Bryce Harrison

Seems like each time I read something coming from the Ash Institute from Harvard, I am left shaking my head in disbelief.  It has now advanced to the point where I just accept that they will say things that defy all reality.  They can spin a web faster then any spider I know. 
In the latest travesty John O’Leary in Driving Change: Go Big or Go Home likens government to driving a bus where everyone has access to a brake.  Meaning anyone can kill any change program in government.  He uses this as an impetus to basically run over people to achieve change.

With apologies to one of our fine educational institutions this is ridiculous.  What got us in the mess we are in today is our inability to seek knowledge before seeking change.  Government management can only make assumptions about one thing . . . that they need to get knowledge before introducing change.

The cost of not getting knowledge is to guarantee failure in any organizational change management program.  The result is higher costs, worse service and a poor culture.  The political spin of this has to be exposed as they administrations point to those costs that go down and not to the ones that increase due to this flawed approach.

Any new administration at any level of government management would be well-served to start by performing "check."  This means understanding the what and why of current performance.  Not to come in with pre-conceived notions, agendas, mandates, milestones, schedules and project plans. 

Further, Mr. Leary promotes the favorite of the Ash Institute which is cost cutting.  Even worse he promotes it as a top-down exercise.  Both of these again are command and control moves that increase government spending . . . let me explain.

Costs are often seen from activity and productivity numbers that are leading government management to take a shared services strategy or outsourcing.  What the fail to see is that cost are in the flow not the scale of activity (economies of flow).  To focus on costs increases them and instead we need government to focus on the causes of costs that are in the flow.

With respect to top-down implementation of a political agenda, we would be much better served to design our government systems from the outside-in.  This requires understanding demand while getting knowledge in "check."  When we don’t understand demand we stand to outsource failure demand (demand caused by a failure to do something or do something right for a customer) or share services that shouldn’t be shared.

I have found a better way (as opposed to top-down) is to get knowledge of the work and engaging government workers.  Rather than a small group by engaging employees we get far more ideas for innovation.  And larger changes are accepted because when we make decisions with the knowledge of the work we don’t alienate those that do the work. 

Think about it . . . would you rather have a small group innovating or the assistance of thousands to help facilitate change?  When you don’t make decisions with the work we wind up with SNAFU and FUBAR types of results and activities.

Workers engaged and understanding purpose and customer measures should be allowed to experiment with method.  This experimentation can lead to new methods and innovation.  New administrations would be wise to tap into this valuable resource pool.

Indiana has had a massive failure in the Welfare Modernization project they just cancelled with IBM.  Let’s not spin this any other way than a disaster that cost taxpayers money by not doing the things I have outlined above.  More approaches like this and we will continue to have to sell the public’s assets to meet the fiscal responsibilities of the state.

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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.

1. High error rates
2. Low job placement rates
3. Two dozen employees convicted of fraud
4. Federal Sanctions

All true as I witnessed them during my tenure as CIO at FSSA.  The problem is the context and many may be duped by these anecdotal comments.  The FSSA Secretary (Anne Murphy) reported $1 million losses due to fraud from 2005-2008.  Indiana will be spending (most likely) anywhere from 2 – 25 times that per year to prevent it.

As with most with political agendas the Indiana Welfare Eligibility Reform was doomed from the beginning.  FSSA entered to change the system without knowledge of the "what and why" of current performance.  They had a reform agenda and disrespected the state workers, recipients (now called clients), and the taxpayer.

Mr. Goldsmith outlines the usual poster child for reform . . . antiquated technology and a paper-based system.  Neither of these assumptions should lead us to  believe that more technology or less paper will actually improve things.  In fact, in a government management paradox more technology led to increased costs and the locking-in of a poor design of the work.

Further, Mr. Goldsmith talks about the risks associated with innovation as if this should be something to embrace.  When spending $1.3 billion of taxpayer money to take a risk on innovation, it should be done on a small scale to see if the concept works.  To do otherwise, is to be arrogant . . . not bold.

He makes a mistake in stating as fact that outsourcing employees made things better.  No data to support this statement, which seems to play to those gullible enough to believe such statements.

The usual blame about unforeseen circumstances and federal regulations attempts to pacify the reader that things just couldn’t be done any better in this attempt and avoid actually holding anyone accountable or responsible for this bold attempt.  To this I say "hogwash" (it is Indiana after all). 

