Most Read, Systems Thinking and Government, Systems Thinking Concepts

6 Things to Learn Before Starting a Government Modernization Initiative

October 27, 2009 Tripp Babbitt Leave a comment

US Government
Having witnessed the demise of the Indiana Welfare Modernization project and other Modernization projects in the US, we have a learning opportunity applicable to any level of government (federal, state, city or local). With former Indianapolis Mayor Stephen Goldsmith (a long-time proponent of privatization) admitting in Governing magazine that his drive for privatization early in the Bush administration was ill-advised we all need to take a step back. Here are some things I believe we can or should learn.

A Focus on Costs Increases Costs. The flawed belief that economies of scale reduce costs prevails in government management thinking. We have found that costs are in the flow (economies of flow). There is a dire need to end the fallacy that reducing costs as an objective works, governments need to find the causes of costs and they are in the flow.
Standardization Can Make Things Worse. A difference between manufacturing and service is variety of demand. Standardization can (and usually does) lead to the inability to absorb variety of customer demand. This leads to increased costs and worse service in the form of failure demand (demand caused by a failure to do something or do something right for a customer) which increases when services can’t absorb variety.
Technology can lock in Waste. Too many modernizations get kicked-off with faulty assumptions that technology and automation will improve things. There are some things that technology is good at and some things that humans are good at . . . and in service humans are better able to absorb variety. Further, standardization locked-in by technology is to institutionalize waste in government.
Perform “Check.” Before making changes of any type government management must get knowledge about the service they want to change. This means understanding the “what and why” of current performance. No plans, schedules, milestones, projects, cost-benefit analysis, etc. can precede getting knowledge.
A Big Lever for Improvement in Government is the Design of the Work. The reality is that the design of the work to be done is flawed and needs to be redesigned against customer demand eliminating hand-offs, redundancy and other wastes.
Sharing Services and Outsourcing without Knowledge is to Invite Trouble. In desperate attempts to cut costs quickly these two methods are deployed as “no-brainers.” Without knowledge gained from “check” these methods are typically disasters. They ignore the causes of costs and focus on visible costs.

There are many more of these management paradoxes and counter-intuitive truths that have been learned that should be communicated. Many before us like W. Edwards Deming, Taiichi Ohno and others laid the foundation for learning. This is not best practice or tools as these stagnate learning, but theories of management that have universal application.

Please join us in making government better through better thinking at www.thesystemsthinkingreview.co.uk where you can learn more about advances in improving thinking and method.

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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 Waste of Activity-Based Costing (ABC) in the Service Sector

October 26, 2009 Tripp Babbitt 7 Comments

During my lifetime I have witnessed two attempts at Activity-based Costing (ABC). For those unfamiliar this is an approach that flowcharts processes (activity) and then totals the costs of these activities. Seems a reasonable approach to anyone trying to manage costs and productivity.

The method deployed is to interview workers involved with the process and find out how long each activity takes and what percentage of their time is attributable to each activity. Each worker is allocated indirect costs (overhead) for things like lease expenses, information technology, human resources, etc. The result is an activity cost.

The flaw of ABC is to assume that being active is being productive. As managers like the idea that workers being active 100% of the time is to be efficient. Such thinking brings the human robot to mind.

My personal experience has been attempts by accounting organizations coming in and doing organization-wide ABC. The problem was at the end of the ABC exercise, I summed up the activity costs multiplied times the volume of actual activity and the costs did not come close to the organization’s total costs. This was problematic, but by no means the end.

ABC treating all activity as work to be done ignores failure demand (demand from customers caused by failure to do something or do something right for a customer), duplication, errors, etc. This is to manage costs instead of the causes of costs.

Where costs are high to deliver service, organizations still need to understand customer demand and the reasons for waste before making changes to the organization Or they run the risk of making things worse. To set targets for a piece or function of the process ignores the understanding of the end-to-end system and purpose.

