BofA, Jackie Ramos and Customer Purpose

Wednesday, December 9, 2009 by Tripp Babbitt
OK corporate America get ready for more of this as I suggested in my blog post The End of Buyer Beware.  Jackie Ramos, a former BofA employee is speaking out about the business practices of said bank (listen here).  I’ve listened to this video several times now and the mood of the nation favors her compassion over the "evil" business world.

Ms. Ramos was a customer advocate for BofA.  Her job was collections and she was told to do three things:
  1. Think of yourself as the customer,
  2. Do the right thing for the customer, and
  3. Do the right thing for the company.

She apparently did less of #3 and was fired for it.  Her crime was refunding fees and putting people that weren’t qualified for a "fix pay" (accommodating payment plan rather than 29.99% interest).

Jackie isn’t the first person to be fired for doing what she felt was right and certainly won’t be the last

I am not here to debate the responsibility of debt (things like people should pay off their loans or who gave these people the loans in the first place) or even what corporations made bad decisions that started this financial mess.  And, I am sure there are many others including our lawmakers.  There is plenty of blame to go around.

My focus is on customer purpose.  Doing right by the customer always costs less.  Yet our organizations are built around business cost reductions and costs.  Few look to the causes of costs.

In the above BofA/Jackie Ramos scenario who is in a position to do what is right for the customer (in my world called who has knowledge).  Ms. Ramos outlines in detail some cases she had worked – a cancer patient and legally blind lady to name a couple.  These cases did not meet the criteria of getting relief based on policies (most likely) developed based on costs and not knowledge of the work.

What is the purpose of not working with a customer to help them.  The job of any collections department devoid of helping customers finding ways to make payments is to miss an opportunity.  The result of bankruptcy most likely ends in no payments to the bank, never mind the fallout of an angry customer or disenchanted employee.

The belief that helping customers costs money is one founded in the zero-sum mentality that there is a trade-off between costs and good service.  This is a fallacy.  Many times executives don’t see the costs of poor service until they get into the work and see for themselves the damage of bad policies and other cost-control decisions.

My business is to help organizations design their systems against customer demand.  This approach is powerful as the purpose of the work is not to submit to a policy or specification, but to serve the customer in the context of their demand.

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

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.


 


Banking – 5 Ways to Make Your Operations Profitable

Tuesday, November 10, 2009 by Tripp Babbitt

The banking industry has been through nothing short of hard times lately.  Many banks are in varying degrees of distress or will be.  So, what can banks do to help their cause.

Having worked with banks for almost 10 years performing bank management consulting, I see many opportunities to improve service and reduce costs.  Here are some ideas that may help.

(1)  Functional Design. 

Every bank I have ever been has designed the work Frederick Taylor style (scientific management theory) separating the duties into specialties.  This has created the well-known front office and back office environment.  Many times this design has been locked in by technology that inhibits the flow of service and creates waste. 

(2)  Separating the Decision Making from the Work.

Banks are built on command and control thinking with the workers working and the managers managing this presents a missed opportunity.  Most bankers in management have "done the work of a teller" at one point in their career.  But things change and with out a thorough understanding of the work as it is done today, wrong or poor decisions are made.  Banking management needs to be on a constant vigil to understand the work and not abdicate decision-making to reports, vendors or anecdotal evidence.

(3)  Understanding Customer Purpose and Demand.

When I visited a bank, most executives and managers thought it was bizarre that I would want to start at the front-line.  The points of transaction for customers is where improving banking systems begins.  Understanding the what and why of current performance naturally leads us to where the customer touches the bank.  Contact centers, tellers, and loan officers offer a good opportunity to easily understand how well a bank is performing in the eyes of the customers.  Understanding "what matters" to customers and the types of demands presented can be a profound education.

(4)  Technology and Automation. 

When you combine making decisions about the work without knowledge, poor work design and technology you get huge amounts of waste in banking.  The use of technology and automation is over-prescribed in banks at great cost.  Technology folks and IT vendors running around looking for ways to use technology without questioning the design or understanding the demand.

(5)  Best practices, Copying, and Standardization.

All of these lead to increase costs and worse service.  The inability for standardization to absorb variety leads to failure demand demand caused by a failure to do something or do something right for a customer).   When workers find the need to standardize they can pull it in, forced standardization is never a good idea.  Copying and best practices (a form of copying) lead to much waste as all banks are different by culture, management, work design, structure, customers, etc. to copy is to miss opportunity for innovation and new methods.

Any bank looking to improve service and reduce costs should find plenty of ideas with each and all of these.

Some sample results are:

Measure

Before

After

Bank servicing

Failure Demand – 60%

First Call Resolution – 30%

Failure Demand – 10%

FCR – 92%

CD

Retention – 20%

Retention – 42%

Mortgages

Conversion – 21%

Conversion – 95% (and the 5% were ones the bank didn’t want)

Card Servicing

Failure Demand – 54%

FCR – 24%

Failure Demand – 18%

FCR – 86%


These results are from a bank management consulting engagement that resulted in a 20% reduction in expenses in one year.  You may be getting these results, if not, you may want to learn more about the Vanguard Method.

