Category Archives: Outsourcing

Outsourcing, Systems Thinking and Management

The US and Our “Average” Workers

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I am still baffled by the article from March 6th by CNBC titled, ‘Average’ Workers Plague US Businesses: Execs Survey.  The knock on the American worker is that they lack critical thinking, creativity and communication.

WOW!!  Imagine that the American worker is now the problem.  Never mind the American worker has been outsourced, marginalized by poor work designs and subjected to outdated management thinking.  However, clearly the worker is the problem?

What’s missing?  According to the survey  . . . “highly developed skills in making decisions, the ability for workers to transmit their ideas in oral and written form, being able to collaborate with co-workers, and the foresight to be innovative and make something happen when action needs to be taken.”  Let’s take a look at these:

  • Highly developed skills in making decisions – How often do executives actually allow a worker to make a decision?  On anything?  Compliance is the name of the game for a worker – written procedures and rules see to that.
  • The ability for workers to transmit their ideas in oral and written form – Other than the outdated “suggestion box” when is an executive really interested in what a worker has to say?  The strategic plan and projects restrict any ideas of relevance this is a management problem not a worker one.
  • Being able to collaborate with other workers –  Deeper issues here, reward systems pit one worker against another in too many cases.  Competition is cited as the best path, not cooperation.  Again, a management issue.
  • The foresight to be innovative and make something happen when action needs to be taken – Again the system workers are laboring dictates how much innovation is achieved.  Workers are restricted by the system.

American management is what plagues the US, not the American worker.  Something American management has not come to grips with yet.

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.  Read his column at Quality Digest and his articles for CustomermanagementIQ.com. Reach him on Twitter atwww.twitter.com/TriBabbittor LinkedIn atwww.linkedin.com/in/trippbabbitt.

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Outsourcing, The 95 Method and Government, The 95 Method and Management

Onshoring, Offshoring or Outsourcing – The Reasons Matter

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The last American election “exposed” outsourcing as an evil, and in part, a reason one presidential candidate defeated another.  The belief is that outsourcing – foreign or domestic – helps to optimize a business function.  I heard this argument for the hundredth times on the Washington Times Communities website in an article titled, Outsourcing vs. Offshoring.

It is the wrong thinking.

However, organizations continue to perpetuate the “optimize each function thinking” as blindly acceptable.  Sub-optimization results on a large scale.  Locking in waste for short-term profit games has become a national pastime in the US.  It is hard to find organizations that don’t lick their chops when they see the reduced costs in the form of lower wages in outsourcing.

Political and consumer backlash seems to be bringing back the jobs . . . and again for the wrong reasons.  The problems with outsourcing go beyond politics.  This is not to say that consumers should be ignored as they decide what organizations to place their business with.

The deciding factors need to connect with the waste service organizations are outsourcing.  When the design of the work prevents customers from getting their demands satisfied – we get failure demand.  When phone calls run 40, 60, 80% and higher of these types of demands -which I find in almost every organization – why would you outsource this much waste?  It is more prudent to redesign the work.  Service organizations that outsource this much waste are locking in costs, not reducing them.

So few organizations know what to measure that reduces costs and the result is managing by costs alone.  The result is always increased costs.

Before the next onshoring craze let’s address the problems first . . . the right ones.

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.  Read his articles at Quality Digest and his column for CustomermanagementIQ.com.  Learn more about the The 95 Method for service organizations.  Reach him on Twitter at www.twitter.com/TriBabbittor LinkedIn at www.linkedin.com/in/trippbabbitt.

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Outsourcing, Systems Thinking and Government, Systems Thinking and Management, Systems Thinking and Measures

Revisiting MBO (Management by Objectives)

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The Honorable Jennifer Granholm, Governor of t...

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I am reading two books right now.  One by Governor Daniels of Indiana and another by former Governor Jennifer Granholm of Michigan.  Governor Granholm talks quite a bit about the loss of jobs in manufacturing in her State to outsourcing.  In fact, her last election against Dick DeVos – the former Amway CEO – she let him have it during her campaign for outsourcing jobs to China.  Certainly, the subject for a future blog post.

However, something else caught my eye . . . Governor Granholm’s love for MBO.

“As a big believer in management by objectives, I loved using  the State of the State speech as a blueprint for the year.”

