The No Tool Zone

Folks are hitting my blog from everywhere on earth.  What are they most interested in . . . “How do I reduce costs?” or business cost reduction. The easy way is to reduce headcount, which to me is the worse thing to do.  You wind up with dictates like let’s cut 6, 60, 600, 6000 people from our company.  The bean counters love this approach just cut so many from each department.  These folks are command and control thinkers, they understand nothing about the “work” just the numbers.  I understand those that are forced into this to survive and have NO other alternative.  But what about those that didn’t eliminate bonuses or take executive pay cuts . . . FIRST.  The response is typically we have to keep the good people, funny how it usually isn’t the executive ranks that are trimmed.  So, now we have too many chiefs and not enough indians . . . any one left to do the work?

A systems thinking company does everything they can to not lose those on the front-line.  Executive pay and bonuses are cut FIRST.  Then “across the board” pay cuts before job elimination takes place.  These organizations understand when things get better they will need their collective system to service customers.  

Need more?  Business improvement and cost reductions can be achieved by eliminating failure demand (rework, “chase” calls, etc.) at the points of transaction of service organizations.  Call centers run from 25 to 75% failure demand which is unprecedented opportunity to achieve these reductions.  This may mean that mangers and executives need to step outside their office amongst the front-line to learn about the work they have been managing from balance sheets and income statements for the last two decades.  Scary stuff to actually go where real work is done that matters to your customers.  You will find plenty of waste from that last policy, rule, script, strategic plan, mandate, target, project, balanced scorecard, performance appraisal, etc. from the last executive dictate.

Get started today with systems thinking.  A free download is available to “Understand Your Organization as a System” with information and exercises. Twitter me at “tribabbitt”, but get started.

I used to use what I thought was a word (not an acronym) Snafu to describe those things that had hit a snag.  Later when I discovered it was an acronym born from WWII, I was less willing to use the it.  FUBAR came later and still less willing to use it.  If you don’t know what the acronym stands for Google it, this is a blog not an acronym finder.

Command and control thinking certainly can lead to FUBAR and SNAFU.  It did during WWII and it does today.  The functional separation of work (scientific management theory) is only only the beginning.  Blame Frederick Winslow Taylor if you must, but no one forced you to follow this method that creates sub-optimization and waste.

Separating the decisions from the work came from A.P. Sloan at GM over 50 years ago, yet we still use this thinking today to come up with targets and mandates that almost always assure locking in waste.

The zero-sum mentality of costs and good service where costs must increase to improve service is only exposes the ignorance of command and control thinking.  Worse this thought process leads to increased costs.

Financial and performance targets, the norm for US businesses increases costs, promotes cheating, prevents cooperation, and becomes the defacto purpose of the organization (i.e., meet the target).

Customers are managed to contracts to reduce costs only to increase them with complaints, relationship managers, call centers and mandates in the command and control approach.

Command and control thinkers love to copy and buy IT to automate only to assure that costs will increase and value to customers decline.

A systems thinking organization understands that business cost reduction and business improvement comes from creating systems that satisfy “what matters” to the customer and allows workers to make decisions about the work and managers to manage the system.  No more SNAFU or FUBAR, only a change of thinking is required.

For more on the distinctions of command and control vs. systems thinking click here.

Command and control thinkers believe that organizational change management comes from projects and project plans, cost-benefit analysis, deliverables, milestones, strategic plans and the like.  Time wasted over and over again breaking things down, timelines, inter-dependencies identified, resources and skill sets . . . you get the idea.

Systems thinking reduces complexity by eliminating all this.  The Vanguard Method (that I use) begins with “check” which means understanding the “what and why” of current performance as a system.  Change begins at “check” in contrast to the command and control style of predetermination of outcomes.  In the command and control world plans and projects are rarely returned to . . . they usually wind up in a neat binder on the executives desk.  Worse, much time is taken to cover-up failings and milestones are extended, manipulated or constantly adjusted.

The Vanguard Model for check follows a six step process:

1. What is the purpose?  At each service touchpoint (where the customer transacts business with service company) What is the purpose of this service from the customer’s standpoint?
2. What are the types and frequencies of demand?  Managers must go to the point(s) of transaction to find out.  Why do they call?  What do they want or need?  What matters?  Are the demands value or failure?
3. How well does the system respond to demand?  How well does your service respond to these demands?
4. Study the Flow.  Only after studying demand and measuring how well the service is performed do we study flow. 
5. Understand what system conditions exist.  Systems build their own waste from command and control thinking.  Work design, information technology, contracts, targets, structure, scripts, etc. are all potential conditions that add waste to the system.
6. Review management thinking.  Learning is not something for the front-line only, managers learn through this process.  They can see the waste caused by command and control thinking.

