The Difference of Measures in Management

Executives can tell you a lot about financial data . . . and why not they manage by these measures.  ROI, expenses, debt-equity ratios, revenue all play crucial roles in the decision-making process of command and control organizations.  However, managers saddled with these measures are limiting their ability to improve and innovate.

Financial measures are a type of results measures.  They are measures that tell us how we are doing, but not what to do to make them better. 

“Focusing on results is like driving your car by looking in the rear view mirror.” – Myron Tribus

Yet, this is the way managers manage.  Fish have to swim and birds have to fly. 

None of these measures of results will improve an organization.  Adding targets to these measures just adds more dysfunctional management behavior that spirals the organization downward.  Traditional (command and control) organizations budget and plan around these results measures hoping that they will achieve the targets set forth.

But like scoreboard in a football game it tells us little more than the result.  The blocking and tackling is what makes the result possible.  And so it is with business and governments that improvement comes from leading measures, not lagging (results) measures.

Many in management believe that they can functionally breakdown results measures by department or unit.  KPIs are born with their accompanying target.  This, however, is not reflective of measures that matter.

IN working in the systems thinking world, the only measures that I have found that matter are those associated to customer purpose (or what matters to customers).  These measures are measures to achieve business improvement and corporate cost reduction.  The only way to get these measures is to get knowledge by going to the points of transaction (where customers interact with the organization).

For service these are measures of one-stop capability, end-to-end times from a customer perspective (and not the internal functional ones), failure demand, etc.  These measures focus the organization on what drives all the other results measures as they create value in the eyes of the customer.

Knowing what these measures are helps to identify new ways to improve them by experimenting with method.  Experimentation with method leads to redesign and innovation.

The difference between measure of results and measures of customer purpose are monumental.  We could build a WalMart between them.  Keep the results measures, but build the customer measures and soon the results will take care of themselves.

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

Make the new decade a profitable and rewarding one, start a new path here.  Download free from www.newsystemsthinking.com “Understanding Your Organization as a System” and gain knowledge of systems thinking or contact us about how to get started at [email protected].  Reach him on Twitter at www.twitter.com/TriBabbittor LinkedIn at www.linkedin.com/in/trippbabbitt.

Tripp Babbitt is a columist (Quality Digest and IQPC), speaker, and consultant to private and public service industry.

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The Curse of W. Edwards Deming

We all know about the sports famous curses:

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  • The Bambino Curse– From the sale of Babe Ruth to the Yankees by the Boston Red Sox.  Subsequently, one of the great sports draughts where the Yankees would win 26 World Series and the Boston Red Sox did not win one for 86 years (ending in 2004).
  • The Andretti Curse – Mario Andretti won the Indianapolis 500 in 1969, but despite 25 years of efforts he was unable to win again.
  • The Curse of 1940 – Cited as the reason for the New York Rangers inability to win the Stanley Cup until 1994.

Many other curses with strange names and funny stories like the Curse of Biddy Early, the Buffalo Sports Curse, Curse of the Billy Goat, the Sports Illustrated Cover Jinx and the list goes on.  However, I believe we are under the W. Edwards Deming Curse.

It was Deming that said we have been in economic decline since 1968, which he noted as the high water mark for the US.  Just as General Lewis Armistead’s fall at Gettysburg marked the decline of the South during the Civil War. 

It hasn’t been a complete disaster with a few rays of sunshine here and there.  But government deficits have built.  

A tiny country with few resources (Japan) has brought manufacturing to its knees . . . and do we really want to talk about how poor service is in the US?  The fall has been incremental so many haven’t felt the decline just as a frog that boils in the kettle doesn’t feel small changes in heat.

What have we missed?  We have had fads like lean, six sigma, TQM and an assortment of promising strategies to break the curse.  Yet, we wallow in the cesspool of an economic conundrum that has everyone turning to China to fund government deficits and manufacture cheap products.  In service, we outsource to cheap labor countries based on our thinking that economies of scale and quarterly dividends will right the ship.

