work.

Mutual mystification was born.

Organizations have many things to blame for this dilemma.  Outsourcing and functional separation of work certainly are at the top of the list.  We shouldn’t exclude loss of knowledge from down-sizing and getting rid of the expensive workers (usually the ones that have knowledge).

Management often believes that knowledge can be replaced by technology and I have never found that to be the case.  Written procedures, scripts and knowledge databases are used to replace wisdom with damaging consequences.

It is hard to find what we used to call “superusers” those people that understand both the work and the technology.  Everything has been boiled down to a process that workers are required to follow and if they don’t they will be written up by the process police or the inspection imbeciles.  This has created a culture of workers leaving their brains at home.  Sounds like a fun place to work, doesn’t it?

Many service organizations lose business from customers because it is so hard to find workers with knowledge.  The technology has dumbed down the worker.  Instead customers are passed around in hopes of finding someone with knowledge.  Woe to the customer that has a complicated problem as specialists can shed light on a piece of the problem.  But many times require the customer to be transferred  and then put the pieces together to get an answer.

In our age of technology, knowledge has been lost.  It will require great effort on the part of service organizations to eliminate it mutual mystification.

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.  Read his articles at Quality Digest and his column for CustomermanagementIQ.com  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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System vs. Individual – One More Time

The shocked looks on people’s faces when I talk about the 95/5 Rule or the resistance to my writing on such a thing is noteworthy.  Usually, it is HR folks and executives that provide the banter.  This isn’t surprising since many of these same people have been doing it wrong for a long time or maybe even promoted based on “individual performance.”

The reality is that the system dictates performance.  Individuals put in bad systems will lose every time.

So, what is a system?

It’s structure, work design, culture, technology, management thinking, measures, compensation systems, training, etc.  that govern performance.  And all systems are different, that is why they can’t be copied into best practices and the one best way mentality.

This does not mean that the individual is unimportant.  In fact, the individual is crucial to performing good service.  Systems need to be set up to enable the individual not disable them.  Unfortunately, work design and management thinking don’t usually allow this to happen.

Most organizations believe that performance comes down to the individual and so they (erroneously) see their systems up around individual performance.  These assumptions around the individual prevent breakthrough performance and create huge and costly waste.  This comes in the form of costly appraisals and assessments of individual performance.

The damage of an emphasis on individual performance doesn’t end with just appraisal systems . . . careers are damaged every day by this thinking.  I see individual performance in management and worker being labeled and then released for their performance.  Can we first fix the systems workers work in before ruining them?

Whenever I work with organizations and the systems are squarely what is being worked on, you can almost hear and feel the collective sigh of relief. They happily go on with the task of fixing the system and improving performance because everyone wants to work in a better system.  The whole tone and culture changes to something positive.

I rarely find bad individuals, but I find bad systems in almost every service organization.  It is evident in the service their customers experience.  Management doesn’t see the damage of bad systems because they don’t know how to look.  They can’t understand unless they go to the work and get knowledge about how bad these systems are in delivering service.

The 95/5 rule isn’t so much a rule as a way of thinking.  Whether you believe the real number is 70/30 or 80/20 or even 60/40 the system still dictates the performance.  All you have to do is look.

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.  Read his articles at Quality Digest and his column for CustomermanagementIQ.com  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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A New Generation of Management

W. Edwards Deming suggested implored us to reinvent management.  This more than implies that the state of management back in the 1970s and 1980s was taking us the wrong direction.  The direction of management has taken us to deeper levels of despair . . . and you really think management has gotten better?

Walk into any organization and you can see the levels of silliness that take is us into business purgatory.  If we didn’t learn the wrong way in a MBA program . . . we learned it by the managers we admired.  Even if what they did was not that admirable.  It was a good way to get ahead, whatever that means.

In many ways, when the Baby Boomers start to retire we may finally rid ourselves of a very selfish generation of management.  One plagued with short-term thinking, targets, incentives all aimed at short-term profits to win the prize for themselves and the heck with all others.  The “as long as I get my share” generation.  Deficits for the US and new answers to “cut costs” – which increases them.  The spending generation has no idea how to reduce deficits or build value that reduces costs.

How do I know this?  I am from this generation.

There is hope.

A new generation of management is starting to take hold.  In a management paradox, the changes actually increase profit and the management motive is not selfish.  Focusing on the customer creates breakthrough profit not more expenses to be managed.  It is a simple and provocative truth:  Enhance the lives of others and profit will follow.  Wow, simple yet profound.

The new generation will understand about targets, incentives and the ridiculous outcomes that follow.  Do they drive behavior?  Absolutely, the wrong behavior and creates a wake of destruction for the customer to navigate.

The new management generation will value knowledge over assumptions and hierarchy.  Truth over authority.  The words, “greater good” will mean something.  It will mean happy customers and greater profit.  Sound like a broken record yet?  Repetition is required for the oblivious Baby Boom generation.

If knowledge rules the day, the people in the work will be recognized as the ones that hold the knowledge.  Not the latest Red-Yellow-Green report, CRM technology spend or project plan.  None of these hold the knowledge in service that a simple demand between worker and customer.  The battle and ultimately the war is won and lost there.  A meeting won’t be held in the conference room, but in the work.

The generation that is better known for Ponzi schemes, government deficits and other carnage leaves much to overcome.  Let’s get on with it.

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.  Read his articles at Quality Digest and his column for CustomermanagementIQ.com  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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A Glimpse of the Future

Cover of

Cover via Amazon

I have been doing a lot of traveling around the world and back and forth to the US.  I am reading a book called, The Next 100 Years by George Friedman.  Mr. Friedman is a futurist.  His insights are insightful and whether they are accurate . . . I don’t know and won’t until some point in the future.  He does make some compelling arguments from current events and future trends.

Many things standout in this book, but interestingly he predicts that as baby boomers retire there will be a labor shortage.  That’s right . . . a shortage of labor.  This is hard to imagine given our current state with high unemployment.  The crisis is predicted to be so bad that the US and other advanced nations will be begging for manual laborers, engineers, health care workers and physical sciences.  The solution is either to raise productivity per worker or hire immigrants.

Mr. Friedman doesn’t give much detail (a futurist’s prerogative) but does believe that the timing and magnitude of the crisis, hiring immigrants will be the only solution.   He doesn’t really mention technology which has only helped us do the wrong things faster.

I beg to differ.

However. the levels of productivity needed require better design of work that we don’t see in service organizations today.  Current fads to improvement will not get us there fast enough.  It requires new thinking that allows breakthrough performance and continual learning from there to beat back this prediction.  If not the result will be inflation and increased role of government.

When will we start to see the effects of Friedman’s predictions?  Around 2015.

Most organizations will begin need to compete for resources internally and externally and build programs to train and make the work more interesting and in control of the worker.  There won’t be the bureaucracy of management that we have in today’s organizations . . . they won’t be able to afford it.  The work itself will become more important.  That is, at least, my prediction.

In working with organizations, I  find that there is massive improvement for organizations.  Using systems thinking (and more importantly the 95 Method) the improvement achieved is 20-60% better than other methods I have used.  The reason is work redesign, worker steering of decision-making and management focused on getting knowledge (rather than targegts and financials).

Decidedly, if Mr. Friedman’s predictions are correct, now is the time to start preparing for the coming labor shortage.  Are you ready?

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.  Read his articles at Quality Digest and his column for CustomermanagementIQ.com  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 i[email protected].  Reach him on Twitter at www.twitter.com/TriBabbittor LinkedIn at www.linkedin.com/in/trippbabbitt.

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