Category Archives: Systems Thinking and Healthcare

EA Sports – Worst Company in America?

What makes a company the worst in America?  The Consumerist website has determined EA Sports is this years winner of the Golden Poo award – for the second year in a row.  EA Sports soundly defeated perennial powerhouse Bank of America.

I like to read the Consumerist as you get some really good info on what problems organizations have in delivering product and/or service.  I see many of these problems with organization obsessed with revenue and costs – where they should be focused on the customer and let revenue and costs take care of themselves.  Unfortunately, too many executives only get targets for revenue and expenses that lead to bonuses.  This leads to a short-term focus and an internal view.  Consumers feel the pain.

There are few companies (and I haven’t found one) that deliver really good service and mostly for the reasons I have noted above.  All organizations in the US are struggling with an environment that has been shrinking.  The shrinking has to do with our collective approach to management and a scarcity mentality.  Budgets are part of this thinking.  Growth and innovation takes a back seat to budgets and shrinkage.  Businesses fight over market share rather than ways to grow.

This is a disease that began here in America.  EA Sports in the eyes of consumers that frequent the Consumerist have spoken.  However, so are your customers – are you listening?  Do you know how?

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/TriBabbitt or LinkedIn at www.linkedin.com/in/trippbabbitt.Enhanced by Zemanta
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Technology – A History of Increasing Costs

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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Pay and Performance – Two Separate Things

As the political season heats up, so does the call for “pay for performance.”  The assumption here is that it works . . . and yes, to some degree it does.  Unfortunately, it works in a manner that actually diminishes and destroys service.

Performance is dictated by the system in which you work.  This is true for front-line workers and executives.

I have often quoted W. Edwards Deming and written about the 95/5 Rule.  95% of the performance of any organization is dependent upon how well your system is set-up, and only 5% is down to the individual/  The system is comprised of processes, work design, management thinking, measures, roles and any other element that exists.

It is true that pay drives individual performance.  However, this takes away from the focus on the customer.  Organizations that are functionally separated try to give managers individual pieces of the organization to optimize which results in sub-optimization.  Sub-optimization is the enemy of synthesizing the whole – creating waste and inefficiency.

Individual pay for performance creates competition between workers where cooperation needs to exist to improve any system.  Further, individuals learn to manipulate the system to survive or gain reward.  What this boils down to is that the system loses when pay is tied to performance.

I have seen organizations go out of business while everyone is still getting bonuses for performance.  How can this be?  Some claim it is just the wrong measures and miss the point.  The problem is that pay is tied to performance in the first place.

Improving performance requires redesigning our organizations be they governments or private companies.  Working on the 5% is just dumb and wastes what little time we have already.  This requires a shift in Western mindsets about how we think about work.  It wouldn’t hurt to have governments start to learn this with teachers, police officers and other government jobs.

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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Management Infatuation . . . The Large Project

What is it about large projects that is so attractive?

Is it the ability to put a large project on a resume?  Or the feeling of power to have introduced massive change?  It is hard to figure out the answer to this management paradox.  Maybe there isn’t one.

Service organizations and governments love the large project.  A lot of them involve information technology, but these projects certainly aren’t just IT.  IT just seems a good way to fund it.  No one will argue with large projects that are the future.

However, large projects seem to fail at unbelievable rates.  In fact, I am yet to see a successful one.  All have begun with great pomp and circumstance.  Executive speeches given, resources allocate, Gantt charts populated on hundreds of pages and the master plan is unveiled.

Two months later and the ADD management has usually already lost interest.  Funding for other things is poured into the financials of the projects.  Large projects do represent a great way to hide costs.  Our software developers put in 500 hours last month into your project . . . and you got one line of code – if you are lucky.

These days I remain amused by those that promote their company or themselves as large-scale project managers with years of working on large projects.  All that experience that has delivered so very little in tangible improvement.

The problem is really quite simple, the need was never really there to do a large project.  Egos and assumptions play a larger role in these decisions than need.  The truth is that most of the time value can be created by small changes on the front-line.  It just isn’t as glamorous.

Before the next big project kicks off, take a couple of deep breadths and do the following:

  1. Get knowledge – leave the egos and assumptions behind
  2. Improve the work and pull IT

There are more to these steps, but if you are reflective on this you will discover a much better way than big projects.

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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IT Workers – Let’s Get the Outsourcing Argument Right

Former IT workers at Molina healthcare have started a firestorm with a lawsuit (see Outsourced and Fired, IT Workers Fight Back).  The article is an interesting read and I side with the former IT workers . . . but not for the reasons that keep being used.  They claim discrimination and they may be right, I don’t know.  The court will have to sort this one out.