The source of the Curse has been blamed on the lazy, overpaid and uneducated worker.  Most of the improvement fads place emphasis on the front-line measuring productivity, copying and cutting costs (and heads).  Yet costs continue to rise and creative ways to make short-term profits improve are embraced.  Only to compromise the long-term and the day of reckoning has come.

So, if the Curse of W. Edwards Deming doesn’t manifest itself in the front-line where is our opportunity to do what the Red Sox did?  Break the Curse.

For many it lies in the things that haven’t changed, Dr. Deming warned that management must reinvent itself.  Doing so with an emphasis to create value and jobs and something for the greater good.  Rather than the bottom-line thinking that has crushed both value and jobs.

Management  has to begin to understand that economies are in the flow, not the scale.  The functional separation of work  started by Frederick Taylor at the turn of the last century is stagnant.  Leading management to reinventing itself by redesigning the work and its own thinking.

Whether this Curse lifts or not, depends largely in part on whether curiosity leads us to experiment with our thinking.

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

Make the new decade a profitable and rewarding one, start a new path here.  Download free from www.newsystemsthinking.com “Understanding Your Organization as a System” and gain knowledge of systems thinking or contact us about how to get started at [email protected].  Reach him on Twitter at www.twitter.com/TriBabbitt or LinkedIn at www.linkedin.com/in/trippbabbitt.

Tripp Babbitt is a columist (Quality Digest and IQPC), speaker, and consultant to private and public service industry.  

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Washington DC Teachers – Dismissing Teachers Won’t Improve Education

The floggings will continue until morale improves – Unknown

 

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The Washington DC school system has fired hundreds of workers – DC Firestorm: Hundreds of school workers to be dismissed.  I believe we will need greater discretion before we use the word “system” as the only people taking a hit are the teachers.  Since a system needs cooperation this head-hunting mission stands to disable this system.

W. Edwards Deming told us that 95% of the performance of any organization is based on the system, not the individual.  Many education systems are looking for individuals to blame rather than improving the system. 

We have built a divide between teachers and administration in education not unlike the union/management conflicts we have seen in manufacturing.  There is little manufacturing done in this country any more in part because of this relationship.  The sad part is these relationships have pitted American against American.

Teachers being graded on performance based on test results will not improve education, improving the education system will.  Soon we will have teachers playing politics to get the “good” students and teaching to test scores.  Neither of these outcomes will help educate our children to compete on an international playing field.  Test scores give us little knowledge on whether our children are developing the skills they need to learn and testing is no more than inspection.  Students are learning how to take tests and not learn.

Teaching is about method and administrators and teachers need to work together to improve education.  Discovering better ways through experimentation with method is the way to improve education, not the pointing of fingers. 

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

Make the new decade a profitable and rewarding one, start a new path here.  Download free from www.newsystemsthinking.com “Understanding Your Organization as a System” and gain knowledge of systems thinking or contact us about how to get started at [email protected].  Reach him on Twitter at www.twitter.com/TriBabbittor LinkedIn at www.linkedin.com/in/trippbabbitt.

Tripp Babbitt is a columist (Quality Digest and IQPC), speaker, and consultant to private and public service industry.  

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Mergers and Acquisitions – Scale Thinking that Leads to Higher Costs

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There are been fewer mergers and acquisitions in recent months . . . and that is a good thing.  Too many organizations and government entities have swallowed whole the economies of scale thinking that in a management paradox has led to higher costs.

The culprit behind is a shared services strategy that is fundamentally rooted in economies of scale thinking.  Government entities and for-profit companies desperate for cost savings look to combine services to achieve them.  The problem is not the scale, it is the flow.

Blindly combining IT, HR or contact centers seems to be where organizations have been duped in to thinking that this is a good idea.  The problem with this approach is rooted in the design.

Most organizations destroy flow by their design through the functional separation of work.  Phone calls have been centralized into contact centers to achieve such scale economies and back offices built to do processing.  Technology entraps the worker through such poor design thinking and locks in the waste.