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

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.

 


The End of Planning for a Change

Monday, October 5, 2009 by Tripp Babbitt

Planning
By now, some plans for 2010 have been made.  Or may be in the throes of debate, conjecture or finalization. It has become a staple for service organizations to plan, and execute to the plan with milestones, schedules, cost-benefit analysis and deliverables.

Would it be so bizarre to skip this step?  How much time is eaten up by this exercise?  Does it bare fruit?  I say it is a wasteful endeavor, but so do the likes of John Seddon and Mary Poppendieck.

We would be much better off without the command and control, top-down style of management that planning promotes.  The plans are almost always made without knowledge of the work they are planning.  Conversations in planning meetings usually surround budgets and revenue is fore-casted with stretch goals and worse-case scenarios based on nothing more than a guess or BHAGS (Big Hairy Audacious Goals).  What a crock!

A return to sanity for those looking to get ahead of the behemoth service organizations that usually adopt this type of planning.  How about getting knowledge and taking action based on that knowledge for a change?  I have found this to be a better process for those wanting to achieve corporate cost reductions.

This planning change leads to decisions made based-on knowledge rather than opinion.  Executives and managers going to the work to understand customer demands on their service organization.  With this knowledge the service organization will develop measures related to customer purpose different than the top-down, financial-driven measures usually accumulated.

Armed with knowledge of customer purpose, demand and measures, a service organization can gain innovation leadership and new insights to improve value.  Increased value drives more business in from customers with less marketing and less expense.  The management paradox being that eliminating planning reduces all the expense associated with it (and that is quite a lot).

Things are changing rapidly in this economy and those left with old mindsets will be gone in a few years.  New thinking is upon us to bring more value for customers, profit and competitiveness.  Are you ready to change the way you plan?

Leave me a comment. . . what do you think?!  Click on comments below.

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.



 


Innovation without Technology

Thursday, October 1, 2009 by Tripp Babbitt


Let me take you back to a simpler time when people helped people.  I’m not talking about Little House on the Prairie times, but probably late-70s and early 80s where computers began to dominate the scene.  Since this time our fascination and zombie-like attitude toward information technology (IT) has continued . . . at great cost.

A combination of media, business and government  with unbridled exuberance has done nothing to . . . well, keep things in perspective.  When improvement is needed we turn to technology.  Innovation leadership can not be achieved without IT, correct?  Wrong, and not just wrong but costly wrong.

In our collective psyche we have managed to place IT on such a pedestal it has become a dominate industry, more so than the industries to which they serve.  But in a management paradox, IT has failed to deliver in many cases.  And I am not just talking about missed schedules and cost over-runs.

The problem is that in our rush to go paperless (never happened) and automate (not always a good idea), we lost track of the ability to design and manage work optimally.  The current thinking of outsourcing, shared services, business analytics, Business Process Management, IVRs would never have been possible without Information Technology.  But one question never seems to get asked, "Since IT can, should it?"

I have to say a resounding NO is in order.  In fact, I would submit to you that larger gains in innovation can be achieved through better thinking around the design and management of work and pulling IT into the work as needed is more in order.  Then maybe, just maybe we can learn that cost reduction and business improvement can come from better thinking and not IT.

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

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.




 

Target Obsession Disorder (TOD)

Friday, September 25, 2009 by Tripp Babbitt

Worse than the outbreak of H1N1, Target  Obsession Disorder (TOD) has been around a lot longer.  There really is no cure for this disease, save one . . . stop doing it.  The sad part is most don’t recognize TOD as a disease.

Where did it begin.  In a public company probably the boardroom.  In a private company or public sector it began with the budget, filtering down the numbers by function (sales, operations, etc) and then monitoring the numbers in executive or functional meetings with performance against plan.  Riches for those that make the numbers or unwanted attention (or worse) to those that don’t.

So, managers and workers alike are given targets and the discussion at most companies surrounds "making their numbers."  "Hey, Tony . . . what’s it gonna take this year to make the numbers?"  Tony (in response) "cheat, well not cheating we will just manipulate the numbers. You know, early revenue recognition, shift some costs around, RIF . . . we’ll hit those numbers." 

All this ingenuity to hit a target can be repurposed to understanding the work as it is delivered from and to the customer.  Finding better ways to make the work work reaps enormous gains for service companies not preoccupied with targets.

For service organizations wallowing in the mediocrity of Target Obsession Disorder and the control it brings.  There is a cure that will result in business improvement and business cost reduction.  It is to realize greater control and cost reduction can be achieved through flow than targets, function or activity.

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

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.

Cost Reduction Idea: Costs are Not in Transactions . . . They are in the Flow

Thursday, September 24, 2009 by Tripp Babbitt

One thing you can plan on is when a bad idea catches fire, it is hard to stop.  Outsourcing vendors, public sector consultants, private sector consultants, cost accountants, CPAs, MBAs, CEOs, CFOs, etc. etc. all want to reduce transaction costs.

