The No Tool Zone

I know I have posted on this several times, but when I googled “the case against shared services” I only found IT companies that stand to profit from shared services and their case for shared services.  The truth must be known.

Whether you are in the public or private sector a shared services strategy is a short-sighted one when the driver is to reduce costs.  Management by the visible numbers has long become a staple and this is a bad habit that just keeps increasing costs.

The management paradox is that when we set out to reduce costs as our focus, we wind up increasing the costs.  Shared services comes from this mindset.  If we combine like work we can save our business, country, state, or town money.  It’s a no-brainer and they are correct (in part) . . . they lack a brain.

Whether administrative functions, call centers, back office or other assorted combinations, people need to understand that costs come from flow and not activity or scale.  In short, economies of scale is a myth.

Here are some potential problems (thanks to John Seddon of Vanguard for these) with shared services:

• Moving the work to a central location removes continuity.
• The creation of waste from handoffs, rework and duplication.
• It lengthens the time to deliver the service.
• It increases the amount of failure demand (demand caused by a failure to do something or do something right for a customer.
• The Front-Back Office design is not always the best design for the work.

What we need to do instead is understand that the design and management of work is in question.  This requires understanding our organizations as systems by performing check (from the Vanguard Method) where we understand the what and why of current performance. 

Starting with an understand of customer purpose and demand, deriving customer measures from purpose an organization can improve services first.  Based on knowledge gained from “check” an organization can determine whether or not sharing services makes sense.  Making decisions about shared services from knowledge is always a better way.  Don’t you think?

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

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

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

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

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

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

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

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

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

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to make the work work.  Download free from www.newsystemsthinking.com “Understanding Your Organization as a System” and gain knowledge of systems thinking or contact us about our intervention services at info@newsystemsthinking.com.  Reach him on Twitter at www.twitter.com/TriBabbitt or LinkedIn at www.linkedin.com/in/trippbabbitt.

Earlier in my consulting career, I was contracted to help sell BPM software to banks.  The product seemed plausible to me, automating manual processes using the latest in technology.  This makes for less cost through greater speed.

My job was to improve the processes before they were automated . . . or so I thought.  I ran into some problems with BPM products and wish to share those with anyone that is considering such a venture.  So here are 3 items that you should be aware of when considering such a move:

1. Technology companies exist to sell hardware and software.  Many times in the sales process or later I ran into problems with the technology company wanting to “meet schedule” or “make the sale.”  This attitude didn’t help the bank improve the work and worse automation of a poor process was implemented.
2. The design of work is fundamentally flawed.  The whole front office-back office design of work in banking (or any public or private service organization) is fundamentally flawed.  The hand-offs, routing, queuing, sorting, etc. is all waste.  The design leads to much of the failure demand (i.e., the demand caused by a failure to do something or do something right for the customer) that customers give to service organizations leading to increase costs.
3. The standardization required leads to entrapping technology.  Technology organizations require standardized processes or work to code the flow.  Standardization is the great management paradox in service industry.  Why?  Because standardization can not absorb the variety of customer demand that service organizations receive.  Inability to absorb variety leads to increased failure demand and thus higher costs and worse service.  Technology just locks in the waste.

Even since working with banks have I found the same flaws in service organizations.  However, many of these organizations forge ahead without knowledge of the work.  But the pre-existing paradigm of:

• How much work?
• How many people?
• How much time?

 . . . drives organizations to believe they are achieving innovation leadership when in reality they are increasing costs.  Improvement of costs require redesigning the systems against customer demand then pulling technology.  As costs are reduced through the flow not the scale (see: Economies of Flow Defined for Service).

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

Whoa down, cowboy!  When we are talking about saving money in government, we are in such a rush . . . to waste more money with shared services.  Go to Govtech.com and you will find many “success” stories of shared services.
The reality is that shared services has actually wasted more money than it has saved.  The crime being committed is coming from those vendors (cowboys) telling prospective government officials how much money shared services will save them.  But in previous posts I have talked about the foolishness of this thinking.  So let’s go with the Dos and Don’ts of shared services (some with links):

DON’T . . .

• Make assumptions about your Government Service being the same as another department, state, agency, etc.
• Listen to an opinion from vendor “experts” about your Government Service
• Listen to stories about standard metrics or KPIs for your Government Service
• Assume that a front office – back office split is an optimal design (a common requirement to shared services - combining the front office or the back office)
• Assume that costs are in the transactions and economies of scale
• Don’t buy any technology until you understand your system

DO . . .

• Understand that costs are in economies of flow (not scale)
• Understand that you must get knowledge about your own Government Service by performing check
• Understand customer demand and measures from the outside-in
• Understand the concept of failure demand and how much you have as a percentage of your total customer demand
• Understand that information technology should be the last thing to look at when dealing with shared services
• Redesign your services first

A shared services strategy (or any other strategy) done without knowledge of your system as outlined in this post is destined for an expensive failure.  Government officials can not afford to fall into this trap and taxpayers should be intolerant of anything that does not improve service and decrease costs.  Government officials must become good stewards of tax dollars.

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