If a function or process is deemed too expensive it stands to be paid attention to by looking for cheaper outsourcing or shared services opportunities. These also lead to increased costs as it disregards the end-to-end costs and waste that are not seen in the activity as already illustrated above.

My 95 partners in the UK found that the inventor of ABC Thomas Johnson changed his mind about the benefits of the technique after spending time at the Toyota plant in Georgetown. He came to his senses regarding the foolishness of managing through costs. My hope is that the US government and other private sector businesses will come to the same conclusion. Millions are being wasted by conducting and taking action on the ABC approach.

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Indiana State Budget Committee, FSSA and Welfare Eligibilty Modernization

October 23, 2009 Tripp Babbitt Leave a comment

Indiana Flag
I decided to jump into the Suburban this morning and go to Bloomington for the Indiana State Budget Committee meeting. Never have I attended one of these events, but I plan to attend more if my schedule allows.

The main event was to be the Secretary of FSSA giving us the good, the bad and the ugly on the Indiana Welfare Modernization project. However, I was treated to the budget review that showed that budget forecasters had missed the revenue mark (another word for taxes) by a large margin and for all intent and purpose had not figured out why. I was left shaking my head through the explanations as I really can’t imagine how much time, money and energy will be wasted trying to reconcile the short-fall.

Finally, the Secretary of FSSA was called in where she answered some questions left over from the last budget meeting regarding the Welfare Eligibilty Modernization debacle. Here are some items that stood out to me with my comments:

There has been a 30% increase in enrollment since 2005 for Welfare programs and an increase of staff of 36%. (Now that is modernization we can believe in. Unfortunately, similar modernization projects in the UK have had the same results. The focus to reduce costs always increases them.)
Training was identified as the problem and a 10-week training program has been implemented, plus a testing program. (One fact I have learned from working with my 95 partners in the UK is that government overspends on training, when training is not the biggest lever for improvement. The design and management of work is our biggest lever for improvement, starting with understanding client demands and designing the system against demand allows for something worthy to be trained on. Further, the High Frequency Value demands are the only ones to be trained on and probably cut training down to a couple weeks once the system is redesigned.)
Doubled the data-gathering effort. (There was no conversation on what data was being gathered or why or for how long. Many governments institutionalize waste this way. Just because we have IT to collect data . . . we do. I can only hope these are measures related to client purpose and measures of failure demand.)
Focus on the client experience, face-to-face contact and improve timeliness of determinations and pre-determinations. (Sounds hopeful, but didn’t get much explanation or detail.)
Move from a task-based system to a case management system. (With great confidence, I can say that a case management system poorly designed can have more problems and costs than a task-based system, but does sound better.)
Specialized team for the Elderly and those with Disabilities. (Is this more scientific management theory and the functional specialization of work? Does this require a different group of workers? I don’t know why the client demands call for this, specialization can be very ineffective.)
On-line applications, ability to check status by phone and paperless case files. (All these items have the potential to add costs and not save them. Checking status by phone is a type of failure demand and we are locking in the costs of a poor work design.)
Working in teams, so if someone is gone they can have someone to follow-up on the case. (If the work design allows for a case to be done timely, why do we need follow-up, hand-offs and other waste? Can’t workers decide for themselves how to handle vacations, illness, etc. with out a command and control dictate to establish teams? Teams are best pulled and not pushed upon workers.)
We had fraud of $1 million from 2002 – 2005 and have a two-tiered system to prevent it. (What really is happening here is developing an inspection regime to hound workers. These systems cost organizations and government many millions to save $1 million. Guaranteed to lock-in waste. Government management thinking and work design is at fault here. We can’t prevent the next financial meltdown through more regulation either as the next one will be different than the last one. But we can waste a lot of money trying.)
22-different contracts currently held by IBM will be turned over to Indiana with a performance matrix with the IT contracts going to the State CIO, operations to someone else, etc. (All I can hope for is that the end-to-end system works for the client, the functional separation of these contracts with performance matrix calls into question the ability to get economies of flow and whether these contracts are filled with targets and incentives that will further sub-optimize the system.)