 I am yet to see any company when we really look at the financials and other customer data gain business cost reduction by focusing on reducing  transaction costs. Total costs always rise . . . eventually.  Why, public sector and private service organizations don’t understand that cost are in the flow not the (transactions) activity.

The counter intuitive truth and management paradox is that focusing on costs always increases them.  My other posts have shown why standardization, scripts and best practices don’t allow the absorption of variety that customers give service organizations.  The number of transaction increases in the form of failure demand (demand caused by the failure to do something or do something right for the customer) increases and the system works against itself to increase costs.

So ill-advised managers march off to lower transaction costs by using outsourcing, shared services, reduced service levels, etc. so they can avoid increasing transaction costs and all these decisions lead to more transactions and more costs.  They are missing the great lever for improvement.

The great lever for improvement is flow.  Flow is improved by designing our service systems against customer demand, end-to-end from their perspective.  When customers get what they want, costs fall because the flow satisfies customer demand.  The counter-intuitive truth here is that when good service from well-designed work happens, costs fall.

The management paradox is that the design of work in almost every service organization inhibits the flow and the measures have nothing to to with customer demands, end-to-end from their perspective.  The opportunity to improve is huge, not 5-10%, but 40-80% or more.  The only question now is are you ready to deal with it?

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

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.

The Great Customer Barrier – The Interactive Voice Response System (IVR)

Wednesday, September 23, 2009 by Tripp Babbitt

Frustrated CustomerI have posted many times on this subject, yet as companies find ways to "save money" they turn to technology that increase costs, makes customers shake their heads and take actions that make companies more unprofitable and less competitive.  Really, enough with the snake-oil and one of the worse technologies ever invented . . . the IVR.

But everybody has one (whining).  Sorry, time to fess up, pay the piper and get real.  Customers hated them when they first came out and hate them today.

A better customer management process does not have to include the IVR system.  I know everyone has one, but really.  You don’t need one and it does not save you money.  It is nothing more than a poor sorting process in the best cases and chases away customers in the worst cases.

Contact center executives continue to believe  that that separating the calls to specialists is a good idea so that customers get the right answers, but getting to that specialist is a journey through hell for the customer. IVRs (as with all technology) has to standardize things in the menu options.  What is not realized is that customers may have a variety of problems and I have to talk to several different specialists as a customer.  This is wasteful for both customer and service organization.

I have a better solution.  Service organizations should study customer demand and purpose from the customer perspective.  Derive customer measures from this purpose and redesign the system to accommodate variety of demand offered by customers.  While you are doing this at least offer the customer an option to talk to a human.  Humans a better able to absorb variety offered in service.

Redesigning against customer demand will help achieve corporate cost reduction and business improvement.  The management paradox here is that as service improves, costs will fall.  Happy customers are less expensive to take care of and when you do take care of them they will come back for more.

Leave me a comment. . . What’s your opinion?!  Click on comments below.

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.

 

Give’em a Better Job to Do

Tuesday, September 8, 2009 by Tripp Babbitt

Cooperation and Coordination?OK, Labor Day and I’m looking for a picture of istock.com that depicts the cooperation between workers and management . . . none found.  Maybe I shouldn’t be surprised by the absence of such a picture.  The management and the work have been separated for far too long . . . one of the reasons we have too many chiefs and not enough indians.  You can either be counted as a manager that does something (command, control, edicts, policies, rules, etc.) to someone or be the someone and most people don’t like to be the someone.  Because the someone gets coaching, appraisals, targets, carrots, sticks and when things really get bad blamed or reduced.  If that isn’t enough, management gives the someone tools and technology that make the work harder.  By the way, I am not talking about your company . . . I’m talking about the other company.  Like Congress, it’s not MY representative it’s the other ones.

The problem with this in service is the culture and bad culture is expensive to maintain.  Think about if you aren’t having to inspect and monitor everything because of incentives, policies, compliance, etc., you have to inspect and monitor because of distrust.  Inspection and monitoring is expensive and adds to costs.  Firing is expensive because we have to hire another worker and train them and who knows the next someone may be worse than the someone you just had.

My modest proposal is to give the worker a better job to do.  When workers understand the purpose of the work is to serve customers and not targets and incentives, new measures emerge and these measures are relevant to the customer.  A far cry from the traditional measures given to them top-down with targets and incentives.  New measures and understanding of purpose give way to liberating method where the work becomes more interesting (as opposed to the prescribed method of telling what to do) and innovation follows.  This method leads to business improvement and corporate cost reductions (structure costs less to support) accompanied by improved culture.  Then maybe . . . just maybe we can find a picture of management and worker happily together at istock.com.

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

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.

Economies of Flow Defined for Service

Tuesday, September 8, 2009 by Tripp Babbitt

Have you ever called customer service and wondered why it took so long to get an answer?  Most people blame the representative that they are talking to at the other end of the line.  "Stupid people, they just don’t train them very well" or "This company must hire the dumbest people" is usually the conclusion.