Regardless, discrimination or even the patriotic message of protecting American jobs will not resonate with corporate America.  Heartless . . . maybe.  But workers – and not just IT workers – need a new tactic.

Plainly said, almost all outsourcing I have seen in contact centers and IT is not profitable.  Yep, that is correct . . . it is NOT profitable.  This is a message that corporate America will understand.

Yes, I know the wages paid to foreigners is much lower.  However, reducing wages 30 – 50% or more isn’t enough to make up for the poorly designed IT when you separate developer and the work that IT is supposed to enable.

IT executives have made IT in the form of production plants in manufacturing.  I even hear words like “software factory” when I speak to executives.  Software is not manufacturing and to treat it as such is foolhardy.  This is economy of scale thinking and is used in an IT outsourcing strategy.

So what is wrong with the design?  The flow of the work – economies of flow.  Traditional software process: project planning, feasibility studies, systems analysis, requirements definition, implementation, integration, testing, installation, deployment and then maintenance.  There may be derivations of this, but who came up with this crap?  Why has this become best practice or the “one best way.”  IT projects have stunk up the place for a long time.  New thinking is needed to save jobs, profit and improve IT in general.

The traditional approach allows for the functional separation of work.  Project managers, business analysts, testers and other roles for the most part are non-value adding.  Most outsourcing seems to go after the developers, because they are expensive in an executive’s mind.  But developers are the only ones that do the work that adds value.  They have been hidden away as too expensive to interact with those workers that add value in the eyes of customers.

Developers are the only workers that can add value.  Having them away from the front-line employees that interact with customers is expensive.  Instead they have phone calls, meetings, requirements documents to facilitate their work.  Flow is disrupted and costs are increased . . . a lot!

Functional separation of work and economies of scale thinking leads to higher costs.  Outsourcing the pieces makes sense with this line of thinking.  This is why executives embrace it.  It is wrong thinking familiarize yourself with the arguments I have linked to in this article.  If you are in the midst of having outsourcing companies learn your system to get rid of your job, give me a call.  New thinking that is more profitable may be your only chance.

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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A New Blog for Healthcare

I will send out a more formal announcement later this week, but the new 95 healthcare blog has arrived.

A little about the blog:

Andy Brogan and Mark Cannon have both been senior managers in the NHS, each having considerable experience of Acute and Community health care, Social Care and commissioning. Despite their years of experience working inside the NHS they are only now, together with other 95 colleagues, starting to explore the application of the 95 Method within the UK health and care sector. What they are learning reveals a system which, in taking care of business, may be at risk of forgetting that it is in the business of care. The very performance management infrastructure which has been designed to improve quality and efficiency is revealing itself to be a primary cause of dysfunction. So too with commissioning, competition and the thrust towards a market approach to health care provision the 95 Method is revealing these to be driving forces behind a system which is fragmented, adversarial and, critically, incapable of enabling continuity of care across providers. The human and economic consequences are distressing but point the way towards an immense opportunity to improve the health of the population and the health of the bottom line. The ‘95 In Health’ blog is tracking the journey of the 95 Method in health as Mark, Andy and their colleagues learn. You can find it here if you want the latest and if you want to contribute.

Personally, I can’t wait to learn what applying the 95 Method does for healthcare in the UK.  As we get knowledge using the 95 Method in healthcare, the US can benefit too.

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

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Service as a Commodity

An excellent post by Simon Caulkin called Not Customers but Commodities got my attention.  It illustrates how customers are being treated like commodities.  Technology, standardization or a combination of the two have left us feeling . . . shorted in the service we receive.

Efficiency has replaced sanity and customers feel it.  Service organizations (public and private) have looked to their own bottom-line to “hit the numbers.”  Meanwhile service to customers has deteriorated either rapidly or slowly, but does entropy.

Managers without fortitude or knowledge claim they are trying to balance profit and good service.  The result is disastrous and preposterous.  The false assumption is that there is a trade-off between good service and costs.  The “zero-sum game” as I call it.

The truth is there isn’t a trade-off.

Good service delivered the way a customer wants it always costs less.  Less handling and more revenue.  Oh, and less marketing to service customers that don’t need to be convinced of your good service – because you are delivering it.

Absorbing variety in a technology, best practice, rules, scripted and standardized world is very difficult and the customers are left out of the equation.  Like a product that is cheap but only lasts a few days, service is done in the cheapest manner at the expense of the customer.

The examples are many, like a contact center geared to answer calls that add revenue but put customers through the gauntlet when they have a problem.  In an attempt to avoid costs, service organizations add costs.  IVRs to navigate and back offices to negotiate . . . in a word it sucks.

The good news – for now- is that all your competition stinks too.  Customers are mired in mediocrity or less and yearn for someone to actually stand out.