I was privileged to hear Senator Vaneta Becker outline the problems in Vanderburgh county and how other Indiana folks had stepped up to fill the void at great cost both emotionally and financially (the unseen ones not in the State financials). Two people in her district had died and as she said probably would have died anyway because of the illnesses, but they spent their last days worrying about eligibility and sending emails and faxes.

My Indiana-based company is not IBM, Accenture, Crowe, ACS, Xerox, EDS, etc. but we have a new way of thinking about the design and management of work that can help prevent the experience Senator Becker has had to endure the past 3 years. Let’s hope that FSSA respects Representative Welch’s call to be open to new ideas and approaches. I can only hope.

To learn more about our public sector work go to www.thesystemsthinkingreview.co.uk.

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CCPF Master Mind Group – Muted, but Not Silent

October 22, 2009 Tripp Babbitt Leave a comment

I had a meeting today with the Contact Center Performance Forum (CCPF) Master Mind Group. I had a technical problem where I was not able to be heard. I had some comments that I am putting in this post.

By subject:

Attrition in the Contact Center: There is no such thing as good attrition . . . ever. You paid to train that person for that seat and any turnover is waste. You must hire the right people and keep them there.

To prevent turnover, you need to give them a better job to do. One that is interesting and free from command and control where targets, standardized processes, inspection, monitoring, etc makes the job boring or raises the anxiety level.

The trade-off between costs and good service: There is no trade-off. This is not a zero-sum game where costs increase when we give good service. Here is an exercise for you to illustrate some of my point.

Exercise: Go listen to phone calls and determine the type and frequency of demand in your center. Determine whether the demand is value or failure (demand from a failure to do something or do something right for a customer). You will find failure demand runs between 25 – 75% of all contacts. This is not only an opportunity to increase satisfaction, but reduce costs (fewer calls).

Executives and Contact Centers: Show your executives your failure demand numbers. Two important things happen:

Executives will stop (at least for the moment) looking at cost and productivity measures. Instead they will consider the causes of costs or what causes the failure demand.
They will realize that the contact center is not a profit center, that the center is dependent on the rest of the organization.

This is a different conversation as costs are not in the transactions (scale), they are in the flow, end-to-end from a customer perspective. Designing systems from the outside-in and giving customers good service eliminates failure demand, gives customer service in accordance to what matters to them and reduces costs.

IVRs: Waste, waste and more waste. IVRs (for most applications) do not lower costs as many of the participants alluded to in the conversation. IVRs can not absorb the variety of demand posed from customers. There are things that can and should be done by technology and some things that need to be done by people. Technology can not absorb variety, people can.

First Call Resolution: Can and should be measured. I missed a lot of this conversation, so that is all I have to offer as I don’t know what else was discussed.

I hope this helps someone.

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Indiana Welfare Eligibilty Plan: Questions for FSSA

October 21, 2009 Tripp Babbitt Leave a comment

Indiana State Flag
The Indiana State Budget Committee meets this Friday (October 23, 2009) with the FSSA Secretary in the wake of the cancellation of the IBM contract. The FSSA Secretary will have the opportunity to disclose FSSA’s hybrid plan. As a critic of the way government runs in this country there are certain questions I would like to see answered that I haven’t seen elsewhere.

Most of the focus has been on the ACS contract. The reality is even before the Daniels administration, Indiana state government was highly outsourced. This is nothing new so whether Democrat or Republican outsourcing and/or privatization is not a partisan issue. What I am more concerned with is . . . are we learning about provisioning services to people in our State that provides good service to our neediest families/individuals and lower costs to taxpayers?

The pursuit of service that is good and achieving lower costs is not a zero-sum game as most people seem to think. In fact, government management cannot achieve lower costs without good service. This is a counter-intuitive truth that must be adopted in government at any level.