Tripp BabbittWhat if I were to tell you . . . it is not the representative’s fault?  Indulge me for a moment.

Some time ago, I came across the term "economies of flow" when reading John Seddon’s Freedom from Command and Control.  He was describing the important work of Taiichi Ohno in manufacturing.  For those not familiar, Taiichi Ohno is one that uncovered some counter-intuitive truths at Toyota. 

In order to compete in the automotive industry, Mr. Ohno had a problem.  He didn’t have the same number of press machines that the Americans had . . .  in fact, he had only one machine.  This wasn’t the only problem Mr. Ohno had, the other problem was the variety of demand in styles and options in automobiles.  In those days, to handle the variety, Ohno was faced with change-overs to different styles and options of about 10 days. 

Out of necessity (one machine), he worked to reduce waste in the changeover process reducing the time to 10 minutes.  A counter-intuitive moment occurred . . . smaller batch sizes actually reduced costs, because problems were caught earlier with smaller batches and less inventory was required.  He had reduced the time between the order and completion of the product.

In service, John Seddon discovered that variety was even greater.  He realized that the ability to handle variety was key to improving service and reducing costs.  Further, what he discovered was that "people are good at handling variety and computers are not."  This meant that in service the need for fewer computer applications and systems (in a management paradox) leads to more control and ability to absorb variety with people – reducing costs AND improving service.

I know what you are thinking . . . NO WAY! Everyone is investing in technology to reduce costs and improve service.  BPM, IVR and a host of other existing and emerging technologies are being sold as the panacea or cure-all for the next service problem. What we have found is that computer systems (for the most part) prevent the absorption in the variety of demand.  Partly because of the things that precede IT applications like best practices, scripts, written procedures, etc. that wind up entrapping the service worker and not allowing them to handle the variety offered.

Does this mean the end of IT?  No, it doesn’t mean the end of IT.  IT needs to be movedEntrapping Technology back to the supporting role it once had, up until IT vendors started selling solutions with out understanding the problem . . . and the problem is variety of demand.  The work and the people who understand the work need to "pull" technology as needed to enable the work that needs to be done.  Something all service organizations need to improve to achieve corporate cost reductions that last.

What we have is an important business cost reduction method that if leveraged will bring about a change in thinking that can start an organization down a path to reducing expenses and improving service by the ability to absorb variety.

Where does my organization start?  How can I quantify the inability to absorb variety? When a service organization (private or public sector) can not absorb variety the fallout includes (but not limited to) failure demand.  Failure demand comes from the failure to do something or do something right for a customer.  Things like missing an appointment, chasing progress on an order, etc.  I have found this number ranges between 25% and 75% of all contacts from a customer for service organizations.  This is an exercise that will bring service organizations to the doorstep of business improvement.

Does your service have failure demand?  Let me know what you find.

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

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.
 


New Thinking About Layoffs and RIFs

Thursday, August 6, 2009 by Tripp Babbitt
OK, I’ll come clean.  It really isn’t "new" thinking.  I got it from The New Economics written by W, Edwards Deming.  In the United States, the dividend is the last thing cut (typically).  We will lay off people before cutting the dividend.  In Japan, the worker is the last to take the hit and rarely do they cut positions.  Consider what Deming outlined in the steps Japanese companies take (from The New Economics):
  1. Cut the dividend.  Maybe cut it out.
  2. Reduce the salaries and bonuses of top management.
  3. Further reduction for top management.
  4. Last of all, the rank and file are asked to help out.  People that do not need to work may take a furlough.  People that can take an early retirement may do so, now.
  5. Finally, if necessary, a cut in pay for those that stay, but no one loses a job.

Wow, quite a difference than the thinking in the US.  First sign of trouble with most US companies and the heads start rolling.  Can this be good for our overall economy or the state of our nation.  All those folks that complain about the inefficiency of the government we keep forcing people to use the government for unemployment checks, food stamps, medicaid, etc.  And by the way, more houses get foreclosed on and lessen our property values.

Toyota continues to stave off layoffs.  Who will be better off when the economy comes back?  The company that laid off a bunch of people and have to rehire and train or the company that hung on to workers?  Seems like a simulation game I played while getting my MBA.

I hear conversations from executives saying that we only laid-off the "dead wood" so this gave us a chance to clean house.  So, in the words of W. Edwards Deming, "Did you hire the wrong people or just kill’em?"  Meaning what part of your system hired the wrong people or is your system so poorly put together that no one could survive it.  Regardless, maybe executives should find a better leadership strategy.  With all the waste I see in organizations maybe a better idea for business cost reduction is finding better ways to manage and design the work.

Leave me a comment. . . I can take it!  Click on comments below.

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.

 

Improving Government in the US

Wednesday, June 24, 2009 by Tripp Babbitt
The application of systems thinking in government is being well-documented by my Vanguard partners and you can witness the improvements yourself by going to www.thesystemsthinkingreview.co.uk.  This is a great resource for local, city, state and federal government.  The debate wages on how big or small government should be, but whatever side you stand on, services still have to be provisioned. And it is in our best interest to provision them with the least amount of cost and improved service.  I have established in previous posts that there is no trade off between good service and costs.  If you improve service costs will go down . . . this is a government management paradox (read: The Zero-Sum Game:A Loser’s Mentality).