– from A Governor’s Story – Governor Granholm

There is a correlation between the loss of jobs to outsourcing and MBO, but I won’t make it in this post.  They are both wrong behaviors and outsourcing you can find plenty of posts why it isn’t typically saving money.

Organizations and governments are still using MBO – shocking?  Not really.  I still see it in many organizations, once a bad idea . . . always a bad idea.

Peter Drucker invented this thinking in 1954, W. Edwards Deming rocked the world when he spoke about MBO as one of the evils of management (as practiced).  Closely related to MBO is SMART (Specific, Measurable, Agreed, Realistic and Time-related) and a Balanced Scorecard.  Targets come along with these thinking methods.

First of all, Dr. Deming understood that when you provide objectives and targets by function you get sub-optimization.  Meaning if you optimize each functional piece you miss the inter-dependencies and create a system works against itself.  This creates waste.  For example, you often see departments vying for resources focused on what they can get in resources for themselves. Artificial competition is produced and the loss to the system is great because we do what is right for the department, but not right for the system.

Information technology seems to get much of the money in organizations.  Yet IT cannot create value, it can only add value to the relationship between customer demands and work.  Unfortunately, too many organizations don’t get that IT, HR, Finance and other supporting areas aren’t meant to create a profit for their department – they are there to enable the value creating relationships.

With MBO, we get management and worker focused on the wrong things.  Hitting the target laid out in the objective (remember SMART).  The flow is interrupted by the functional separation of work as each piece tries to optimize itself.

“(MBO) nourishes short-term performance, annihilates long-term planning, builds fear, demolishes teamwork, nourishes rivalry and politics.”

– W. Edwards Deming (from Out of the Crisis)

“Management by Fear” was the Deming phrase that replaced MBO.

Governor Granholm is a Harvard graduate.  Peter Drucker taught there.  Harvard, with all its money has become the poster child for bad theory.  Smart people, wrong method.

As voters, we need to ask candidate, “By what method?”  As managers, we need better thinking about the design and management of work – devoid of MBO and targets.

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.  Read his articles at Quality Digest and his column for CustomermanagementIQ.com.  Learn more about the 95 Method for service organizations.  Reach him on Twitter at www.twitter.com/TriBabbittor LinkedIn at www.linkedin.com/in/trippbabbitt.

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Outsourcing, Systems Thinking and Government

Cheap Labor – Not the Answer for Government

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I follow a l0t of the conversations going around on the web comments pages.  An article about contract labor and outsourcing for government showed up on CNBC’s site.  The high wages of government workers are cited as a reason for our deficits . . . can’t be the politicians.

These governments workers are making the budget busting amount of $15 – 20 per hour plus benefits.  Bastards!  Greedy, aren’t they?  This bothers me in light of the government bailout poster children – Fannie and Freddie – whose top execs got over $2 million in bonuses (each).  This for such well run organizations that just borrowed $169 billion more.  When do we get the well run organization first, before we pay the big bonuses?  I am still waiting for the previous execs for Fannie and Freddie to go to jail.

Back to the task at hand – cheap labor in government.

I worked as a CIO for a year in government, government is full of waste.  It is everywhere you look.  However, the workers in government are not to blame for the poor design of the work.  Political ideology vacillating back and forth over the years is what created our current problem with government design.  No one in government knows how to design good work.

Politicians go immediately to the “technology well” to modernize and automate.  No evidence or knowledge this is the right or wrong thing to do.  The design requires many times the number of workers that are needed for a well-designed system.    But between the functional separation of work and keeping labor costs down, government management instead “dumb’s down” the design to keep costs down.  Ridiculous? Yep and it is costing us in the way of huge deficits for government.

What this means that if design work that adds value to constituents that maybe workers are paid a wage of $30 – 40 per hour or more.  As a taxpayer, I would gladly pay these wages for a system that isn’t full of waste.

We are missing a great opportunity to change the system that is more full of blind political ideology and misguided legislation.  Making the government workers a part of the solution rather than pointing a finger at them as the problem would be useful . . . that would mean that politicians would have to point the finger at themselves (sigh).

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.  Read his articles at Quality Digest and his column for CustomermanagementIQ.com.  Learn more about the 95 Method for service organizations.  Reach him on Twitter at www.twitter.com/TriBabbittor LinkedIn at www.linkedin.com/in/trippbabbitt.