For any organization (public or private) a better way is to study demand before taking on scale thinking.  This can’t be done at the 50,000 foot level, but by studying demand where transactions occur between the worker and customer.  Too many assumptions are made based on “you have a contact center and so do I, let’s save money by combining the two” thinking.

If the demands are the same (rarely the case) their may be opportunity, but contact centers, IT, back offices and HR are typically fraught with waste.  This waste comes in the form of failure demand.  As much failure demand as organizations have in it, we miss the opportunity to redesign the system to design out the failure demand.  Do we even need that back office?

The functional design is an inhibitor to flow.  Poor flow leads to higher costs as hand-offs and queues lead to poor service.  The insightful study of demand can aid in a better design as we can design failure demand out and design in services that accommodate “what matters” to customers and constituents.

Better design for increased economies of flow will decrease costs, not economies of scale thinking.

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

Make the new decade a profitable and rewarding one, start a new path here.  Download free from www.newsystemsthinking.com “Understanding Your Organization as a System” and gain knowledge of systems thinking or contact us about how to get started at [email protected].  Reach him on Twitter at www.twitter.com/TriBabbittor LinkedIn at www.linkedin.com/in/trippbabbitt.

Tripp Babbitt is a columist (Quality Digest and IQPC), speaker, and consultant to private and public service industry.

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Indiana FSSA Troubles Continue

 

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I have written several posts on the State of Indiana and the Indianapolis Star offered an opinion today titled,  A wrong righted none too soon.  The Star claims that FSSA has two strikes . . . I would say more like two outs, bottom of the ninth, an o-2 count and the batter that is up is batting below the Mendoza line.

There are several that have a hand in this, chief among them is the former FSSA Secretary that came with a political agenda and cynicism for the working class.  The media for supporting a technology mindset that says paper-based and manual processes are always bad.  The legislature for enacting laws that have created an unintelligible system that serves no one.  The current FSSA Secretary for not blowing the whistle when she had the chance and continuing to implement wrong thinking in a hybrid system that has 30% greater staff and still fails the recipients of welfare.

The good news is that the current FSSA Secretary has a law degree and she will need it to fight the lawsuit with IBM and the Federal government.  So, this fiasco plays into her hands.  Nice person, but not the skills or apparently the openness to seek better thinking.

And so goes the pendulum back and forth, Democrats and Republicans getting into power and squandering the opportunity as deficits mount.  Political agendas outweighing what is important to taxpayers, better provisioned services with less spending.  The reality is we can have both.

If government would focus less on political agendas and more on customer purpose and demand, we would begin to have the focus in the right spot.  We could still give people that are less fortunate a hand up.  This economic mess wasn’t made by these folks. And many like the 26-year old man (that couldn’t speak and functioned as a 6-year-old that was getting his benefits cut by FSSA) would be able to live with out his presenting more failure demand to get what he needs to live.

All these legal problems, political agendas, failure demand, poorly designed work, etc. leads to more costs for government management.  Waste creates waste and more oversight is ordered and the waste grows. 

We are long overdue to sweep the hacks out that run agencies in command and control fashion.  Government management has to look beyond the legislature and reach the points of transaction where the real costs and value occur.

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

Make the new decade a profitable and rewarding one, start a new path here.  Download free from www.newsystemsthinking.com “Understanding Your Organization as a System” and gain knowledge of systems thinking or contact us about how to get started at [email protected].  Reach him on Twitter at www.twitter.com/TriBabbittor LinkedIn at www.linkedin.com/in/trippbabbitt.

Tripp Babbitt is a columist (Quality Digest and IQPC), speaker, and consultant to private and public service industry.  

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Dr. Donald Berwick – Trouble in the Making for Health Care

Reading through the Wall Street Journal this morning I ran across the “Letters to the Editor” and the one written by Keith R. Jackson, MD titled “Standardized Medicine Doesn’t Mean Better Medicine.”  Dr. Jackson should be worried, the WSJ article he was writing  about has to do with implementing manufacturing ideas into service.