The problems with services provisioned by the government are many.  Too much focus on reducing costs, that in another paradox only increases them because we manage by visible costs alone, but it is the invisible costs that can’t be seen (the ones in the flow).  The types of wastes outlined by John Seddon in Systems Thinking in the Public Sector hold true for the US Government:
  1. The costs of people spending time writing specifications.
  2. The costs of inspection.
  3. The costs of preparing for inspections.
  4. The costs of the inspections being wrong.
  5. The costs of demoralization
The functional separation of work conceived by FW Taylor 100 years ago still drives thinking in both the private and public sector.  This thinking along with technology leads to such foolishness as outsourcing that increase costs in the pursuit of transaction cost reduction.  This productivity mindset fails to look at the end-to-end costs (or total costs) by lowering the cost of a function or transaction leading to avoiding opportunities to reduce total demand (because most of it is unwanted or failure demand).  Outsourcing is not possible with technology, so we both outsource waste and lock it in with technology.

Shared services fares no better, the idea is to achieve economies of scale and reduce transaction costs.  The problem is that costs are reduced by economies of flow (not scale).  We typically get the double-whammy of shared services and outsourcing where we are allowing our government to contract out our waste and add to it in many cases.  Most of the waste in shared services is because government management has separated the work into front office-back office or skilled – simple (functional or transactional).  A better way is to design against demand where the variety produced by service can be absorbed.

Another waste is targets set in government.  Targets become the defacto purpose of government agencies, creating measures that sub-optimize by focusing on compliance and provide poor service by restricting method.  The purpose should be to provision services against customer demand, finding measures that matter to understanding and improving the work, and liberating method.  This liberation of method achieves government innovation by allowing government managers to be responsible and choose what to do free from compliance.

The conversation will continue, and we will need to try new methods to improve the way the US Government provisions services.  Otherwise, new ways are restricted and costs increase in an over-burdened system.

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.

Service Paradox: Managing Costs Increases Them

Monday, June 15, 2009 by Tripp Babbitt
Not one organization I have been in recently has had any other goal than to decrease costs.  If you work in a call center, the question is, "How do I reduce AHT (Average Handle Time) of a call; "How do I reduce my IT costs?"; "How do I make more profit" . . . the age old questions with a greater sense of urgency.  After all, Moses was given the charge (by the Pharaoh) of creating the same tally of bricks with no straw.  Regardless, this is not a new problem.

What is a problem is how organizations approach corporate cost reduction.  The command and control method is to focus on costs and come up with such original (sarcasm for those that don’t know me) ideas as RIFs (Reductions in Force), shared services, outsourcing, and focus on transaction costs seem to be the most popular methods.  I always find pursuing these is a pipe dream based on bad assumptions . . . the bad assumption, is that these methods are good assumptions.

The management paradox is that being pre-occupied with reducing costs doesn’t allow us to see end-to-end or total costs.  The focus on AHT raises costs as we go to make call times shorter, we give incomplete answers, don’t deal with customers problems which in turn creates more customer calls (failure demand in my world).  Companies then further lock these wastes in with technology, scripts, procedures, targets, standards and compliance.  Never mind all the wasteful inspection, auditing, reporting and general "supervision" of these activities.  Frustrated they turn to outsourcing and shared services to reduce costs further locking in failure demand and waste, plus reducing the value received by the customer.

A better way is to realize that the paradox exists.  The benefit of this realization is that you can actually increase customer satisfaction and decrease costs that they are not diametrically opposed to each other that it is not a zero-sum game.  An organization can reduce costs and improve service by a change of thinking from command and control to systems thinking.  The systems thinking approach involves an unlearning and relearning process that opens up new methods in pursuit of profit.  Systems thinking involves the understanding of the relationship between purpose, measures and method.  It eliminates the waste by understanding customer demand, value, and flow.  In service, the improvements are quick because the changes are immediate (weeks vs. months).

New approaches are required by service organizations.  Organizations will need to shed "economies of scale" in favor of "economies of flow" this thinking will allow the small to mid-sized service companies to compete with the big companies, because costs are in the flow . . . not in the transactions.  Service organizations not understanding these paradoxes will be flushing profits down the toilet.

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.

The Humanator: Rise of the Front-Line Worker

Friday, June 12, 2009 by Tripp Babbitt

Anyone ever wonder what happens to that new worker you just hired, so willing to giveThe Humanator their life for their company?  A few weeks pass (maybe months if you are lucky) and the worker you just hired has lost that gung-ho attitude in favor of that dismal attitude of other employees.  Dr. Deming would often be asked in his 4-day seminar about what an organization should do about all the dead wood in their organization.  In which he would reply, "Did you hire the wrong people or just kill’em."  The suggestion for this article is . . . we just kill’em.

