Season of Dysfunction – The Budget Process

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Nothing is more wrought with waste than the dysfunction of the annual budget process.  Arbitrary targets are set during this process and management plans against corporate and government fantasies.  The process is painful, and outright delusional.

W. Edwards Deming would be correct to ask “by what method” will you achieve that 8% reduction in expenses or that lofty 16% growth in revenue?  The truth is rarely do managers know, only that they have a target to achieve and the games begin.  Naive managers play this game like a game of poker . . . “I call that 8% reduction and raise it to 11%.”  While the mature manager will negotiate the number down and immediately devise excuses that will get  the manager through the first quarter or two.

The rest of the year is spent looking at that annoying report that describes “planned vs. budget” and like a roller coaster the management ride begins. Reports are written about the variance from budget.  Display lights show red, yellow, green against budget and the psychological torment to “do something” begins.

Short-term behavior to “hit the numbers” often create a management paradox.  Resources are cut, maintenance is cut back – in a rob Peter to pay Paul scenario that one would think they would only see with “The Three Stooges.”  It is laughable, only this is real life in business and government.  The bean counters have taken over business and government.  This, I have concluded, is why accounting firms are so into consulting as one dysfunction (budgeting) can be reinforced by more dysfunction (consulting to achieve short-term numbers) . . . waste begets waste.

As targets are put in place, the whole focus of the organization turns to the numbers as this is what managers pay attention to.  It creates a defacto purpose, instead of focusing on creating value for customers everyone’s attention is on achieving their target.  And with customer purpose gone, sanity soon flys out the window.

More dysfunction of plans, milestones and schedules based on assumptions, but managers have no time for such silliness as getting knowledge.  There are meetings to have, people to bash and excuses to dream up and that takes a lot of a manager’s time.  The very thing they are trying to reduce raises the need for more resources directed at keeping the budget score and not tending to the system that creates value for customers and constituients.  Wrong focus, in a management paradox, creates more costs.

I don’t believe the budget process will die, but I wish it would.  This is a problem that will take years to undo.  The problem is literally billions will be wasted until we do.

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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Management’s Pre-Occupation with Measures . . . the Wrong Ones

Walk into any business and you can get measures.  What measures are being kept is of greater importance.  Typically measures are associated with financials and/or activity . . . and this is where the trouble begins.

Measures of the activity and financial type are inextricably tied to profit and efficiency or so they believe.  This is an assumption that drives dysfunctional behavior as there is a relationship between assumptions and waste.  Whole organizations tie their fortunes to known, but wrong, business practices.  They stand to win if everyone else is making the same mistake and they do the wrong thing, righter.

Activity and financial measures can be defined as lagging measures or results-measures.  They tell us how an organization did after the fact.  I sometimes like to call them “forensic measures” as those organizations that use these measures are already half-dead  (Zombie measures may have been a better analogy).

Managing by lagging measures (financials and activity) may be useful to know the score, but tell us little about what to do.  Add targets and incentives to the recipe and crazy things start to happen.  Managers and workers focus their attention to achieving numbers that sub-optimize and create waste.

Lagging measures are doled out to each functional area as they are given their measure to hit.  They may even be asked to be profit centers when their role is to support.  When a supporting function is asked to be a profit center the value creating parts of the organization take a hit.  Why?  Because now functions compete for resources and are now have to arm-wrestle for resources.

If lagging measures aren’t the answer, what is?  Leading measures, they help us understand what we need to focus our attention on and that is the customer.  When customer measures that are derived from what matters to them are revealed, the lagging measures take care of themselves. 

Why doesn’t everyone use leading measures related to purpose?  Usually this is a condition of functional, top-down thinking that makes lagging measures invisible to executives.  Or more simply put, they just don’t see the dysfunction when they are so far away from where the customer is.  Only when they see it for themselves do they believe and even then some try to rationalize it away.

Many want to have a prescription for what they should measure.  I don’t have one except the measures should be related to purpose or help improve performance.  You may read the post Test of a Good Measure.  But the best way is to go to the work to get knowledge and derive measures from purpose.

All managment wants better performance and better measures.   To get there requires a different approach and to through out the existing assumptions about what makes a good measure.

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 State Department of Education – Where is the Evidence?

 

The Great Seal of the State of Indiana
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The proposed evaluation of teachers in the State of Indiana continues to be the mantra of Dr. Tony Bennett, State Superintendent.  What Dr. Bennett continues to fail to realize is that evaluations are results-focused and only improved method will improve education.

