Bryce Harrison : Systems thinking for service organizations

12/27/2008
Fit for the Future – Part 4

Step 4: Think flow

To summarize the arguments of the first three steps: The major disease of modern organizations is in their design and management. If we want to achieve a quantum leap in performance, we have to be prepared to change the way we think.

In Step 1, Be prepared to change the way you think, I exposed the problems associated with designing and managing organizations as top-down functional hierarchies.

In Step 2, Think outside-in, we began to look at the organization in a better way, from the outside-in.

In Step 3, Think capabilities, we looked at the idea of organizational capability – what is predictable about what is happening between you and your customers? If you conducted the exercises as suggested you will have a diagram of the transactions with your customers and at each point of transaction, reliable data about what is currently happening. We will take this further, as we now move from the ‘what’ to the ‘why’.

Change management thinking
*From..*	*To..*
Top-down	Outside-in
Functional measures	Capability measures
Function and procedures	Value and flow

Figure 1

Flow tells you why

Capability tells you the ‘what’ of performance; flow tells you the ‘why’. Many organizations claim to be working on their processes or flows, but the question I always find myself asking is how have they decided their focus? In many cases I find people simply re-defining their functions as processes, resulting in improvement work that doesn’t improve very much, if anything. If you have completed the previous exercises you will be in the most effective starting place for defining your processes.

Your core processes are defined by the transactions with your customers – how the work flows end-to-end to deliver your current capability. Any other process is a support process – it should be supporting what is done in the core processes.

In most organizations there are a plethora of functions – Human Resources, Finance, Information Technology and so on whose only purpose should be to help the core processes work better. Their contribution should be measured that way – a challenge to some. Often the policies adopted by these functions (for they are seen as functions rather than processes), interfere with the flow of work. We return to this issue in system conditions, Step 5 – Think System.

Define your core processes

The next activity is to define your core processes. In order to help you avoid the pitfall of taking internal, functional perspective, remember:

· The focal point for a systems view is always the customer – outside-in.

· The process must be viewed from end to end – from the point that the customer makes the demand to the point where the customer’s need is fully met.

Activity

Step 1: Take out your diagram of transactions between you and your customers (from Step 2 – Think outside-in). Do these adequately define your core processes? Did you establish capability measures for each in Step 3 – Think capabilities?

If you did the exercise in Step 2 – a diagram of transactions between you and your customers – you will have defined your core processes.

If you did the exercise in Step 3 – measuring capability – you will have measures of your core processes performance. This is of critical importance. If you don’t have measures of your process before you study it, how will you know whether it is worth improving, and how can you judge any improvement? If you haven’t completed this step, my advice is: return to Step 3.

Step 2: Studying your process flows – learning about the ‘why’

In this step we will study the process flows. Why? Because better flow will result in lower costs and improved service – always.

Step 3: Walking the flow

From your map of core processes, choose one that has a high volume of customer demand. Metaphorically ‘pin one to your chest’ – take a customer demand and follow its every move through the organization. As you travel, look for the following causes of sub-optimization:

Activity

Step 1: Walk your flow. Keep in mind the following questions:

· What is the purpose from the customers’ point of view?

· What is the ‘value’ work – what matters to the customers?

· What are the steps in the flow?

And as you go, list all forms of sub-optimization you find. Look for:

Sub-optimization types

Defined

Response failure

The customer doesn’t get what he or she needs.

· How often are customers’ needs met at the first point of transaction?

Are there delays in getting a response?

Re-work

This is easy to measure in manufacturing – how many parts or assemblies do not work and have to be re-made or scrapped.

Similar examples occur in service industries.

· How often is a piece of paper or a phone call ready for action versus needing to be completed, re-done or checked before the action can be carried out?

How often does the work not meet the customers’ needs and the customers call back asking for it to be replaced, re-worked or added to?

Duplication

Different departments doing the same work, resulting in it being done more than once.

Another type is caused by customer confusion. The customer calls one part of the organization with a problem and because of an unclear or unhelpful response calls another part with the same problem.

Sorting/re-routing

Work being sorted or passed on with no ‘value’ work being carried out. Sorting is often the work of supervisors whose task is to decide who should be allocated what. It may seem plausible but it is wasteful.

Internal requirements

Work carried out to meet requirements set by other departments or management, but which adds no value to the customer. Some of this may be unavoidable in the short term but must be viewed as something to be ‘designed out’.
[A particularly harmful form of waste is ‘compliance with procedures’. Managers, having specified what people should do – procedures – then inspect for compliance. The outcome is that people often do work because the procedure requires it rather than because the customer requires it.]

Inspection/double checking/authority levels

Checking work is pure waste. With more inspection . . . you get more errors. Similarly, authority levels typically cause delays and errors in the work-flow.

Delays

A useful method for analyzing flow is to measure the ‘end to end’ time – how long does it take to meet a customer demand – and compare it with the amount of time the ‘value work’ takes.

Bottlenecks

These are usually easy to see as things are piling up. It is important to understand where bottlenecks exist as they will dictate the capability of the process.

‘Black holes’

Work getting lost in a department where no value is being added, for example, authorizations, financial or quality ‘controls’. The true waste here is not just the delay but the removal of responsibility for good work from the operators.

Batching and Queuing

The consequences have much in common with those of bottlenecks. Creating inventory can be seen as an example of batching and queuing.

Filtering

One of the more subtle but dangerous examples of waste being designed into flow is filtering work – getting ‘cheaper’ labor to do things at the front end of a flow to avoid ‘wasting’ more expensive resources. It is often described as the ‘dumbing down’ of work. Actually it shows how ‘dumb’ productivity thinking can be. No value work is done and often it makes it harder to do the value work later in the flow.

What do you do now?

If you have completed this exercise and found lots of examples of sub-optimization you will feel compelled to act to remove them. The object of your work will be to change your flows to only do the value work – as a consequence your costs will fall and your service will improve. But a word of caution: The sub-optimization of your current flows exists because of what I like to call ‘system conditions’, for example

· the design of work,

· the types of measures and

· control in use and so on.

To get to and remove these causes, you have to understand the relationship between system conditions and performance. So that will be the next step in this series.

Articles were written by John Seddon (Managing Director) and Vanguard Consulting Ltd. He is an occupational psychologist, author and consultant. John describes his work as a combination of systems thinking – how the work works, with intervention theory – how to change it. This article has been edited by the people of Bryce Harrison Inc. (USA). The Bryce Harrison website is www.newsystemsthinking.com.

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