Service executives and government management seek ways to "motivate" employees by:

  • playing games
  • coaching sessions
  • setting targets offering rewards and incentives
  • personality studies
  • working in teams
  • performance appraisal
  • individual and team recognition
The problem with these approaches is that 95% of the performance of any organization is attributable to the system, not the individual (only 5%).  So to address the problem that I see in organizations we are mostly working on the wrong things.  The poor work design, entrapping technology, targets and incentives that inhibit service to the customer, management decisions about the work they do not understand, etc. . . . all play roles in creating what we call the system.  This leaves our front-line worker with little opportunity to be accountable or innovative when the decision-making has been separated from the work.

The targets and incentives drive the wrong behavior. Achieving targets and the incentive captures all the focus of the individual’s creativity robbing the organization of potential innovation breakthroughs in service or product.  To achieve the target for the reward or to avoid a "coaching" session usually involves some type of manipulation or cheating on the part of the worker at the expense of serving the customer or exerting energy to innovation or improvement.

Another method to limit the importance of the worker has been through entrapping technology, scripts, policies, procedures, standard work and other efforts to "dumb down the front-line worker."  Kind of reminds me of Geico . . . "so easy a caveman can do it."  All these things in service industry make it almost impossible to absorb the variety of demand that customers offer putting the worker in a state of flux, do I serve the customer or these stupid mandates my management has given me?  Technology is typically brought in by command and control management and thrust upon the worker telling them that it will get better when they get used to it.  The worker continues to be accountable for the work where they have no say in the decision-making.

The question around customer experience is why customers don’t trust brands the same as 10 years ago.  Service has been in a decline for longer than that, the mantra for command The Humanatorand control thinkers is I must cut costs and in a management paradox have increased costs and worsened service to customers.  If a service organization wants to communicate authenticity, energy and trust to customers we must return the front-line worker to the forefront  . . . only they can deliver these things . . . they are the humanator of bad service and increased costs.

How do you unleash the humanator?  We first must understand customer demand and purpose, and measures that matter to the customer.  Employing purpose and measures where the work is done allows the liberation of method by the front-line worker.  Innovation, value and profit from the newly engaged front-line worker is accompanied by corporate cost reductions.  A well-served customer is less expensive to serve than a dissatisfied one.  It is not the zero-sum game of a trade-off between service and costs that command and control thinkers believe it to be . . . good service always costs less.

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.

Lesson: Technology Couldn’t Save GM and Won’t Save Service

Monday, June 1, 2009 by Tripp Babbitt

With all the advancements in US technology shouldn’t GM, Ford and Chrysler just been kicking the daylights out of all the competition? What lessons can we glean from GM, that at one point owned EDS.  GM had all the latest in software and hardware.  I am not here to dispute there were or weren’t other factors at work that caused GM to fail.  But let’s own the fact that the US technology advantage didn’t make a difference here and won’t for service either.

With regards to GM, I have read on more than one occasion how Toyota (the nemesis of the Big 3) actually saw more failures in technology and pulled them out in favor of manual processes (from The Toyota Way by Jeffrery K. Liker).  WOW . . . that’s an eye-opener try selling technology around that philosophy.  Toyota was always behind the Big 3 in technology, because they understood that it wasn’t an advantage and in most cases a waste in resources.

It’s been a long-time since I have worked in manufacturing, which seems to be dying in the US like a dinosaur.  I have learned over the years that in working with service organizations they are in a frenzy to find the latest technology to give them (gulp) . . . a competitive advantage.  It’s like the "fountain of youth" do you really want to spend millions on something that can’t deliver?

Let’s face it . . . IBM, HP and a host of other companies are making tons of money showing lots to their bottom line.  The promise of technology just doesn’t live up to the hype.  They certainly have lots of money for advertising and boondoggles (conventions, advisory board meetings, etc.). They make you feel good, but fall short of making your service organization better.

A better technology change management program is at hand, a systems thinking approach.  Let’s take a page from Toyota and first improve processes without technology or consider technology as a constraint.  Then pull technology if it will enable the work to be performed better.  Service organizations will achieve corporate cost reductions on from not trying to automate work that is better off being done manually.  Something you will not hear from your technology vendor.

Service organizations have an opportunity to learn from both GM and Toyota.  Which would you rather be right now, GM or Toyota?

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.


 


Economies of Scale (Push) vs. Economies of Flow (Pull)

Wednesday, May 13, 2009 by Tripp Babbitt

I remember sitting in my economics class at Hanover College my freshman year and the professor explaining to the class about "economies of scale."  Definition: Reduction in cost per unit  resulting from increased production.  We all know this one: the more produced or purchased the lower the cost.  This is the American way, mass produce in batches for less cost or "economies of scale."  With schedules and targets needed to produce batches, overproduction is common place.  This overproduction requires marketing to sell this excess inventory.

Taiichi Ohno (Toyota) looked at production as a supermarket.  Each time product is pulled of the shelf one is made to replace it.  This gives less inventory, less time, less waste and good service.  A wholly different view that (for the most part) has been rejected by Americans that favor the command and control thinking associated with economies of scale.