Dr. Bennett has provided no evidence that his assumptions around evaluations to improving education exist.  In fact, we should be more concerned that all these evaluations will require more administration, inspection, monitoring, legislation, etc. . . . it becomes another unfunded mandate from a department that shouldn’t even exist.

Instead, closing down the Indiana State Department of Education would allow schools to pay teachers more and allow schools to have local control.  We are not in need of more bureaucracy in a State that has to lease toll roads to show a favorable budget.  We are in need of smarter money being spent where education takes place . . . in the classroom.

Adding evaluation programs and setting new standards, as seems to be done monthly, does not help our children become better learners.  The education system will continue to operate the same way until our educators experiment with teaching methods – or when manipulated to achieve targets or avoid punishment.  It is the latter that will create more costs and funnel needed classroom money to administration.

We should be in favor of bold reform in Indiana, but that reform should be the elimination of the Indiana State Department of Education.

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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Changing Thinking Isn’t Always Easy, but . . .

Changing thinking isn’t always easy, but it must be done or maybe considered. 

As government and business try to overcome tremendous economic adversity people are searching for answers.  For the most part, we hear more of the same.  Technology, cutting costs, smaller government, bigger government, outsourcing, shared services, lean six sigma, etc., etc., etc.  None are new ideas and in some cases represent new names for past failed attempts to make things better.

We have sliced and diced our way to bigger deficits and less competitiveness from faulty thinking to the point nothing seems to work.  Stepping back for a moment, maybe there needs to be a shift in the way we look at things.  We need fresh eyes to old problems, not new labels to old answers that don’t work.

Methods for changing thinking have hardly been explored except between an individual and a psychologist/psychiatrist.  But organizationally in the matters of change . . . not much. 

It is not a matter of just changing thinking, but a matter of methods that teach how to change thinking.  Experimentation and learning in this area is so overlooked.  Yet, as I have seen an area of great learning.

95 has been exploring and learning new methods to change thinking now for over two decades and the area of opportunity for breakthrough change is monumental.  For those that have tried everything else, maybe a new look at a new way may be in order.

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 Battle for Change is a War

I was reminded today of the nature of change and more importantly the methods of change.  Here, I am reminded more about the fundamental rules of change and less about whether it is lean six sigma, TQM or any of an assortment of other disciplines that may describe organizational change management.

The default method of change seems to be in making people change or training them in ways to do so.  Neither of these methods are optimal, but both may have a time and place.  The former (making people change) is a reflection of the power in wielding control, while the latter attempts to convince people.

People “do” what they believe makes sense.  It is only when people are constantly challenging assumptions that breakthroughs are realized. 

But this creates an uncomfortable position for a world made of assumptions.  Columbus challenged the flat earth theory with his life.  Copernicus was afraid to reveal his theory that the sun (not the earth) was the center of the universe and waited to almost death to have his thoughts revealed.  And so it goes through history that until assumptions are challenged through theory and observation are advancements made and new paradigms created.

New perspectives are a never-ending cycle that shortens the cycle of discovery through new and better thinking.  And so it is with systems thinking that intervention theory for organizations can create breakthroughs in innovation and method that advance mankind. 

This is not just a battle to win the day, but a war with battles won and lost.

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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Hilton’s Outsourcing – Unwarranted and Unnecessary?

I know there are a lot of flag-waving US citizens angry over the outsourcing of US jobs that goes beyond Hilton.  The corporate mantra of achieving business cost reductions has been the subject of many of my offerings including the Quality Digest article Paring Down to Spend More.  As US jobs are lost overseas in a time of financial difficulty the ire of many is sure to make these companies pay, but these decisions to outsource contact centers are financial . . . as in dollars and sense.

Hilton allegedly has told employees not to talk to the media or risk losing their severance.  The embarrassment of sending workers to a foreign land calls for such measures.  Especially when they have to travel overseas to train their replacements.  Could it get any uglier?

Hilton is not the only company that outsources and offshores, let’s be real.  The auto industry has done the same and even the technology industry has done similar moves to reduce costs.  People are mad in a country with now high unemployment, but the case of patriotism should not be where arguments begin.

There is a better argument than patriotism and short-sighted, dividend producing service companies need to get in touch with the fact they may be increasing costs.  You see they are managing transaction costs when they outsource.  To cost accountants it is a simple math problem – we pay US agents $9 – 15/hour and we pay overseas agents $2/hour.  We save on human resource costs.