The article in question from the Wall Street Journal is titled Berwick: Better than Kagan written by Daniel Henninger of the Journal.  In this article Dr. Berwick says some alarming things.

It may therefore be necessary to set a legislative target for the growth of spending at 1.5 percentage points below currently projected increases and to grant the federal government the authority to reduce updates in Medicare fees if the target is exceeded. 

I have often written about the damage of targets and though well-intentioned are arbitrary in nature and drive dysfunctional behavior (search “targets” on this blog for further reading).  The issue here is method and we will need experimentation with method to achieve results, not setting new targets.

I would place a commitment to excellence—standardization to the best-known method—above clinician autonomy as a rule for care.

Here is the “lean” connection something that I have found fundamentally wrong with taking a lean manufacturing approach.  Service is different from manufacturing in that variety is greater.  All of this standardization for care leads to a one-size fits all – ever hear of a weight reduction plan that works for some and not others?  Variety is great in health care and standardization will lead to the wrong care.  Dr. Jackson (in his letter to the editor) rightly that “best care” can only come from the “right diagnosis.”  If the variety of patient is great (and it is) than standardization will lead to cheaper services, but more expensive care.

Health care has taken a century to learn how badly we need the best of Frederick Taylor [the father of scientific management]. If we can’t standardize appropriate parts of our processes to absolute reliability, we cannot approach perfection.

I have pointed this out often as a problem.  Dr. Berwick accepts the existing work design of Frederick Taylor – this functional separation of work is part of the problem with health care, service, manufacturing and government.  We optimize the pieces (functions) with standardized work and sub-optimize the entire system.  Costs are seen reducing by function but total costs rise as the pieces don’t synthesize.  Lean too many times misses the opportunity to design for effectiveness to achieve functional efficiency.

Young doctors and nurses should emerge from training understanding the values of standardization and the risks of too great an emphasis on individual autonomy

Berwick advocates best practice as well as standardization a notion of the one best way.  He does not in any way account for the variety patients bring and ask the questions important to avoiding systems that can not absorb this variety (who invented the standard? what problem were they trying to solve? Do I have that problem?).  Inability to absorb variety will cause failure demand (demand caused by a failure to do something or do something right for a customer) and costs will rise . . . a lot.

Unfortunately, Dr. Berwick learned the wrong way by going to other industries (for best practices) and he often quotes trying to be like manufacturing.  Not a good example as the US has so little manufacturing left.  Further, this approach leads to copying and copying rarely ends well.

Some will see this as lean-bashing, but Jim Womack of lean.org has touted his friendship and influence of Dr. Berwick.  This is troublesome as I have often pointed out that lean manufacturing is not for service.  To learn more about why see Redux:  Rethinking Lean (Six Sigma) Service from IQPC’s website.

There is much to learn and improve in health care, but in order to begin we need to start with customer purpose and demand.  This will tell us if standards are needed and if the workers (in the form of physicians, techs and nurses) can pull them.  We can redesign these systems based on purpose and build systems that absorb variety.  They should never be pushed for the sake of best practice, standardization or saving money and if they are . . . look for skyrocketing health care costs even worse than now.

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

Make the new decade a profitable and rewarding one, start a new path here.  Download free from www.newsystemsthinking.com “Understanding Your Organization as a System” and gain knowledge of systems thinking or contact us about how to get started at [email protected].  Reach him on Twitter at www.twitter.com/TriBabbittor LinkedIn at www.linkedin.com/in/trippbabbitt.

Tripp Babbitt is a columist (Quality Digest and IQPC), speaker, and consultant to private and public service industry.

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My Encounter with Trend Micro

Every spring I have to renew my security on the internet.  I have Trend Micro on my Dell computer and two other laptops have gone unprotected for awhile.  So when I ran across a 3 for $55 deal I thought – this is perfect.

Things went smoothly through the on-line purchase process and I was able to download the updated version on my Dell without pause.