John Seddon in Freedom from Command and Control) said it best when comparing the PullAmerican view vs. the Ohno view, "So it comes down to a choice: use marketing to stimulate demand for what we have made, or build relationships with customers to deliver what customers want – push vs. pull."

Systems thinking organizations understand the problems of economies of scale (push) and that a better way is to achieve economies of flow (pull).  But making this change in thinking is not easy . . . it will require a different leadership strategy that requires a change in thinking. 

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  He is focused on exposing the problems of command and control thinking and the termination of bad service through application of new thinking . . . systems thinking.  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.



 

Best Place for a Reality Check: The Call Center

Thursday, May 7, 2009 by Tripp Babbitt
Command and control thinking has to manifest itself somewhere and no where is it more prevalent than the call center.  The call center has the worse set-up.  Let’s look at the typical call center:

  • Productivity charts for team, unit and individual performance (complete with targets)
  • Display monitors with number of calls in the queue (and other worthless information)
  • Coaching sessions for those that don’t "hit the numbers"
  • 4-6 weeks of training on phone calls one will never get
You get the idea.  I have the greatest empathy for folks who work in the call center environment.  I have heard them be called "lazy, stupid, unmotivated" and the like.  But inevitably (as always) those call center workers are the most savvy, innovative and knowledgeable workers in any organization.  Unfortunately, they are rarely tapped as sources of knowledge.  Worse, they sometimes put that savvy and innovation to cheat the system at the expense of the customer.  Command and control thinkers this means that we need more inspection and monitoring (at great cost), but these call center workers are always one step ahead and the game with its accompanying waste continues and escalates. 

Call center management is playing an expensive and losing game when taking a command and control approach.  The call center worker is a tremendous source of information for any organization and if they realized this they would rarely outsource.  Workers can help tell us what is broken with the system and changes in demand from customers, but call center management must be willing to dump the productivity mindset. 

Productivity measures (and targets that accompany them) like call volumes and handling time may be useful for resource planning, but tell us nothing about how to optimize the system.  Yet, the call center is rife with information to improve any organization.  If we engage the worker to study customer demand (type and frequency)  they can share information management could never have thought of unless they spent time there (which I suggest).  Workers can also help call center management with whether that demand is a value (calls we want) or failure demand (problems, follow-ups, etc.)  My Vanguard partners and I have found that failure demand runs from 25 – 75% of all call center calls.  Instead of pounding the desk for faster handling time, we can reduce the number of inbound calls by reducing failure demand and learning better ways to handle value demand. 

The call center worker is engaged to get the information and can tell us if demand changes more capably than some report a manager gets way too late.  This information provides crucial information to managers to fix the service system or product and maintains a perpetual feedback loop changing culture, achieving business improvement and corporate cost reduction.  All for changing the way we think.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  He is focused on exposing the problems of command and control thinking and the termination of bad service through application of new thinking . . . systems thinking.  Download free 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.

The Core Management Paradigm that is a Paradox

Monday, April 27, 2009 by Tripp Babbitt
What elements do every command and control manager believe are core to their management paradigm?
  • The amount of work to be done.
     
  • The number of people to do the work.
  • The amount of time it takes to do the work.
The command and control manager sees their problem as a resource issue.  They are focused on SLAs . . . # of things done over time, talk time, volumes of incoming work, etc. This is a manufacturing view of service work, complete with inspection.  This thought process brings forward the need for scripts, procedures, targets, standards, compliance, etc. to "manage" the organization.

In manufacturing, we used to reference the hidden factory.  The visual factory was the one that built the good stuff (value) and the "hidden" factory was all the scrap and waste.  Well, in service there is a hidden management factory that is separate from the work where managers gather to make decisions about the work that they don’t understand.  This factory is supported by technology to help "dumb down" front-line workers.

Command and control thinkers are focused on cost reduction.  Scientific management theory promises economies of scale, but in a management paradox this thinking drives costs up and service down.

There are five fundamental thinking problems that John Seddon outlines for us in Systems Thinking in the Public Sector.
  1. Treating all demand as though it is work.
  2. No accounting for failure demand.
  3. The foolishness of managing activity.
  4. A service systems that prevents absorbing variety.
  5. Negative Assumptions about people.

For more on these see my blog 5 Fundamental Thinking Problems in Service Businesses (link).

Systems thinking is about changing from command and control to systems thinking.  This shift in thinking can achieve corporate cost reductions and business improvement beyond traditional organizational change management programs.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  He is focused on exposing the problems of command and control management and the termination of bad service through application of new thinking . . . systems thinking.  Download free 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.
 

Lean Manufacturing is Not for Service Organizations

Friday, April 24, 2009 by Tripp Babbitt
One thing I have learned from John Seddon (and Vanguard Consulting Ltd. my partners in the UK) is that that tools of manufacturing do not transfer very well to service organizations.  Personally, I have always started with concepts and principles before tools, but command and control thinkers want the quick fix . . . so to the tool kit we go to for immediate results.  The problem is that there are differences between service and manufacturing.  With more and more lean manufacturing people moving to service they don’t distinguish the difference.

