5 Fundamental Thinking Problems in Service Businesses

Wednesday, March 4, 2009 by Tripp Babbitt

Like most service organizations, command and control thinking is the dominate paradigm in which we build and manage organizations in the public and private sectors.  We really have not been taught a better way of thinking for over 100 years (scientific management theory).  Our technology world has grown while our thinking has remained stagnant. In Systems Thinking in the Public Sector, John Seddon (Managing Director of Vanguard Consulting Ltd. – my partners in the UK) points to 5 important fundamental flaws in command and control thinking.  Let’s look at them:

(1)  Treating all demand as though it is work.

We are constantly trying to reduce talk time in call centers, process an item faster, etc. and this thinking has the fundamental flaw of treating work  as units of production.  We fail to separate the value work from the failure work (value work gone wrong) and therefore happily process the failure with the value demands.  The reality is that this failure demand makes up 25 to 75% of all demand from customers, in the public sector I have seen unspeakable levels approaching 90%.  Mr. Seddon’s fear is that people will understand failure demand and set new targets for its elimination, instead of changing the way work is designed and managed to eliminate it.

(2)  Failure Demand – leverage for improvement

Our response to failure demand is even more alarming instead of its elimination we wind up adding (at great cost) call centers to handle it, IT systems to manage it, share services and outsource to cut unit costs thus institutionalizing the waste. 

(3)  The foolishness of managing activity

I am yet to walk into a call center without seeing individual and department statistics kept for number of calls, talk time, AHT, etc.  For individuals, managers spend their time paying attention to these activity statistics, monitoring workers and doing "coaching sessions" with those that miss their targets.  W. Edwards Deming taught us that 95% of the problems are systemic and the responsibility of management to fix and only 5% are attributable to the individual.  The performance of the individual is the center of ire and performance to the command and control thinker.  Their "proof" is when they see cheating that more controls are needed creating more waste.  The focus on people’s activity is not the source of errors, it is the way work is designed and managed.

(4)  Preventing the system from absorbing variety

One must credit John Seddon for this discovery.  Modern day "lean" practitioners advocate standard work like "lean" manufacturing, this is a bad application for service industry.  There are differences between service and manufacturing, a primary one being the variety of demand service industry receives.  Most business improvement efforts focus on too narrow a focus (department) when the customers expectations are end-to-end.  Government is overwhelmed with waste because of the inability to absorb this variety of demand. Government management has institutionalized this waste with information technology, best practices, work design, poor measures and the use of targets.

(5)  Negative assumptions about people

How many times have I heard service executives say "we can’t let the patients run the asylum" or "workers would just give away our service."  I’m sorry, but you built the asylum based on command and control principles that allow the workers to check their brain at the door.  Morale is sapped in these cultures and "fun" day at work is like being treated like a 3rd grader.  A little MacGregor Theory Y (trust of workers) intrinsic motivation would go a long way in improving service. These same front-line workers are the perception customers have of your organization and represent your only chance to absorb the variety of demand customers present.  Managing with more controls will only add more costs and institutionalize waste.

These are good management problems for any service industry to work on in improving their system.  If you want leadership change management or organizational change management this is a great place to start.  Systems thinking truly begins with changing thinking.

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