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Outsourcing, Systems Thinking and Technology

Software Development and Outsourcing

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Earlier this year, I went to India on behalf of a client that had outsourced their software development.  I met with architects, project managers, business analysts, testers and developers.  What they had to say about software development was astonishing, but revealing.

I have nothing against any country.  Outsourcing is not always bad and the worse reason to reject outsourcing is patriotism.  The reason outsourcing fails is because it is not profitable.

Say again?

That’s right outsourcing is not profitable.

So scratch that concept of less expensive software developers right from your brain.  Software requires knowledge of the work.  Not better documentation, not better analysts.  The problem is the way we have industrialized software development.

There are a number of things that don’t work in traditional software development.  Prepackaged and turn-key systems sold to customers ignore the existing system customers have in place.  There is no study of customer purpose or the customer demands placed on systems.  Instead the “better” IT system is put into place.  It is the ignorant selling the plausible to the gullible.

Further, the flow of the work is not considered or if it is considered it is automated in an inefficient or as-is fashion.  Sometimes the existing functionally separated systems are perpetuated.  No one asks if the back office needs to exist, often it can be designed out and this does not require software.

Others treat software development as manufacturing.  You hear such words as “software factory” and “production line.”  Software development couldn’t be any more different than manufacturing.  However, it has been designed with different functions, where we can than outsource the pieces like testing or development.  Economies of scale gained through optimizing the pieces and lowering costs by lowering salaries.

It just doesn’t work that way or certainly doesn’t work this way very well.  But organizations continue to follow this path to its failed destiny.  Project overruns, exploding costs for IT development, late projects and software that doesn’t work or entraps workers with poor flow.  The price of admission for this privilege is expensive.  Sign me up.

Oh, and what did that conversation with the outsourcing company produce as its biggest problem in our conversations.  They could do a much better job of developing software if they could come and see the work.

Why did you outsource again?

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.  Read his articles at Quality Digest and his column for CustomermanagementIQ.com.  Learn more about the 95 Method for service organizations.  Reach him on Twitter at www.twitter.com/TriBabbittor LinkedIn at www.linkedin.com/in/trippbabbitt.

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Outsourcing, Shared Services, Systems Thinking and Contact Centers, Systems Thinking and Financial Industry, Systems Thinking and Government, Systems Thinking and Healthcare, Systems Thinking and Management, Systems Thinking and Technology

Technology – A History of Increasing Costs

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The problem isn’t technology alone when it comes to costs, but more the thinking behind it that increases costs.  The transaction costs are very visible and for the gullible represent quick savings for companies.  And companies laden with rewards and pressure to reduce costs “quick” is an embraceable proposition – it becomes a way to achieve instant gratification and survival in organizations.

I recently had a phone call with a technology company that assured me that IVR systems – that I loathe – were saving companies millions.  No evidence but the reduction in visible transaction costs – this means each transaction cost is lower.  Systemic or total costs are completely ignored.

No one asks about how many transactions that come in the form of customer demands are actually value or failure they just look at the transaction alone . . . not whether the transaction should have occurred in the first place or not.

Reducing failure demand (demand caused by a failure to do something or do something right for  a customer) becomes a huge area to make improvement and does not involve any IT.  As part of reducing failure demand, we are improving the flow . . . as economies come from flow and not scale.

Looking at the history of reducing transaction costs with a flawed mindset, we see that in the good old days we would get service face-to-face.  Telephony advances in technology allowed for a cost reduction in centralizing customer demands through contact centers.  Now, we have websites to reduce transaction costs and avoid the contact center.

The result has been worse service and more costs.  A natural extension of when the focus is on reducing costs . . . costs increase.

Outsourcing and shared services have been enabled by technology – couldn’t have either without technology.  However, both perpetuate the reduction of transaction costs as a form of improvement and ignore the systemic customer demand and flow that really are behind reducing costs.  The management paradox is that the transactional mindset is increasing costs in the form of lost customers and acceptance of a poor service design.

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.  Read his articles at Quality Digest and his column for CustomermanagementIQ.com.  Learn more about the 95 Method for service organizations.  Reach him on Twitter at www.twitter.com/TriBabbittor LinkedIn at www.linkedin.com/in/trippbabbitt.