So let’s establish the one big difference and it is in variety of demand.  The lean manufacturing folks love to start with 5S.  A tool that is used to provide a standard workplace environment, establishing standard work and the removal of waste.  The philosophy is comprised of order, organization, discipline, elimination of bad habits and wasted effort.  This leads to the standardization of work, wholly the wrong place to begin in service because of the variety of demand that customers bring to service organizations.  This creates failure demand when the standard process is unable to absorb the variety of demand that customers bring.  Command and control thinking managers love standardization because this allows them (typically) to blame the worker for the non-standard events, plus this allows them to do planning and resource management unaware of the need to separate the planning and operation management.

Requirements for workers to meet standard times and work measures known as targets give us plenty of examples for this misconception.  Dr. W. Edwards Deming showed us how to deal with variation and stood against the targets promoted by lean activities.  An understanding of variation is in order to avoid tampering with the systems they work in.  Unfortunately, this leads to increased costs and a drop in customer satisfaction that is a spiral adding more costs and decreased service to customers as the system becomes more burdened with command and control decisions.

Business process improvement and corporate cost reduction in service industry is best done without the influence of Lean or Lean Six Sigma manufacturing tools.  They miss the point of variety in demand in service industry and lock in costs with their standardization activities.  There is a better way.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  He is focused on exposing the problems of command and control management and the termination of bad service through application of new thinking . . . systems thinking.  Download free 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.





A Systems View

Wednesday, April 15, 2009 by Tripp Babbitt
The first signs of systems thinking came in the middle of the last century in Japan.  This is where W. Edwards Deming influenced the Japanese to start to understand their organizations as systems.  They learned that the functional separation of work and budgetary controls led to sub-optimization and reduced performance. 

When economies of scale first enlightened Frederick Winslow Taylor in the late 1800s it was a breakthrough for its time.  The Japanese breakthrough was about taking a systems view to manage economies of flow an advancement so large it had US manufacturers pleading for protection.

Taiichi Ohno and Shigeo Shingo further developed these ideas at Toyota and Matsushita.  As a whole this the work of these two and Deming largely made up the Japanese Industrial Miracle.

US service companies still follow the economies of scale approach in command and control fashion.  Functional separation of work and budgetary controls that lead to sub-optimization.  The problem with command and control is the design and management of the work.  This thinking features separation of the decision-making from the work.  The worker works and management makes the decisions.  Work is broken into functions and decision-making (control) is achieved through financial goals and performance targets.  Management focuses on output for business improvement and cost reduction.   This focus assures sub-optimization by causing waste and preventing learning about the "what and why" of organizational performance.  Another drawback is the damage it does to culture when those that understand the work can’t make decisions about it or when they are forced to targets they know damage the customer and create internal competition.

This command and control thinking will be abandoned eventually.  John Chambers of Cisco says it will happen in 5 – 10 years.  Will your organization be ready?  What can be done.

Taking a systems view we can overcome this sub-optimal thinking.  To improve performance we must change the system to change the system we must change thinking to systems thinking.  Management thinking must change to improve the system . . . they are the owners of the system.  The good news is with the right approach this thinking can change in a short period of time in service industry. Months rather than years to achieve business improvement, culture change, and business cost reductions.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  He is focused on exposing the problems of command and control management and the termination of bad service through application of new thinking . . . systems thinking.  Download free 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.

The Standard Email: Acknowledgement, Order Status and Thank You

Wednesday, April 15, 2009 by Tripp Babbitt
We all get them the standard email when doing business with an organization.  "We acknowledge receipt of your order" and "Thank you for your business."  It’s appropriate to thank someone and acknowledge their order.  It is just so  . . . automated.  I like the thank you, but it doesn’t sound real or heartfelt.  I will soon forget this company and may by from someone else just because the experience wasn’t memorable.  Some services may get away with this, but if I am spending money that is significant . . . I want more . . . your customers want more.

Technology change management has brought us email and it saves money which for the command and control thinker is a bottom-line proposition.  Order status emails makes me wonder how much money they are wasting in technology and other non-value-added tasks to tell me the status, they are locking in waste.  As a customer I am left wanting more service and am more likely to refer business with a feeling of belonging than a "cost-saving" email.  If my experience is bad or didn’t meet my expectations the "standard" survey does not account for the variety of demand that I want from a service.  Standard emails, scripts and technology can not absorb this variety and usually lead to increased costs.

The customer management process must be appropriate for this variety of demand.  We are in desperate need of methods that lead to absorbing this variety.  Studying customer demand is a good starting point.  The type and frequency of demand will tell us how to redesign our services for customers to "pull" value.  This method will allow a service organization to achieve business improvement, business cost reductions and new business with a more customer friendly and "systems thinking" work design.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  He is focused on exposing the problems of command and control management and the termination of bad service through application of new thinking . . . systems thinking.  Download free 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.