Doing “check” creates the mindset and momentum for business improvement.  Purpose and measures change in systems thinking.  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 info@newsystemsthinking.com.  Reach him on Twitter at www.twitter.com/TriBabbitt.

Nothing emits more emotion and discussion in my conversations and speeches than incentives and bonuses.  My position is against them in that they cause waste, sub-optimize and drive the wrong behavior in individuals and managers.  Most people politely listen, a few strongly agree and there are those that call me a communist, socialist or unAmerican.  For the latter, my response is either “you mean . . . opposed to the dictatorship you have here” or “show me in the US Constitution or Bill of Rights, your right to bear bonuses and incentives.”

Why is it that bonuses and incentives equate to “all things American” in some people?  There are no democracies in business, they are run in dictatorship (command and control) style.  No one votes for what project to do next, these are decisions by management.  So why is it that this decision-making process is seen as American and a conversation against bonuses and incentives seen as unAmerican?

What do I have against bonuses and incentives?  Let’s take an intellectual look:
 

1. Bonuses and incentives sub-optimize.  The focus is usually on an individual, department, team and group.  AIG has brought this to the forefront:  How does a company that loses billions pay out bonuses?  They focus on the individual.  Dr. W. Edwards Deming taught us that 95% of performance has to do with the system and 5% the individual (see Red Bead experiment).  I recommend an understanding of variation is in order for any manager. So why do we focus so much on the individual?  When it creates winners and losers and manipulation of the system to win.
2. They become the de facto purpose.  The purpose needs to be expressed in terms of serving customers and not . . . will I make my bonus.  Be honest, it does cover up REAL purpose.
3. Typically are accompanied by performance and financial targets.  If I hit my individual (or group) financial and performance targets not only does it sub-optimize and set a defacto purpose, but lead to cheating and creation of waste.  We also will never know with targets how well we could do with purpose-related measures.  We stop when the target is hit.
4. They drive out intrinsic motivation (Theory Y) in favor of extrinsic motivation (Theory X).  Not all extrinsic motivation is bad . . . like pay.  But if I doubled your pay, would I double your performance?  The answer is “of course not” not unless the system changes (work design, enabling technology, policy, etc.) will I be able to improve performance.  Bonuses can drive out our intrinsic nature to do better.

These are all attributes of a command and control organization.  A better leadership strategy is a systems thinking one.  A systems thinking organization looks to those things that distract from purpose which (again) is serving the customer.  Those wanting to accomplish strategic change management might want to explore a more American 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 info@newsystemsthinking.com.  Reach him on Twitter at www.twitter.com/TriBabbitt.

I have seen it over and over again in service organizations.  The over-prescribed use of information technology in service.  I have already blogged about The Evil of Information Technology.  Where two command and control systems (buyer and seller of technology) create a scenario that almost ensures creating waste.

The issue at hand is that good customer service is pulled from service organizations at the points of transaction (or I like to call them “touchpoints”).  These often ignored front-line workers ARE the company to most customers.  How well the customer management process performs at the touchpoint is crucial to the performance of the organization.

“Lean” manufacturing likes to standardize as the first step and those using “lean” service like to start here also.  This is wrong first step in service industry.  Service customers bring a variety of issues to the table and standardization makes the customer fit into the company’s process, where what the customer wants is the service company to absorb their different varieties of demand.  With technology change management leading the way with scripts and coding to “standard work” service organizations can not absorb this variety of demand.  Worse, the software has locked in the waste.  Why?  Because when customers don’t get what they want they either go somewhere else or they complain and/or call back to get the service they seek (failure demand).

Organizational change management in service begins with understanding the work (beginning at the touchpoints) and the ability to absorb the variety of demand posed by customers.  This variety can only be absorbed by a human, not technology or scripts or standard work.  Command and control managers believe they should be the ones making decisions about the work . . . the work that they don’t understand.  A systems thinking manager understands that the best person to make decisions about the work is the worker and the job of the manager is to work on the system.  Only a human can absorb the variety of demand from customers and the human worker should determine what technology, scripts, standard work, etc. will be valuable to enhance the service.

It was reported that $450 million in bonuses was paid out to AIG after losing $40.5 billion.  I ask how can an organization pay out a large amount when losing this much money?  I see two drivers of this nonsense.