Indiana FSSA could have (and should have) understood that the biggest opportunity for change is the design and management of the work.  With knowledge gained through understanding they would have been able to design a system and trial it on a small scale, but the rush to "be bold" was their downfall.

It is a John Seddon says "ignorant people shouldn’t be in government management."

Please join us for a better way to manage in government at www.thesystemsthinkingreview.com.

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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.

• The CEO or leader must get their hands dirty, meaning that they have to understand the work.  The place where business is transacted between the customer and their company.  No more can they rely on vendors, reports or anecdotal evidence of what is happening in the business.
• The must quit managing by the financials to improve service.  To focus on costs is to increase costs.  The management paradox is as strange and uncomfortable as it sounds.  Yet, to improve service business we must understand the causes of costs.
• And the causes of costs are not in the scale as we have all been taught in our college economics classes, they are in the flow (economies of flow), end-to-end from a customer perspective.
• That technology, shared services, outsourcing, standardization, best practices, scripts, and benchmarking have helped to lock in costs rather than reduce them.  These are all things that we have been held to be self-evident as in truth.
• Some say it sounds like there will be less control using a systems thinking approach, when in fact there is greater control.
• Giving up command and control measures like those of cost and productivity is very uncomfortable.  Until managers understand they are replaced with better customer measures and done in an emergent way based on informed choices (meaning with good knowledge at your speed).

So yes, there is much to be afraid of in moving to a systems thinking approach.  We can only promise that the first step is the hardest . . . but the results are phenomenal.

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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.

• Get Knowledge.  You will face resigning leaders and others that will leave with the political overhaul.  Most of what they learned will be lost.  Before any political agendas come roaring in, the new administration must get knowledge of the systems they wish to change.  This needs to be done by the leaders and not abdicated to a vendor, underling or anyone else (as most of these folks have their own agendas).  So, before the first plan, milestone, schedule, etc please begin by understanding the "what and why" of current performance (please see: performing "check").
• Understand that to Manage Costs is to Increase Them.  New Jersey is in a poor fiscal state and Virginia is better than most other states, but let’s face it this is hard times for state government.  The immediate reaction is to focus on cutting costs.  The government management paradox is that this always increases costs.  Governments work on what seems obvious missing the causes of costs. (Please see: Managing Costs Increases Them)
• Don’t Start with the Bad Assumptions.  There are several I see in government here are three:

1. Bad Assumption #1:  Technology is the Answer.  After a decade of working with large technology vendors, I can tell you this is not true.  In most cases, technology locks in the waste and sub-optimization of a poorly designed system.  The will tell you about other government successes, best practices, benchmarks, government analytics and more, but fail to deliver the value governments so desperately need to reduce costs and improve service.  Their aim is to improve their own bottom-line . . . not yours.  (Please see: Throwing Technology at the Problem)
2. Bad Assumption #2:  Shared Services Strategy.  Sharing services is NOT a no-brainer.  Government management must understand that sharing services without knowledge leads to higher costs and worse service.  (Please see: Dos and Don’ts of a Shared Service Strategy and The Case Against Shared Services)
3.   Bad Assumption #3:  Outsourcing/Privatization.  I’ve been a CIO in state government, it is unrealistic that we wouldn’t have outsourcing and/or privatization.  The problem is that in many cases we are outsourcing our failure demand from constituents (demand caused by a failure to do something or do something right for a customer).  This locks in waste, we need to improve the system by redesigning the management and work.  I have found this reduces technology spend, improves service and costs less on a large scale.  (Please see: Outsourcing: Why it’s a Bad Idea and Better Tips for Government IT Outsourcing and Shared Services)

• Understand that Your Greatest Lever for Improvement is the Design and Management of Work.  Understanding that a different line of thinking about how to manage and improvement through better work design is a huge leap in reducing costs as it addresses the fundamental thinking problem around the causes of costs.  Government management should take time to browse "Systems Thinking in the Public Sector" and the website for government systems thinking at www.thesystemsthinkingreview.com. 

My hope for both of these new governments is that through better thinking you can serve constituents better and be good stewards of their money.  Government management requires a different look at some age old problems . . . doing more with less.

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Need help with transitioning government, reducing costs or improving service.  Call us at (317)849-8670.

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 debate at sixsigmaIQ.com was one that has been boiling for awhile.  However, I believe it is an important one.  I sense this will be the first of many as systems thinking begins to penetrate the minds of people in the improvement arena.

With a background that dates back to the  W. Edwards Deming movement and the Deming User Groups I am sensitive to how people hijacked Dr. Deming’s thinking into something that could be packaged and sold.  Dr. Deming did not reference a label for his thinking and did not promote TQM.