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Outsourcing, Shared Services, Systems Thinking and Contact Centers, Systems Thinking and Financial Industry, Systems Thinking and Government, Systems Thinking and Management, Systems Thinking and Technology

Asking the Wrong Questions to Improve Service

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A client recently forwarded me an invitation from a company promoting a seminar titled “How to make off-shoring work?”  He rightly pointed out that if your asking the wrong question, you will get the wrong answer.  After all, it isn’t about getting off-shoring (or outsourcing, shared services, etc.) to work, it is about getting the work to work better.

The problem is (as with most fads) they are based in assumptions.  Here is the one that caught my attention in the promotion:

“Most major corporations have embraced offshore delivery of IT and are moving to the next stage of a global delivery model, in which the location of both supplier and internal resources are decided from a business perspective, with very few duplicate roles across the world. With major economic benefits, this transition has been accelerated by the economic developments of 2009. What are the challenges? What are the opportunities? And how can you make it work for you?”

Obviously someone with a vested interest in convincing an audience that off-shoring is the right thing to do and you would be ignorant or stupid to have not embraced it as this point.  No evidence, just a lot of hype from a major consulting firm that is trying to sell the mirage.

Too many companies will fall into the cost trap of such claims.  They will do this because they see a reduction in activity costs . . . a very short-term thinking proposition.  But with executives salivating over bonus potential in the next quarter, reducing activity costs sounds appealing.  They miss huge improvement opportunities with this thinking by not addressing the design of the work BEFORE considering off-shoring, outsourcing or shared services.  This is the fundamental thinking problem that management must overcome to improve service.

Off-shoring, outsourcing and even a shared services strategy have gone from a snowball to an avalanche without proof of total cost reduction.  If companies would see that they are off-shoring the waste that is in the design of the work, I believe a different approach would be in order to achieve business improvement.

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.  Read his articles at Quality Digest and his column for CustomermanagementIQ.com  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/TriBabbittor LinkedIn at www.linkedin.com/in/trippbabbitt.


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Outsourcing, Shared Services, Systems Thinking and Government, Systems Thinking and Management

Facts are Stubborn Things

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“Facts are stubborn things; and whatever may be our wishes, our inclinations, or the dictates of our passion, they cannot alter the state of facts and evidence.”   – John Adams

John Adams:

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While watching the HBO John Adams series for the third time, I was impressed by many things that happened before the Revolutionary War.  Most notably that John Adams made the above quote in defense of British soldiers that fired during the Boston Massacre.  The provocation by the crowd was what caused the British soldiers to fire.  The sentiment of the day was that the American settlers were being taken advantage of by the British and King George III.  But the facts brought forward by John Adams during Boston Massacre trial helped shape law in the new land.

Today, instead of resentment of the homeland hierarchy that taxed goods, we are faced with a management hierarchy that concerns itself with position and not evidence or facts.  The ability to make a decision is more important than basing it in fact.  We are left in government with ideology and in business misguided thinking based on history, neither based in facts.

The problem with the management hierarchy is that they have lost touch with what is actually happening.  Management reports and analytics have replaced knowledge instead of enhancing it.  This is the price of technology, lots of information . . . but know knowledge.

Scant evidence exists that business improvement is achieved through work designs filled with front office and back office, shared services or even outsourcing.  In fact, much of the evidence is that these things are poor designs based in promoting the existing hierarchy.  That is management based in assumption rather than fact.

The current sentiment is toward those things that are outdated and changing thinking requires discomfort of management position.  When hierarchy becomes more important than facts we have not only injustice, but reduced profits.  Workers languishing in poorly designed systems that make little factual sense are perpetually stuck in a cycle of despair.

John Adams had it right in the face of unpopularity.  Facts are truly stubborn things.

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.  Read his articles at Quality Digest and his column for CustomermanagementIQ.com  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/TriBabbittor LinkedIn at www.linkedin.com/in/trippbabbitt.

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Outsourcing, Systems Thinking and Contact Centers

Are Contact Centers Still Factories?

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Marshall's flax-mill, Holbeck, Leeds, interior...

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Are contact centers still factories from the industrial revolution?  In a word . . . yes.  OK, the monitoring of bathroom breaks and heavy-handedness may be over, but that doesn’t mean that the work itself has improved.

Contact center management still monitors calls, hoping to inspect quality into a call.  They still use outdated measures like Average Handle Time (AHT) and still give incentives to employees believing this is a way to improve performance.  Oh, and instead of beating employees up, they take them to the “couch” and give them them therapy.  This is so . . . yesterday.