1. The first has to do with sub-optimization of a system.
    
2. The second is the inability of US organizations to treat their organizations as a system.

Sub-optimization comes from scientific management theory where organizations separate the work into parts to create more production.  Marketing, sales, operations, finance, etc. work independently to optimize their own function.  This is based on a production mentality (or command and control) and creates a situation where the parts are optimized at the expense of the whole.  This creates a win-lose scenario.  For instance, Sales can make the sale by cutting price and get there commission, but it can not be produced profitable.  Companies create more and more controls to get around the commissions adding more and more cost to their company.  I see most US organizations with bonus and incentive schemes that don’t add up (sub-optimization) to better performance in terms of optimization of all components.  I liken it to a bunch of prima donnas playing solos in an orchestra competing to be heard.  A better way is to play music as a system that optimizes the pleasant sound to the audience.  This is true for business . . . an organization must play like an orchestra to achieve profitablity.

Their is a better way referenced as systems thinking approach.  Organizations need leadership development that includes movement away from scientific management theory toward a way that optimizes performance.  Those organizations that understand the difference will be the future those that don’t will be like AIG begging for more taxpayor money.  Leaving us all shaking our heads.

I am relatively new to Twitter, Linked-In and Facebook, but I like the idea.  I am hopeful this will be a disruptor to the push sales mentality my Dad knew . . .  you know “smile and dial.”  One gets an opportunity to know someone and “kick the tires.” 

The next old idea that needs to change is customer research where a professional is needed.  There are some important things to do and not do in research, but they can be learned.  People that do the work in service organizations should be engaged in the research as they are really the ones that understand and can change the work.  Too many times have I seen a “professional survey” that sits on an executives desk and no action takes place to achieve business improvement.  Conversely, the people that provide the core (or value) work are in prime position to understand what research can be jettisoned into action. 

My counterparts in the UK (Vanguard Consulting Ltd.) ask two questions to prospective clients:

1. How much money do you spend on customer research?                                                                                                    
2. What actions for improvement have you taken as a consequence?

If the answer is “not much,” you have wasted money on research.  When the response is “quite a lot” to both questions I see command and control managers with new edicts, rules, reporting, work standards and the like in response to any negative findings.  These become frustrating to the people that actually DO the work.  Misinterpretations of the research by command and control management lead to tampering (taking the wrong actions) and creating more waste.  Actions need to be based on knowledge of the work. 

The people on the front-line that do the work are in the best position to interpret what a customer needs or doesn’t need.  In service, many times managers script to ask for help and to comply front-line service workers do, even if it doesn’t look like someone needs help.  This can actually be annoying rather than helpful.

So if you are going to improve your customer management process by using customer research, engage the front-line worker.  They can be taught to do their own surveys and customer research.  More importantly, they can save you a lot of money and give you actionable business improvement ideas from the research.  Systems thinking begins from the outside-in and your front-line is best equipped to aid your organization in achieving greater customer satisfaction.

I received some direct questions from leaders regarding “how” they fix their service.  Systems thinking can not be learned by sitting in your office.  It is learned by doing . . . it is only by doing that you can unlearn command and control thinking.  Leaders need to find out for themselves that the current management paradigms around design and management of work are flawed.  This is one reason I have limited classroom training.  I respect training, but not when it comes to changing thinking.  Training is usually absorbed in a way that lets us “fit” things into our current paradigm.  Leaders recognize words like flow, process, value, demand, measures, but only in light of what they currently do.  Leaders have to be shown there are better measures and that the current measures do not help them improve.  Training and presentations on systems thinking only leads managers to argue, defend, rationalize or anything else to maintain the status quo . . .it is only natural.

Only by personal inspection of the work can a leader find new ways to improve their system.  And only with engagement in the work can a leader get a reliable view of what is currently done and the consequences of the work.  So improvement of service cycle begins with “check” or gaining a better ystems thinking perspective to achieve knowledge.

My partners in the UK often find that clients want a presentation to get buy-in as a requirement for change to happen.  Their findings are that inclusion is often detrimental to the intervention because of misunderstandings or offer opportunities for the masses to entrench themselves based on imperfect knowledge.  The word change emits fear and myths around.  “No targets” to them means “no measures” which is not the message.  Or that if the system is attributable to 95% of performance and only 5% to an individual.  Leaders tend to think people aren’t important, when what is being said is the leaders are responsible for the system.  All misunderstandings and interpretations are barriers to learning.

Important questions for leaders (from Freedom from Command and Control) to consider:

• “Do you want to lead an organization where the people who do the work control and improve the work? . . . This is to give up your conception of management.”
• Are you prepared to change your role?  Could you conceptualize you work as ‘working on the system’?  Are you prepared to find out just how different this is from what you might currently do?”
• “Are you prepared to do these things when those above you might not understand or condone it?  When those above dictate the numbers to be obtained, they undermine the ability of the organization to achieve them.  Are you prepared to take on this tension as you investigate better measures?”
• “And would you want to be the carrier of the news when you find it?”