Instead, Dr. Deming gave us 14 Points and 7 Deadly Diseases and later his System of Profound Knowledge (Appreciation for a System, Theory of Variation, Theory of Knowledge and Psychology).  These were guiding principles for those wanting to increase market and market share, improve service and decrease costs through better thinking.  They were (and still are) management paradoxes and counter-intuitive truths that challenged the very fiber of US manufacturing, service and government.

Industrial tourists of all types have visited and written about what the Japanese and later Taiichi Ohno (Toyota) did and came away with new secrets to improvement.  It started as Just-in-Time manufacturing, Quality Circles, etc. and later 5S, Standard Work, A3 and other tools.  The US organizations always looking for a short-cut were hungry for what these folks learned as they became less competitive on an international scale.

The Japanese on the other hand were only too happy to invite the tourists into their plants because they understood it was the thinking not the copying that gave them the advantage.  But copying seems to be a staple in US business . . . because it is a short-cut.  The problem is that it doesn’t work or doesn’t work for long.

Whether Lean = Tools to me is an individual assessment of everyone that applies "lean."  If you find yourself starting with 5S, Kaizen events and such you may want to consider the long-term impact of such actions.  Just as not changing the mindset of managers and executives will reverse all the work that is done . . . no matter how well-intentioned.

The bottom-line is if the thinking doesn’t change the system doesn’t change.  This cannot be pushed away from a executive, manager or the front-line worker they all must play to improve the system.  The reward is dramatic improvement.

I partnered with John Seddon because he has advanced the thinking, something we haven’t done very well in the US.  His knowledge of applying systems thinking to service industry and government is something we all can learn from in the US.  And it all begins with being curious about what he and his Vanguard firm has learned.

I have learned about the problems with tools, standardization, shared services, outsourcing, scientific management theory, and separating the decision-making from the work.  I have also learned that manufacturing is different from service and that copying is not a good idea.  Some I have learned from Deming, some Ohno and some Seddon.

There are many other things I have learned and much more to be learned.  But we need to start with changing our thinking. 

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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.

 

1. Assess the Need
2. Measure Total Cost of Ownership
3. Carefully Craft the Contract
4. Get Everyone on Board
5. Win Approval from the Top

These all appear logical enough which makes most of what I am about to say a management paradox.  Most of the argument is predicated on the cost cutting and efficiency mindset.  We (my Vanguard Partners and I) have long found that a focus on cutting costs always increases them.  To focus on costs is to miss the causes of costs.

1.  Assess the Need.  Nowhere in assessing the need does anyone talk about the functional separation of work and that optimizing each piece leads to sub-optimization.  Or that IT is a supporting service that supports the actual work and can not be viewed separate from the work.  Doing so leads the actual work to fail while IT "saves money." 

It would be difficult to say that the State of Pennsylvania didn’t save $316 million in IT, but they can’t show me that by sharing services that they didn’t increase the end-to-end costs by $500 million by provisioning services with a shared or outsourced service center.  These are the results found by my colleagues in the UK when assessing such moves.

If we are going to assess needs there should be a review of the services that are being provisioned.  In many cases we have already designed in waste with front and back offices.  This by itself begs the question of whether we even need IT, if a better work design can be found (and it usually can).  By studying customer demand and purpose (or called performing "check") government services can be designed more optimally, lessening the demand for IT.

In assessing needs there is another faulty assumption around economies of scale.  A management paradox is that costs are not in the scale, but in the flow (economies of flow).  If or when government management understands this we can get on with saving money . . . on a large scale!

2.  Measure Total Cost of Ownership.  Sounds reasonable until I read the article and realized they were talking about IT and not the end-to-end system.  The focus on costs again doesn’t account for the end-to-end service delivery (system).

The article discusses the IT costs like labor, overhead, benefits, office space, etc. but think about the cost of a contract, monitoring the contract, all things that are typically not done well by States.  Waste begets waste so government management will hire the inspectors/monitors/auditors too.  Good segway to . . .

3.  Carefully Craft the Contract.  Having SLAs is a huge waste in government (please read: SLA: Stupid Limiting Agreement) not only the crafting, but once crafted they are like chasing jell-o across the table.  You seem to have one nailed and something else always slips through your fingers.