However, given the service systems companies have designed business improvement seems so far away. Managing costs over rules good service.  If only service companies and governments understood that serving customers ineffectively is at the root of the causes of costs.

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

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Economies of Flow for Service Design

Most service organizations are designed with economy of scale thinking.  This is an industrialized, mass production mindset that is making service and government worse.  Service designs require different thinking to achieve better performance.

Economies of flow is a much better way to design service.  But this requires thinking outside-in and designing services that work from customers back into the organization – this is to achieve better flow.

Flow can then be evaluated by starting with customer demands.  If a service organization has good flow than there will be less failure demand (demand caused by a failure to do something or do something right for a customer) or more demands that bring revenue – the kind we like.

Resolving customer demands “one-stop” has many different meanings.  FCR (first call resolution – another name for one-stop) too often means that the service representative can’t do anything else.  The reality is that the customer’s view is the only one that matters.  If the customer doesn’t see it as one-stop, than to measure another way is just kidding ourselves.  Bottom line is a customer demand is only resolved when the customer says it is.

To improve economies of flow requires designing out failure demand and designing in better flow for the variety of demands that customers present.  And variety of demand is what makes manufacturing different from service.  Designing service to absorb variety is key.

But it is economies of scale thinking that prevents service from breakthrough performance.  The focus is on activity and reducing transaction costs rather than improving flow.  The result of scale thinking is higher costs and unhappy customers.

Conversely, service organizations and government that embrace economies of flow thinking will achieve unprecedented improvement in performance.

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

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SPC – There is NO Other Way!

I read an article today in Quality Digest about Dr. Don Wheeler (An Interview with Donald J. Wheeler).  I had the pleasure of getting a solid back ground in SPC from Dr. Wheeler and from a local (Indianapolis) statistician named Tim Baer.  I won’t pretend to have their knowledge, but through application of statistical theory I have learned that there is no other way to know whether improvement efforts or experimentation are making things better.

W. Edwards Deming challenged us in many ways.  He warned us not to copy the Japanese (because we could never catch up).  The perpetuation of Dr. Deming’s ideas requires a solid understanding of statistical methods.  Rarely, do I walk into a service organization and see the use of control charts (or process behavior charts as Dr. Wheeler references them).

The truth is there is no way to know whether things are getting better without the use of SPC.

That is correct – there is no other way!  So this begs the question of why their use is so uncommon amongst those that mine, analyze and use data.  If they did they would understand why targets are so damaging.  Or why the system governs performance and not the individual.  These are things you come to understand when you understand variation through the use of SPC.  My Myth Buster series at IQPC explains why – click here.

To me, operating without solid knowledge of SPC is a mistake that is very costly.  An organization trying to achieve business improvement must know when things are betting better or falling apart.  Sometimes you find out that things are worse when it is too late.  This requires an early warning system for a business tsunami that can wipe you out.

Using data in appropriate manner is hard to find these days in service organizations.  SPC is the only tool worth learning.

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

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Tools or Systems Thinker – You Choose

I recently read an article by one of the management fad proponents that even though they used tools they were a systemic thinker.  Further review and reading determined they provided no evidence of systemic thinking in the work they had done.  Where is the evidence?  None existed.

The use of tools offers problems I have written about before.  I wrote about it in my recent Quality Digest column – Are You a Sheet or Shelf Thinker? Tools limit thinking and create a barrier to systemic and breakthrough thinking.

Systems thinking (and more specifically, the 95 Method) is about method and innovation.  It addresses the management thinking that has to be challenged because of the assumptions that lead service organizations in the wrong direction.  The functional separation of work, targets, financials, hierarchy, technology, information are but a small sample of items that need to be challenged.

So, part of systems thinking is about addressing not just the design, but the management of the work.  Management thinking drives the design.  The management fads claim to do this too, but look for the evidence . . . lots of hat, but no cattle.  Pathetic and misleading.

Managers have a choice too, they can pick assumptions or knowledge.  Knowledge requires context to all those management reports with meaningless data.  One can only get that in the work.

Tool-focused activities support status quo in management.  Most don’t know better, but many believe that someday if they see the benefit of tools management will buy-in over time.  The benefit never comes in sufficient quantity to convince management and management relegates the improvement fads to lower and middle management or the front-line.  A dead-end for sure.

Unless efforts to optimize systems include management . . . it is better not to start.  Systems thinking includes everyone and everything, not just the elitist or tool users wreaking havoc on the systems.  This is not business improvement, it is more waste and sub-optimization in the system.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to make the work work.  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 info@newsystemsthinking.com.  Reach him on Twitter at www.twitter.com/TriBabbittor LinkedIn at www.linkedin.com/in/trippbabbitt.

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