So, FSSA Secretary here are some questions that would be good for us to know the answers to in Indiana:

Have you personally gotten knowledge about the process that welfare recipients have to go through to get services? Reason for ?: Reports and reporting is not enough. An executive must go to the work to understand the “what and why” of current performance. This cannot be delegated to a contractor or employee of the State. Plans not based on knowledge are just hopes, dreams and conjecture.
What are the High-Frequency interactions that applicants are giving to the State? Reason for ?: If the State understands the demands from applicants they can design a training program for state workers around the high-frequency demands. This also will help prioritizing which demands need to run smoothly.
What is the avoidable interaction percentage of all contacts at the point of transaction? Reason for ?: Meeting the federal requirements is not enough. An important metric for government is to determine how many contacts are failure (the failure to do something or do something right for an applicant). My guess is that this number is between 60-90% of all demands from an applicant or a legislator, special interest group, guardian, etc. on behalf of the applicant.
What are the end-to-end measures derived from applicant purpose? Reason for ?: Spending time getting knowledge allows the State to understand what matters to applicants. A timely response is most likely one of them, how long does it take today and how predictable is that measure. There will be other important measures derived from what matters to applicants. It is important to understand that costs are not from economies of scale, but economies of flow.
Is the State or the State’s vendors using targets and incentives with workers? Reason for ?: Targets become the defacto purpose as workers get focused on the target (usually with incentive) rather than serving the customer (applicant in this case). This typically is a source for failure demand (described above), waste and sub-optimization.

If or when government management begins to understand that improving the design and management of work is the issue, we can move on to saving taxpayers money. I am not talking about a little, but a lot. Our thinking around the design and management of work must transcend politics and be the foundation to improving service and lowering costs.

Being good stewards of the State’s money means constantly uncovering better ways to think about the provisioning of services and even achieving public sector innovation. Unfortunately, the prevailing thinking in US government and business is made up of command and control thinking. We can do better than this.

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Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public). His organization helps service 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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John Ketzenberger – You’re Working on the Wrong Problem!

October 20, 2009 Tripp Babbitt Leave a comment

State Revenue = Taxes lest we forget
I caught John Ketzenberger on the Gerry Dick’s Indiana Business Review this past Sunday (10/18) talking about how to get more revenue for the State of Indiana. I have long admired John’s writing in the Indianapolis Business Journal and The Indianapolis Star. He has an Indiana Conservative bend to him and tries hard to be balanced in his reporting.

With his move to The Indiana Fiscal Policy Institute in September, I was a bit disappointed that the topic was how to tax more services and how we compared to other states in taxing these services. I guess I see things differently, as I believe the burning question is “how do we provision services more cost effectively so as not to have to raise taxes?”

I always struggle with the word “revenue” to replace the word “taxes” when it comes to government. This must be the new reality. Remember when we had money and these things weren’t an issue? Or even the time when we didn’t have to go to other countries to beg for jobs? Those were the days . . . I digress.

I would much rather see the Indiana Fiscal Policy Institute help find ways to help provision services better. The waste is costly whether privatized, outsourced or government run. Other countries are finding ways to provision services less expensively with better thinking about the design and management of work.

This may lead you (John) to find out why they are being so successful and bring new thinking to government through your research. Entrenched government management may not be open to new ideas otherwise. And in these times we could use some new ideas on greater effectiveness in government.

With this approach you won’t have to continually be creative in the new taxation arena, because it will require less (hmmmm) “revenue.” Public sector innovation and working on provisioning services better and with less tax dollars is certainly a more attractive option.

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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 our international government services www.thesystemsthinkingreview.co.uk[email protected]. Reach him on Twitter at www.twitter.com/TriBabbitt or LinkedIn at www.linkedin.com/in/trippbabbitt.

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The Great Government Modernization Caper

October 19, 2009 Tripp Babbitt Leave a comment

Modenization Caper
It’s like a bad movie that seems to get replayed in every city, state, or federal government. It starts with strategic intent and political bravado that turns to a feeling of malaise. That uneasiness that accompanies you when you know things aren’t just right.