Next were the two HP laptops.  As I started to download, things were going well until I received message that told me I needed to shutdown Outlook and my web browser.  I did so and hit “retry” and (again) the message came up to shut down Outlook and my browser.  These things weren’t open, so I hit retry a couple more times until I decided to reboot my laptop.

The reboot completed and I tried to install again . . . same message.  I looked for a FAQ . . . nothing.  Then I looked for a phone number to call . . . nope, but I could email them.  This was getting interesting, so I did email them.

I got some automated response about searching their knowledge base and a ticket number, but no phone number to call.  This email was followed 15 minutes from some from the consumer support team with basic instructions on how to download . . . not helpful.  I am now an hour into this “simple” task and fired back an email that I would prefer to speak with someone because these instructions were not getting the task completed. 

While I was sleeping that night I got an email giving a number to call and the hours available.  I was going on vacation so I decided to call when I got back. 

Back from vacation, I got the email out and also decided to try to see if I could get the download to work (one more try).  I noticed something I hadn’t before and that the download was good for 30 days . . . I was on day 34.  Frustrated I called technical support.

Navigating the IVR I found someone in support and told my story.  After the technical support person discovered that I owned HPs she informed me I would need to call a different number (lucky me).  I called the number and after about 10 minutes we had the issue resolved.

If a 10-minute phone call would have resolved this why couldn’t I call someone when I first encountered the problem?  This is the problem with today’s service organizations they have all this technology and ideas dreamed up to not provide service.  Customers are frustrated, I am sure Trend Micro is losing business over this.

There are so few companies that are good at service.  And for those that believe that what I experienced was good service, think again.  I was handled 3 times and that costs money and when I want to renew . . . lost revenue.

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

Make the new decade a profitable and rewarding one, start a new path here.  Download free from www.newsystemsthinking.com “Understanding Your Organization as a System” and gain knowledge of systems thinking or contact us about how to get started at [email protected].  Reach him on Twitter at www.twitter.com/TriBabbitt or LinkedIn at www.linkedin.com/in/trippbabbitt.

Tripp Babbitt is a columist (Quality Digest and IQPC), speaker, and consultant to private and public service industry.

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New C-Level Functions – Lipstick on a Pig

People love to draw attention to their cause and I am not exempt from this.  The recent calls for new C-level positions like Chief Innovation Officer, Chief Customer Officer or even a Chief Social Media Officer are well-intended but misguided.

The calls for these positions is because the functionally dispersed organizations we have built make it virtually impossible to get anything done without its own resource-devouring department.  I understand it is hard to get attention for your cause, but let’s address the problem not build new bureaucracies between old and new functions for customers and employees to navigate.  Imminent are power struggles between departments on who should wield more control.

In the days before technology and accounting . . . operations was important, but the new-found disciplines found power in having a CFO and a CIO.  Now we have executives in these positions that don’t understand the work making decisions about the work in too many organizations. 

The functional design has long proven inefficient.  Instead of addressing the design and making the work important and designing the work from customer demand . . . we add new functions.  Every worker in these functionally-designed beasts understands only a piece of the whole system and customers get worse service as no one can put the pieces together.  The result is worse service and higher costs.

A better leadership strategy would be wise to redesign our systems to accommodate what matters to customers and not a new way to make it harder to get service.  Spare the customer the “Oh . . . quality we have a department for that” response . . . or “let’s run the idea by the innovation team.”  I find it unfathomable to figure out what might happen with a Chief Customer Officer.

Organizations are constantly looking for ways to get significant  business cost reductions.  We can start by saying no to more silly and unnecessary add-ons.  Fix the pig, not the lipstick.

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

Make the new decade a profitable and rewarding one, start a new path here.  Download free from www.newsystemsthinking.com “Understanding Your Organization as a System” and gain knowledge of systems thinking or contact us about how to get started at [email protected].  Reach him on Twitter at www.twitter.com/TriBabbittor LinkedIn at www.linkedin.com/in/trippbabbitt.

Tripp Babbitt is a columist (Quality Digest and IQPC), speaker, and consultant to private and public service industry.