If the answer is yes to all, you are prepared to begin “check” and learn by doing.  As you learn . . . it will be painful.  This is not a traditional leadership development program or traditional leadership strategy.  This is ONLY for those that are curious (you will need it to sustain), tough (mentally) and ready to learn a better way.  You may begin by doing a health check (or check out “Our Services” at the top of the blog). As with all services provided by Bryce Harrison . . . we guarantee our work.

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 info@newsystemsthinking.com.  Reach him on Twitter at www.twitter.com/TriBabbitt or LinkedIn at www.linkedin.com/in/trippbabbitt.

There is an article from BusinessWeek On-Line titled JP Morgan Chase to Increase India Outsourcing 25%.  The comments attached to this article are damaging enough.  These comments are mostly related to the TARP money and losing American jobs overseas, people are outraged that their tax dollars ($400 million) are going to help India.  There are bigger problems with IT outsourcing than the heated and emotional ones.

The real issue to me is that it doesn’t make economic sense to have an IT outsourcing strategy.  Yes, Chase may lose some customers, but they are actually increasing their costs NOT decreasing them.  Let’s look at the reasons:

1. The decision to outsource is made top-down, based on costs.  These are the command and control thinkers that don’t understand the work to begin with (ala AP Sloan) but see a huge savings in taking a transaction cost mentality to reduce transaction costs while driving up end-to-end costs.  Additionally, what about the contract that is managed, turnover, and communication which are all issues in outsourcing.
2. IT is over-prescribed.  IT people can automate any process, the problem is most of it is done without understanding customer demand and the work that creates value.  This leads to IT that is not needed and usually institutionalizes waste.
3. Collaboration is needed to produce value-added IT.  The production line mentality of the IT shop assumes that the IT work can be done by gathering requirements and than “sending” the work development work away.  This rarely leads to a good outcome.  Developers need to be with those doing the work to create value.
4. Standard work and best practices don’t allow absorption of the variety of demand.  Outsourced IT demands standard work or best practices that can not let the bank absorb the variety of demand that customers demand leading to waste.
    

A better “systems thinking” way is to approach technology change management is to understand the customer demand, improve the work (without technology changes) and “pull” technology.  An IT outsourcing strategy can only prevent these things from happening and guarantee waste.

How is your organization’s customer management process?  The stories are pouring in from readersof my articles and blogs.  This one from a reader in Indianapolis.  You just can’t make this stuff up.  He writes:

“I bought my wife a new touch screen cell phone from Sprint.  When she got it, she just didn’t like it (couldn’t text well, not user-friendly, etc).  Sprint’s policy is that any new phone can be returned for any reason within 30 days of activation (Feb. 17th for us).  On Sunday, March 1st, I called to initiate the return process only to find that the phone could only be returned via mail and not to a store.  When the return kit hadn’t come in the mail by Thursday (it was promised on Tuesday), I called customer service to find that I actually could bring it to one of two corporate stores in Indianapolis.  When I went to one of the stores the next day, I was informed by the completely imcompetent employees that in fact I could NOT return it to a store and had to go via mail again.  Now I’m coming up to the end of my 30-day refund period.  So I called customer service again.  I was transferred from department to department, put on hold while agents spoke to supervisors, transferred again for a 2 hour period until they eventually said there was nothing they could do.
 
I said, “Fine, then put me through to the disconnection department.”  Suddenly every supervisor wanted to do anything and everything to keep my business.  But I’d had enough.  Altogether, I spent 6 hours and 45 minutes on the phone over a 5-day stretch AND spent a useless trip to one of the corporate stores.  Low and behold, the return kit arrives in the mail the next day, I sent her phone back, and proceeded to AT&T where I was in and out in 20 minutes with a new IPhone and cell phone plan.
 
If someone at Sprint would have spent the time I deserved, I would still be spending by hard-earned dollars with them.  Now AT&T gets their chance.”

The only thing I would challenge the reader on was the “incompetent” employees.  Employees that are “incompetent” are only so because the systems they work in are broken.  Sprint does not understand that a customer draws value end-to-end, only a systems thinking organization would understand this.  The failure demand (progress chasing, rework,etc.) phone calls are driving up costs at Sprint and losing customers for good. 

My guess is that if command and control thinkers get a hold of this they will look for some heads to roll, but a systems thinker understands that only 5% of problems are associated with a worker and the other 95% comes from the system (management, work design, technology, etc.).  More training, rewriting scripts or new targets will not fix this problem . . . it is systemic.  A better leadership strategy is in order and it begins with a change in thinking from command and control to systems thinking.