Targets for times are always a bad idea . . . targets in general are a bad idea.  The example of answering calls in under 60 seconds at a 95% service level is an example of the ignorance perpetuated.  I outline why in my article Call Center AHT-Wrong Measure, Wrong Solution.  The prescribed measure of service level is settling and adding costs to IT.

A good measure of understanding is to track failure demand (demand caused by a failure to do something or do something right for a customer).  This runs between 40-90% in government and offers a huge opportunity to improve.  Outsourcing or sharing services without knowing this number is to lock in waste.

4.  Get Everyone OnBoard.  When workers know a bad deal and the disruption to their work they object.  Seeing that Outsourcing and Shared Services is done command and control style (top-down) is a huge failing of these projects.  Performing "check" means understanding the work that delivers the service (and that is not IT).

It was AP Sloan that separated the decision-making from the work in 1930s GM, government management must start putting decision-making back with the work.  This means they need to understand the work, not use a report, vendor or anecdotal liaison.  To fail at this is to increase costs and worsen service.

The whole benchmarking of processes is another gigantic waste.  Every state, federal agency, city or local government is a unique system.  To draw conclusions about processes through benchmarking is ridiculous and wasteful.  Each government entity has different demands, work design, structure, people, management, etc. and to benchmark is to lead to copying.  Everything you need to improve your system is contained within it.

5.  Win Approval from the Top.  I agree here, but not the way one might think.  The "top" must get knowledge by performing "check" on the organization, not by a command and control dictate using assumptions about the work.  The input for this article is all about keeping in line.  This approach is costly and damaging.

So, that is it.  A better way to approach outsourcing and shared services requires knowledge and thinking.  Before any shared services or IT outsourcing strategy takes place we need to understand current service performance.  This can be accomplished by studying customer demand (what customers want), capability (how well it is delivered), the value work (the service customers want efficiently), waste and its causes.  We can then improve service where it is currently delivered and then have a knowledge-based discussion on shared service or outsourcing opportunities.

To learn more click on shared services strategy or IT outsourcing strategy from my blog or go to www.thesystemsthinkingreview.com

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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.

 

1. 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.
2. 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.
3. 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. 
4. 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.
5. 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. 
6.  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.
 

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 Vanguard 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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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.

1. 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.
2. What are the High-Frequency Value Demands 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. 
3. What is the failure demand 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. 
4.  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.
5. 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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For more on the public sector and systems thinking go to www.thesystemsthinkingreview.co.uk.

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.



 

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 as 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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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.

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.


 

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.




 

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.

I just finished an ezine management article about American arrogance and our collective inability to change thinking, especially management thinking.   My belief is that we are still basking in the sun of our tremendous wealth that was produced between 1950-1968.  All until the Japanese came along and ate our collective lunches.  Bye! Bye! Manufacturing! But that’s OK we have service right?

Service industry with a huge competitive advantage in technology.  Oops! We outsource software development and hardware manufacturing.  After all, good management means a good IT outsourcing strategy to other countries.

Good call center management means that we lower transaction costs to add to that bottom line.  What fool wouldn’t want bigger short-term profits to hit that quarterly dividend target or bonus? 

Unfortunately, just like the Mesabi Iron Range . . . the cream is gone.  Our management style no longer achieves innovation leadership.  Instead we follow in the wake of our short-term thinking.  All the while thinking how great US management is.  Except for the awakening that we have fallen behind because we mistook good fortune for good management.

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.

I have multiple blog posts on this subject, but decided it was time to devote a post just to this topic.  This thinking has dominated our collective US psyche for a century.  We don’t even recognize it, because it is the way we do business and organize our government agencies.  It is like breathing, we don’t have to think about it . . . we just do it.  If you ever want to screw someone up in golf, just ask them if they "breath in or out" on their backswing.  They start thinking about it and the result is they lose concentration.  Try it.

Systems thinking is an improvement over Frederick Taylor’s scientific management theory.  The functional separation of work of scientific management leads to what W. Edwards Deming called "sub-optimization" or when we optimize each function we don’t get a good end-to-end (system) result. 

One of the problems I have with outsourcing is that we take a function (call center typically) and try to optimize it by getting the "experts in that area" to do it.  Sounds plausible, but systems don’t react that way.  Some of my readers take exception (outsource vendors) and this isn’t to say that outsourcing is all bad, but the assumptions it will reduce costs are bad.  Unless the outsource vendor understands how to optimize a system and not a function all is lost.