Except the problem they are working from is based in economies of scale thinking.  But true financial economies are in the flow.  The failure of service organizations to understand true costs and their causes.

Customer demand is a leverage point for reducing costs.  Because contact centers deal with customers this represents an opportunity to reduce costs.  However, economy of scale thinking gets in the way and executives ask the wrong questions, like:

  • How many calls do we get?
  • How long does it take to handle these calls?
  • How much does it cost?

These are traditional questions for an economy of scale thinker.  But they fail to recognize the nature of demand.  Many contact centers have demands that are unwanted like call backs, unresolved problems,etc. these were coined failure demand.  When customers are upset, you get lots of failure demand . . . it is something service organizations don’t want.

Failure demand represents about 25 – 75% of all calls in most contact centers.  Instead of eliminating this waste service organizations outsource to lower its costs.  But it doesn’t end there, the flow of the work is ineffective and the people you need to improve flow are the workers that are being outsourced (and yes, this true whether outsourcing is domestic or off-shored).

The workers are more valuable than just paying low wages they can  help make your system improve, so why alienate them.  But in command and control organizations, managers make decisions like these away from the work, so they can’t see, or in most cases, understand the work.  A critical error in reducing total costs.

The backlash of outsourcing/offshoring is getting louder in social media and other circles as the roles of the unemployed continue to rise.  Hilton stands to get a lot of failure demand from upset customers.  But ultimately, it comes down to changing management thinking about the design and management of work for all organizations seeking business improvement.  Our economy and jobs depend on it.

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 Focus on Function Causes Dysfunction

Every function sales, operations, software development, contact centers, etc., etc. have their own association.  They all promote certifications, training and much more to teach how to be better at their function.  So few, though, have a focus on the broader system and how each function interacts with each the others.

Most of the banter on Linked-In, Twitter talks about how to optimize their function and be profitable.  One might appreciate being updated for a skill he/she might have and learn more about happenings in these functions.  However, much of the conversation is really dysfunctional.

I don’t believe that  a contact center was intended to be a profit center or even something that should be outsourced.  This is especially true for information technology and human resources as they are supporting functions . . . and they need to be profit centers? 

A Fortune 500 technology company with a division that provides ATM services for banks including installation was charged extra for the phone lines by a centralized location (of the same company) that provisioned the phone lines.  In some cases, they were charged double for phone lines and the costs were passed to the customer. Pretty soon customers were complaining about why this companies phone line charges were so high.  The answer: the centralized function was paid a bonus based on what profit it could show and jacked up the price to the internal division.  This is an example of a supporting function gone wild with sub-optimizing results.

It is important to understand that the dysfunction is caused by these functional areas.  Almost all businesses are designed this way.  Each function competing with another for resources and rewards.  While all this is happening, the system falls apart.

Systems thinking is the glue that holds an organization together.  But it requires a change in the design and management of work.  The old design of  functional areas optimizing their own processes can not stand in a world that requires collaboration and cooperation.  Further, management must develop new roles in these redesigned systems.

The corresponding result is business improvement beyond just efficiency and effectiveness.  Culture improves as the customer becomes the focus of a system’s attention rather than each other.  Instead of in-fighting over a piece of the pie, employees work together to make the pie bigger . . . giving growth opportunities for all.

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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The “Working Software” Paradox

Manifesto for Agile Software Development

 We are uncovering better ways of developing
software by doing it and helping others do it.
Through this work we have come to value:

  • Individuals and interactions over processes and tools
  • Working software over comprehensive documentation
  • Customer collaboration over contract negotiation
  • Responding to change over following a plan

That is, while there is value in the items on
the right, we value the items on the left more.

 I am not a huge fan of information technology as my readers know.  More often I find that technology has entrapped workers rather than liberated them. 

Too many technology projects have the wrong aim . . . to save money.  The focus needs to be on customer purpose which brings us to the “working software” paradox of the Agile Manifesto.

You see in software projects we have stakeholders with different aims.  Executives are looking for project plans, contracts and revenue recognition.  The development community typically is drawn down to writing requirements, coding, testing, fixing bugs, etc. under the constraints of these executive imposed dates in the project plan.  The real customer for software should be the worker that has to deal with it on a daily basis.  But too often it is their management that is unfamiliar with the work that buys a solution that doesn’t solve the problem.  Sound familiar?

So the question becomes, how do we get to “working software?”  What works for the executives doesn’t necessarily work for the people who do the work.  Developers are caught in the middle of trying to figure out whose definition of “working software” they should embrace.