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Apple’s Antennagate – A Lesson in Customer Purpose and Demand

Just like the weather at The Open championship inSt. Andrews the media can giveth and taketh away.  Apple has been riding the wind of media hype for awhile.  Now Steve Jobs is calling out the media for blowing the antenna problem out of proportion.  He may be right, but that sword cuts both ways.

Lesser organizations do not get the attention either way, but there is a lesson here.  One of the key customer purposes of a phone is the ability to make phone calls.  Jobs is alleged to have fallen in love with the design and wanted to keep it a secret. 

As with most command and control management, Jobs infatuation over-ruled the internal engineers who were concerned about the design.  Can anyone say “BP Oil Spill?”  No one was injured or killed or will antennagate lead to an economic disaster, but it is a smaller scale disaster of sorts.

Apple has surely done some innovative things over the years to make phones interesting and fun.  However, what matters to customers still is the fundamental use of a phone.  Compromise customer purpose (what matters) and the result is unwanted demand in the form of complaints.

Failure demand in complaints cause costs to rise and revenue to fall.  There are degrees of egregious failure demand, but they are all expensive in terms of brand, phone calls and bottom line.

Too many companies struggle with mistakes in understanding customer purpose and demand.  With so much riding on ignoring customers it seems to make little sense.  Some fall in love with design, some to cut costs and possibly a plethora of other reasons.  In the end, it is just expensive.

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

Make the new decade a profitable and rewarding one, start a new path here.  Download free from www.newsystemsthinking.com “Understanding Your Organization as a System” and gain knowledge of systems thinking or contact us about how to get started at [email protected].  Reach him on Twitter at www.twitter.com/TriBabbittor LinkedIn at www.linkedin.com/in/trippbabbitt.

Tripp Babbitt is a columist (Quality Digest and IQPC), speaker, and consultant to private and public service industry.

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The Challenge – Reinventing Management through Better Thinking

W. Edwards Deming asked us to reinvent management years ago, but instead we have been met with change programs focused on processes and workers.  Often I find myself at odds with lean six sigma folks that swear they are really about improvement but what they write or speak about is more tools, standardization and other strategies that do little to address the management problems that need to take hold to have improvement that is sustainable as well as profound.  All these efforts (although well-intended) ignore the fact that management must come to the table to change too.

Instead we have change programs that compromise the needed management change.  Too few challenge conventional management thinking in favor of “just getting some business.”  Some improvement dreamers hold out hope that if they show management tools at work magical change will happen.  Unfortunately, once you start down the process and/or tool path changing thinking goes out the window.

In an ideal world, we would have any improvement initiative not beginning with tools and addressing the management thinking problems first.  Every organization’s management team would know that if improvement is to occur that they must change too.  Instead we wind up with management believing they can skate while the tools and process improvement fix things.

Each time I see the wrong path taken, I know how much harder it will be to get management to accept the fact that they have to change too.  So, making lean six sigma folks upset goes with the territory as one systems thinker likens it to trying to save someone that doesn’t know they are in danger.  The tool and process people do not see it this way as they see something is better than nothing.

So what has to change in management?  A move from command and control to a systems thinking approach to management.  These are not always easy changes as many are embedded in management thinking through years of a repeated use. But what we find is the faster management puts better thinking in place improvement is usually immediate. 

However, years of building these complex structures in command and control can slow the improvement down.  With great irony, management that wants improvement fast sometimes gets in the way of immediate improvement.

Improvement can not continue to become less, it needs to become more.  This can only happen when fundamental management thinking changes.  A tougher path?  Absolutely, but one that can lead to dramatic and sustainable improvement.

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

Make the new decade a profitable and rewarding one, start a new path here.  Download free from www.newsystemsthinking.com “Understanding Your Organization as a System” and gain knowledge of systems thinking or contact us about how to get started at [email protected].  Reach him on Twitter at www.twitter.com/TriBabbittor LinkedIn at www.linkedin.com/in/trippbabbitt.

Tripp Babbitt is a columist (Quality Digest and IQPC), speaker, and consultant to private and public service industry.

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