For me it has always been that technology just can’t deliver the goods promised. No matter what the industry I have worked in doing consulting work the mantra remains the same. We can automate it, there’s way too much paper or manual processing.

Seems plausible to anyone seeking to modernize the work that is being done. If you are in government management you know that is where the money comes from to modernize via the use of technology. After all, this is what public sector innovation is all about.

Yet, this is the great technology caper. We spend millions to modernize and yet services continue to become more expensive and provide us with worse service. The hype just doesn’t live up to the value.

The issue is not technology in and of itself, but the fact it is not the biggest lever for improvement. The design and management of work is our opportunity. Government management has pieced together a system comprised of front/back offices, redundancy, handoffs, queues, multiple sorts and other bad designs that don’t need to be automated, but redesigned. Technology just locks in the waste if the system isn’t designed well.

But that is not the end of the story as just redesigning systems isn’t enough. We must rethink the management of the work and the way we increase complexity to inspect in quality rather than fix the problem or put in targets that create sub-optimization and waste. It doesn’t stop there either . . . mandates, legislation and other mis-guided efforts have led to a financial infrastructure that our US tax base is unwilling to continue to bear the weight.

The great modernization caper has to include a willing participant or at least an ignorant one. As grasping at straw men like shared services, automation and outsourcing is certainly better than doing nothing (which it is not). Attractive ideas that really have no way of helping.

As we enter this age of provisioning services with less and less “revenue” from the taxpayer base. We are in need of better thinking about how these services are delivered. Let’s just not get carried away with the technology.

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Indiana Welfare Eligibility – The Thinking is the Problem

October 16, 2009 Tripp Babbitt Leave a comment

Indiana State Government
An interesting week in Indiana. Governor Daniels canceled the Indiana Welfare Eligibility contract with IBM. I have to say it took guts to do that as the political fallout already has his enemies seeking his political head. This is unfortunate as I would much rather have a leader that admits when there is a problem than one that keeps their head buried in the ground.

The problem now is that the eligibility system is still a mess. It was before and still is. A group comprised of Representatives of United Senior Action, Hoosiers First, The Generations Project, Indiana Alliance for Retired Americans and other groups is calling to restore a “personal touch” and legislation to rebuild the eligibility system.

Further, FSSA is putting together a detailed plan for a hybrid system that includes:

Client Choice of access into the system
Face-to-face contact in county offices
Case management in county offices
Paperless case files
Fraud prevention
Consistent determination of benefits

All of these ideas (personal touch, legislation, and the items listed above) seem plausible, the problem is so did modernization. We are left with a fundamental thinking problem that is not unique to Indiana. The focus to reduce costs and improve productivity is the problem.

This “economies of scale” thinking has been perpetuated over time into our belief systems. The problem is that it is a fallacy. Costs are in the flow, end-to-end from a customer perspective (economies of flow). A counter-intuitive truth that if followed will give Indiana cost savings beyond what IBM had hoped for using technology (as proven in the UK and other countries).

The management paradox is that when we focus on reducing costs, we increase costs.

Why?

All of these good folks, the Governor, Indiana legislature, special interest groups and FSSA have lots of information about the program from reports and anecdotal evidence. But they lack knowledge of the system as a system. Government management requires knowledge.

In order to determine what the next steps should be there should be an effort to get knowledge. This means performing “check” in my world or understanding the “what and why” of current performance. Additionally, the decision makers need to go to the work and this must precede any projects, deliverables, timescales and milestones.

Performing “check” means getting knowledge so that they don’t make assumptions other than knowing that they don’t know what the performance is. A pre-determined outcome with corresponding plan spells trouble as prescribing improvement this way will drive up costs . . . guaranteed.