My experience with Fortune 500 technology organizations highlights this paradox.  Plans, schedules, documentation, etc. create more expense, but give managers needed information to hit the financial target.  Many of the causes of costs are instituted by the managers and executives themselves in command and control fashion.

Let’s face it, the real work is done by software developers and I believe that developers or architects should be in the work with the people that the software should be helping.  Let the developers/architects “get knowledge” by studying the system with the workers and managers.  Change can be emergent rather than planned.

I have seen too many plans made without knowledge of the work in software development.  Where business analysts write requirements and developers lose context to the software they are developing.  Lack of context creates poor knowledge and subsequently “non-working software.”

Context and knowledge are lacking because executives believe that hiding expensive resources – like developers and architects – saves money.  Again, this creates more costs as iteration after iteration fails to meet the end users needs.

In creating usable software, value can be derived by getting knowledge by those that do the work.  Developers/architects, the end user are those people.  There focus should not be clouded by command and control actions that add costs and diminish customer purpose. 

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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Systems Thinking, the PGA and the Bunker Debacle

My heart goes out to Dustin Johnson.  He lost on a ruling.  Right call by the PGA? . . . yep.  Tragedy for the PGA tour? . . . yep.

I am not much of a rule follower, except when it comes to golf.  I don’t do anything egregious like steal or kill.  But was Dustin Johnson the only guy in the PGA Championship that grounded his club in a questionable bunker during the tournament?  I have a hard time believing that he was the only victim of the local ruling, but he was caught on tape during the last hole of the final round.  The other players weren’t under the same scrutiny and may have gotten away with one.

But for Dustim Johnson, he was under a microscope.  Rules are rules and violaters shall be punished . . . it is, after all, a gentleman’s game. 

Yet, I wonder.  What if one of those officials had helped Dustin out a bit, under the pressure of the situation.  Could the officials have prevented this by being proactive? 

In working with service organizations, I often see people that I call the “process police.”  These folks love rules and they love to catch people breaking the rules.  Some rules are just plain dumb and bureaucratic and others achieve their purpose.

I find it a better practice to create a cooperative attitude among workers and managers in the same system.  Instead of catching someone breaking a rule, managers should spend time in the work.  This approach is much better than new edicts and policies to force compliance.

In the case of the PGA, could they have prevented the bunker debacle?  I don’t know, but with a plethora of rules officials can’t they have a role of being helpful?  This protects the field AND the player (and possibly the spectator) when they take a more proactive role.  It also would save the embarrasment of learning that you just got knocked out of a playoff for a major championship. 

Regardless, for service organizations there is an opportunity to build their systems based on principles, rather than an avalanche of rules that are confusing and maddening to the worker.  Working together to achieve business improvement should be something all managers and workers do to make the system better.

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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Repairing the Steve Slater Syndrome

 

JetBlue Airways logo Category:Airline logos
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Alrighty then, we have ourselves a new folk hero – Steve Slater – from an incident on a Jet Blue flight.  Add this incident to the young lady that quit her job using a dry erase board . . . and we may have the start of a revolution.   “Going postal” just got a little less violent and a lot more creative.

Workers are getting more stressed out.  Nurses and others walking off the job for better working hours.  Even more workers wishing they could.

Meantime, we continue to see the squeeze on workers for more hours leading to more stress and the cycle continues.  Workers are asking for more hires and companies are afraid to hire.

I hear more of this every day from folks on the front-line being squeezed.  The hyprocrisy and power of command and control organizations is evident in these conversations.  Cost cutting is being felt everywhere, but mostly is something done to the front-line . . . an they are starting to fight back. 

Unions are licking their chops at such a plight.  I believe that unions are born from command and control management as when workers feel taken advantage of unions form.

I have listened to employees of systems thinking organizations and I find the exact opposite is true . . . they are happy.  What do you suppose these organizations did to these people? Was it quality education, skills training, empowerment programs, empathy audits, kaizen scripts, best practices, etc.?  Nope. 

These organizations changed their thinking about the design and management of work which changed the system and improved performance.  The work became more important than the management of the work.

Management discovered that being in the work offered better financial returns than pouring over mountains of data and/or financials.  Being in the work allows managers to understand the context of the data they don’t see sitting behind their desks.  Workers don’t have to face dreamed up change programs that are based on assumptions.

Clearly, no one condones the actions of any of these incidents.  However, management needs to be able not just cal HR and legal to clean up the mess.  They need to reflect on the causes of a culture gone . . . Slater.

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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