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.