The same can be said for those pursuing a shared services strategy.  If we combine call centers or back office functions we will reduce costs (or at least the visible ones).  Again, sounds plausible, but most of the time the organization winds up increasing the total/end-to-end costs to the system.  No savings and in a management paradox these moves increase costs.

Our best bet is to decrease costs by understanding our organizations as systems.  This will require that I ask you (my readers), Do you breath in or out on your backswing?  Maybe a break in our concentration is just the remedy for better thinking.

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.

1. Branding.  Customers see your organization through who they come in contact with and organizations reducing costs fail to realize that can have a big effect.  Dell is probably the best recent example, the outsourcing has cost their brand dearly.  As a former Dell customer I was always frustrated with dealing with customer service.
2. Outsourcing Waste.  Probably my largest objection and originally pointed out to me by my Vanguard partners (UK).  Call centers have a large percentage of failure demand 25% to 75% of all calls.  These are calls that are problems, call backs from incomplete answers, follow-ups, missed appointments, etc.  If we eliminated this type of demand we would have fewer calls and happier customers.  Companies need to eliminate this failure demand before outsourcing call centers.  Otherwise we lock in the cost of the waste.
3. Costs are not in transactions, they are in the flow.  Most people see transaction costs go down with outsourcing . . . true.  What they fail to see is not only the failure demand they are outsourcing are costly, but that the customer sees service end-to-end and not by function.  Too often already bad flow (end-to-end or systemic flow) is outsourced increasing the number of transactions at great cost.  You see cost savings are not gained through economies of scale, but through economies of flow.
4. Failure to see that SLAs, inspection and monitoring are costs that rise in outsourcing.  Outsourcing contracts become full of SLAs that have little or no relation to the customer experience, as vendors seek measures that they can "control."  These metrics are never representative of the end-to-end metrics customers seek.  SLAs are by function not the end-to-end as they become too difficult for the outsourcing vendor.  Someone can very well be hitting the SLA for their outsourced call center while overall costs increase and customer service deteriorates.  Inspection and monitoring increases as the service deteriorates and costs continue to escalate.
    
5. Even non-core competencies are part of your system.  An argument I hear often is that call centers are not part of the companies core competency.  Other than the branding argument, being a specialist in a function can be a big disaster.  We live the belief that optimizing a piece optimizes the whole . . . it does not.  It is how all the components of the system work together is where cost savings come from.  The optimization of one piece usually leads to sub-optimization of other parts of the system.  Example, I can reduce handle time by not getting all the information needed to transact business causing chaos in the rest of the system with errors and more calls.
6. Loss of innovation and feedback loops.  Innovation leadership comes from the ability to leverage all parts of the system to optimize the whole.  The front-line worker (call center) has the best ears to hear opportunities to improve service and/or product.  Tied down with SLAs, scripts, monitoring, etc. inhibits the front-line as their purpose becomes to meet the target and not the customer needs.  Feedback that helps optimize the system are usually targeted to optimize the function and systemic feedback is lost.

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

There are a couple of different ways of thinking with regards to call center management . . . command and control thinking and systems thinking.  Both types of thinking require us to plan for resources using call volumes and duration.  The similarities pretty much end there.

The command and control thinker uses these same data (call volumes and duration) to improve productivity.  Such measures as (average handle time), cost/contact, customer satisfaction, agent utilization and of course you must have a balanced scorecard (a pretty version of MBO).  Command and control thinkers also focus on the individual with coaching, performance appraisals, inspections, monitoring, targets and incentives . . . and the worker only is worried about not getting paid attention to by his manager/supervisor.  All of these things are waste and with all the time organizations spend putting into it, I wonder what could really be done to improve things.

Systems thinking focuses on the customer and more importantly the customer purpose and measures from their perspective.  They understand that the focus is the system, not the individual.  That performance of an organization is 95% determined by the system they work end and only 5% is attributable to the individual.  They also understand that call center management’s job is to manage this system and leave decision-making about the work with the work instead of some report.  They understand that failure demand (unwanted calls, problems, follow-ups, missed appointments, etc.) make up between 25% and 75% of all calls in a call center.  They understand that the call center is part of a broader system and not a part to be outsourced to reduce transaction costs or share services to cut costs without first studying customer demand and eliminating waste BEFORE such ventures.  They understand that targets and incentives become the defacto purpose of the worker and the real purpose is tied to serving the customer.

The two types of thinking are almost opposites.  Command and control fails to deliver sustainable results, while systems thinking can provide business improvement that organizations only thought were possible for manufacturing companies in Japan.  Are you ready to change thinking?