What is the purpose? What is the purpose of the service from the welfare recipient’s perspective.
What are the type and frequencies of demand? This requires decision-makers to go to the work where the agency transactions occur. Here they can understand: why they call, what they want, what would create value for them, what matters to them? They must understand the major types of value and failure demand and their predictability. To design for the unpredictable is costly. You stand to entrap the workers delivering the service with technology if this is not understood (raising costs). Understanding demand will also shorten the training cycle for workers as you train for only predictable (high frequency) demands.
How well does the system respond to demand? You will discover the measures that matter are end-to-end from the customer perspective and NOT the ones currently used.
Study the flow. Demand will tell you what to flow and measures related to purpose will tell you what the priorities are to flow activities.
Understand the systems conditions. All the waste and sub-optimization is man-made. The result of poor work design, structure, contracts, roles, technology, measures, etc. Failure to remove the system conditions will lead to improvements that are unsustainable.
Management thinking. Understanding the “what and why” of current performance draws the decision-makers in as this means that they must change too. The actions they take can create more or less waste depending on their degree of knowledge.

Warnings:
Legislation can lead to entrapping the system worse than technology and should be avoided. Systems change over time and to undo legislation is virtually impossible. Variety of demand can not be absorbed by either technology or legislation.

Going back to the old way or planning without knowledge (as outlined here) can lead to missed opportunities or additional waste.

I am hopeful that other government agencies trying to improve their services will see the value in the approach. This thinking transcends all partisan approaches.

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Digging the Financial Hole Deeper – Washington State Shared Services Directive

October 11, 2009 Tripp Babbitt Leave a comment

I had the misfortune of receiving word that Governor Chris Gregoire of Washington State has issued Governor’s directive 09-02. This directive stands to add millions in wasted tax dollars to an already overloaded financial structure in the State of Washington.

The shared services strategy is similar in nature to other misguided attempts to save money in other states, agencies, towns and countries. My 95 partners in the UK have long discovered that such an ill-advised move to shared services leads to higher costs and worse service.

The problem here is that costs always go up when we focus on costs. This is a huge pill to swallow as we have all been taught to manage our organizations from the financials. This is a fallacy . . . a myth if you will.

The State of Washington has taken the bait. I do not know the owner of this document. Listen to the out comes expected:

Drive cost and effort out of line and support services, including IT services
Add value to line and support services
Line staff will have better information or tools to do their job
Leverage existing agency resources, data and processes avoid duplication
Reduce Risk
Reduce time to market
Reduce time for problem resolution

The interesting fact is that all of these will not be achieved and will result in the opposite effect. Before I get into this, let’s look at another bit regarding the ability to “recognize a shared service opportunity.” Here is how you can recognize an opportunity according to the paper:

Standardization is possible
Resources are underutilized
Economies of scale are possible
If an agency has data, a facility, an application or a process that other agencies need or currently duplicate. It could be a candidate for a shared service.

The document outlines items all that need to be challenged to further learning. Let’s look at some of the items that need to be challenged:

Economies of scale – This is mentioned as a primary reason for sharing services. The concept of economies of scale go unchallenged despite evidence that there are better methods and thinking. Costs are not reduced by scale, they are reduced by flow (economies of flow). Economies of scale leads with the belief that by lowering transaction costs we lower total costs. The management paradox is that costs are in the flow, end-to-end from a customer perspective (flow) and to focus on transactions creates sub-optimization and waste (counter to its intent).
Standardization – One major problem in this directive is the focus to standardize. Something good for manufacturing, but not for service. Service offers variety of demand unmatched by manufacturing. Standardization does not allow for the absorption of variety offered by service. And when service variety can not be absorbed, costs go up and service is worse.
Front Office – Back Office Design – Accepted as “best practice” (a fallacy on its own) the front/back office design is staple to areas to share services. The problem isn’t that they are too small (economies of scale), but that the design itself needs to be called into question. The functional separation of work (derived from Frederick Taylor and scientific management theory) front/back office design sends the work to specialists through IT to get worked. Many times I have found that this design is unwarranted and only a front office is needed, something that a shared service strategy misses.
Information Technology – Most shared service concepts are introduced by IT. As IT is needed to move things from front to back office. IT needs standardization to code software as variety of demand is so great in service to code for the great variety of customer demand is an expensive proposition. I have found that IT only locks in the waste and manifests itself in failure demand (demand caused by the failure to do something or do something right for a customer). Government management would see an increase of failure demand as a result in sharing services with a cost focus. In US government, I have found failure demand to run 40 – 90% of all demand. Other costs in flow disruption are commonly found.