Yet, when I walk into contact centers I see the tell tale signs of old thinking.  They come in many forms like those displays that tell you how many and flash colors when the queue is to large.  Yes, let’s hurry up off the current call to get to the next one, so that the customer you just rushed off the phone will have to call back (failure demand) or quit using your company forever.

The monitoring of calls for quality purposes is probably the most pathetic.  Did you smile and sound cheery for the customer.  This seems to be of more importance to management then actually being able to deal with a customers variety and providing service.

You see our problem with contact centers is design and they have all been designed with the wrong thinking.  Many were set up to save money by dealing with customers using a cheaper medium (phone), routing calls, get management data or the worst of all to save money.  Customers have been forced to use contact centers for these reasons which would be alright if service was actually provided.

More often than not I see contact centers filled with failure demand.  This runs 25 -75% or more of all calls.  It is a measure of quality that any contact center should take inventory.  Measure this and you will spend less time monitoring agents and more time fixing the causes of the failure demand and shutting it off.

I know, you can’t control what demand you get into your contact center.  My point exactly.  You have to realize you are part of a service delivery system and not a stand alone function left over from the industrialized design your company or partners adopted ages ago.  The one where you break up the company into pieces and optimize each piece.  But the pieces don’t fit together very well and this causes sub-optimization and creates waste.  Oh yes, your customers feel it, every day when they look for service and have to navigate your “functions.”

Speaking of functions, let’s not forget the IVR that has too often been over-engineered by some technology company trying to get a few extra revenue dollars.  They still remain my most loathed apparatus in contact centers.  Many were created to get you to the right answer (see failure demand) and others to reduce costs, but no one seems to care about the customer that actually brings profit and revenue.

In the end, if contact centers are to be modern they need a modern design and better thinking, not more technology or couches to perform therapy.  Take a look at the demands your customer places on your organization as a place to begin redesign and remove your companies performance from the industrial revolution into a new modern age of service design.

Join me for the International Deming Conference in New York City on March 21 – 22.

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.  Read his articles at Quality Digest and his column for CustomermanagementIQ.com  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/TriBabbittor LinkedIn at www.linkedin.com/in/trippbabbitt.

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Outsourcing, Systems Thinking and Contact Centers, Systems Thinking Concepts

The New Shell Game in Service

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The advent of technology has enabled work to be spread around the world.  Try finding who actually does the work once it reaches an electronic mailbox and you are sure to need to hire a detective.

Service organizations have designed front offices that actually can’t do anything but pass the work to the back office.  And some times either the front office and/or back office are outsourced to a country with cheaper labor.  This is allowed only because we have technology to pass things around the world.

As a customer, I get frustrated with talking to contact centers that have been outsourced and off-shored.  Yes, sometimes I can’t understand the agent, but that isn’t the reason for my ire.  The problem is they can’t help me when I get to them.  They read scripts and are polite, but they can’t help me.

The sad thing is I run into the problem when the agent hasn’t been off-shored.  This has long led me to believe that the design is the problem whether outsourced or not.  Consumers are frustrated with IVRs to navigate, scripts to overcome, and back offices hidden away with the people that can actually help me buy or solve my problem.

Many companies have programs for off-shored companies to teach language skills to their employees.  But no one is addressing the real problem of the design of the work.  The result is predictable demand from customers that are caused by a failure to do something or do something right for a customer (failure demand).  Or worse, the customer never calls back . . . and you can’t measure loss of business.  The reality is that if you have large amounts of failure demand, you have a large loss of potential and existing business – word gets around.

Too many service organizations take the attitude that it is costly to actually answer a phone call with a human that can absorb the variety service customers bring.  And to design work that actually allows a customer to get an answer one-stop would have the organization drowning in red ink.

The management paradox is that nothing could be further from the truth.  Good service always costs less than bad service . . . by a lot!  Designing out failure demand and creating value for customers is what creates profit.  There is no profit without customers.

Service organizations have created a maze for customers to navigate thinking that this is good business.  For customers, it is a shell game from an unscrupulous street vendor determined on hiding the pea.  This is a lose-lose for both service provider and customer.

Join me for the International Deming Conference in New York City on March 21 – 22.

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.  Read his articles at Quality Digest and his column for CustomermanagementIQ.com  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/TriBabbittor LinkedIn at www.linkedin.com/in/trippbabbitt.

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