I have found a better way, before sharing services we need to start by understanding current performance. More specifically, the “what and why” of current performance. This begins with studying customer demand, understanding how well the service is currently being delivered, and identifying wastes and its causes. Next, is to improve the service where it is delivered while teaching managers about service re-design to avoid assumptions around shared services.

The final step is then to decide whether sharing services or IT makes sense. We can pull the concepts in . . . rather pushing them through directives from the Governor. Acceptance is immediate as change is emergent as decisions are made with the work. Costs fall as service and flow improve and failure demand is eliminated.

We are in desperate need of better thinking to have the public sector provision services cost effectively. I can only hope that Governor Gregoire will see and rethink her shared services strategy directive.

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Anyone wanting to learn more about shared services and a better way can contact me at (317)849-8670 or at [email protected]. I have papers, books and other information to help in a better way to think about shared services or to make the work work.

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Shared Services Faces a One-Man Attack in New Jersey’s Brick Township

October 9, 2009 Tripp Babbitt Leave a comment

Joe the Lion
To many “Joe the Plumber” is their hero. For me it is Joe Lamb of Brick Township in New Jersey. Joe “the Lion” Lamb (hey, I can have nicknames for my heroes too) is challenging shared services in his township and more . . . he is challenging the conventional wisdom that it is the right thing to do.

I was forwarded a link to the Brick Township Bulletin titled “Shared services revenue easy to follow, reader says.” The reader along with the Mayor and Business Administrator deem it bizarre that “Joe the Lion” would challenge such savings that anyone can see.

The Business Administrator walked the reader through the almost $300,000 in “savings” from shared services. The problem here is that the “visible” figures in which governments are managed don’t represent the true costs as they are end-to-end and in the flow. It may very well be that the shared services strategy has increased costs when we look at the end-to-end costs.

And “Joe the Lion” was asked if he was familiar with municipal accounting practices or budget law. “Joe the Lion” responded “no” to each during a council meeting. The writer challenges that a township certainly doesn’t want to elect such an official. I would submit “Joe the Lion” is probably the best candidate because he doesn’t understand these things.

“Joe the Lion” may understand that efficiency doesn’t necessarily make you effective. More importantly, that shared services done without an understanding of customer demand and service flow will indeed increase costs. But cash-strapped governments searching for savings wind up increasing costs with shared services. In a management paradox . . . to focus on costs increases them.

Moving work to a central (shared) location removes the continuity of the flow, creates waste (hand-offs, rework, duplication), lengthens the time to deliver the service and creates failure demand (demand caused by a failure to do something or do something right for a customer).

The financials will show savings (lower costs) while the failure costs will be on another budget. It won’t be long before managers deprived of local support will find ways to recreate it. Thus increasing the costs even more.

For governments big and small looking at shared services, consider these dos and don’ts and consider economies of flow (not scale). These offer larger opportunities for improvement than management by the numbers.

For the reader/writer your final question, “Can the taxpayers afford to have council members and mayors who don’t know about municipal budgets?” The answer is a resounding . . . YES!!!! And “Joe the Lion” may just be “Joe the Fox” . . . Hmm.

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Monthly Archives: October 2009

The Waste of Activity-Based Costing (ABC) in the Service Sector

Indiana State Budget Committee, FSSA and Welfare Eligibilty Modernization

CCPF Master Mind Group – Muted, but Not Silent

Indiana Welfare Eligibilty Plan: Questions for FSSA

John Ketzenberger – You’re Working on the Wrong Problem!

The Great Government Modernization Caper

Digging the Financial Hole Deeper – Washington State Shared Services Directive

Shared Services Faces a One-Man Attack in New Jersey’s Brick Township

The 95 Method