The Core Management Paradigm that is a Paradox

What elements do every command and control manager believe are core to their management paradigm?

  • The amount of work to be done.
     
  • The number of people to do the work.
  • The amount of time it takes to do the work.

The command and control manager sees their problem as a resource issue.  They are focused on SLAs . . . # of things done over time, talk time, volumes of incoming work, etc. This is a manufacturing view of service work, complete with inspection.  This thought process brings forward the need for scripts, procedures, targets, standards, compliance, etc. to “manage” the organization.

In manufacturing, we used to reference the hidden factory.  The visual factory was the one that built the good stuff (value) and the “hidden” factory was all the scrap and waste.  Well, in service there is a hidden management factory that is separate from the work where managers gather to make decisions about the work that they don’t understand.  This factory is supported by technology to help “dumb down” front-line workers.

Command and control thinkers are focused on cost reduction.  Scientific management theory promises economies of scale, but in a management paradox this thinking drives costs up and service down.

There are five fundamental thinking problems that John Seddon outlines for us in Systems Thinking in the Public Sector.

  1. Treating all demand as though it is work.
  2. No accounting for failure demand.
  3. The foolishness of managing activity.
  4. A service systems that prevents absorbing variety.
  5. Negative Assumptions about people.

For more on these see my blog 5 Fundamental Thinking Problems in Service Businesses (link).

Systems thinking is about changing from command and control to systems thinking.  This shift in thinking can achieve corporate cost reductions and business improvement beyond traditional organizational change management programs.

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.

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Think First: Call Center Outsourcing

Let’s assume that we already have a call center, as opposed to the question of whether we need a call center (different blog).  In command and control thinking organizations they see an expense of $s for personnel or $s per transaction and say if I outsource this to India, Philippines, etc. (doesn’t really matter where) I will save 50 to 75% of my per head costs.  Call center management or some executive thinks “I would be an idiot not to reduce these costs on my financials.  After all, I want to hit that performance target  and get that bonus to take the wife and kids to Disney this year.”  OK, I have embellished a little here, but I promise I am not far from the truth.

This argument is plausible to the command and control thinker.  What they don’t consider is looking at their organization as a system.  Scientific management theory is the root of this thinking where we have the functional separation of work to optimize production.  Economies of scale for that function.  Taiichi Ohno and W. Edwards Deming taught a better way Ohno to thinking in terms of economies of flow and Deming in terms of viewing an organization as a system.  By optimizing one part we stand the chance of sub-optimizing the whole (and usually do) with command and control thinking.

Further, what no one accounts for is failure demand that call centers receive from customers.  These are the number of phone calls that a call center receives because of a failure to do something, chase calls, errors, etc.  This failure demand accounts for between 25 and 75% of all calls into a call center (and if you are in the public sector even higher).  Essentially by outsourcing call centers we wind up outsourcing our failure demand or waste. Locking in the costs that can’t be seen by the command and control thinker.  Also, we lose our feedback loop to help optimize economies of flow which usually leads to finger pointing between the outsource vendor and it’s customers.

Wrong metrics are used in outsourcing.  Outsource vendors talk about their functional measures like talk time, abandon rate, etc that appeal to command and control thinkers without considering broader system measures.  In one bank, talk time was reduced at the expense of additional failure demand making customer service worse.  We can take more calls by reducing talk time, but in a management paradox increase failure demand leading to more calls and escalations.

You also have to deal with additional costs to manage a contract with the outsource vendor, sometimes hiring someone to help with this, SLAs, performance metrics and a slew of seldom talked about costs.

We live in an outsourced world, but service organizations need to run their organizations as systems as Deming outlined and have consideration for economies of flow.  In addition, technology has enabled our ability to outsource . . . at great cost to service organizations.  Failure to recognize these aspects leads to increased costs and poor service.

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.

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Lean Manufacturing is Not for Service Organizations

One thing I have learned from John Seddon (and 95 Consulting Ltd. my partners in the UK) is that that tools of manufacturing do not transfer very well to service organizations.  Personally, I have always started with concepts and principles before tools, but command and control thinkers want the quick fix . . . so to the tool kit we go to for immediate results.  The problem is that there are differences between service and manufacturing.  With more and more lean manufacturing people moving to service they don’t distinguish the difference.

So let’s establish the one big difference and it is in variety of demand.  The lean manufacturing folks love to start with 5S.  A tool that is used to provide a standard workplace environment, establishing standard work and the removal of waste.  The philosophy is comprised of order, organization, discipline, elimination of bad habits and wasted effort.  This leads to the standardization of work, wholly the wrong place to begin in service because of the variety of demand that customers bring to service organizations.  This creates failure demand when the standard process is unable to absorb the variety of demand that customers bring.  Command and control thinking managers love standardization because this allows them (typically) to blame the worker for the non-standard events, plus this allows them to do planning and resource management unaware of the need to separate the planning and operation management.

Requirements for workers to meet standard times and work measures known as targets give us plenty of examples for this misconception.  Dr. W. Edwards Deming showed us how to deal with variation and stood against the targets promoted by lean activities.  An understanding of variation is in order to avoid tampering with the systems they work in.  Unfortunately, this leads to increased costs and a drop in customer satisfaction that is a spiral adding more costs and decreased service to customers as the system becomes more burdened with command and control decisions.

Business process improvement and corporate cost reduction in service industry is best done without the influence of Lean or Lean Six Sigma manufacturing tools.  They miss the point of variety in demand in service industry and lock in costs with their standardization activities.  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.

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One Secret Weapon to Service Improvement

I have not been subtle in past blogs about the need for change of thinking.  One thing I see in command and control organizations that is a staple is fear.  More specifically, the fear of failure.  Fear drives thinking in command and control organizations.

Front-line workers know it and W. Edwards Deming recognized it . . . Drive out fear was the 8th of his 14 points for transformation of US industry.  Service industry in particular is enthralled with the performance appraisal, merit rating and annual reviews to determine the performance of the individual.  All waste . . . as Dr. Deming pointed out that 95% of the performance of any organization is attributable to the system and ONLY 5% is attributable to the individual.  All this attention to the individual worker drives conformance and not innovation, because of fear. 

The command and control manager and executive are not exempt from this fear.  Missing targets both financial and performance can spell doom for this group.  Fear?  Yes, of course.  I read an article recently by Russell Ackoff called Why Few Organizations Adopt Systems Thinking.  In this article, Dr. Ackoff talks about errors of commission and errors of omission.  “Errors of commission occur when an organization or individual does something they shouldn’t have done and errors of omission occur when an organization or individual fails to do something it should have done.”  He argues that the deterioration or failure of organizations are almost always due to something they did not do.  Fear drives errors of omission.  What will be the consequences of failure? 

So this is the one secret weapon of improving service organizations.  How does your organization handle failure?  Do they hide it, persecute it, or encourage it?  When I talk to service organizations about failure demand, several executives have stopped me and said that their organization does not use that word (failure).  Too bad because failure typically leads to success.

Systems thinking organizations run towards failures and not away from them.  A leadership development or organizational change management program devoid of the topic of failure is missing the opportunity to change thinking.

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.

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Shared Services, Technology and Outsourcing: State of Colorado can Learn from Mistakes in Indiana

I came across an article on Govtech.com where the State of Colorado is legislating and the CIO promoting shared services to “save money.”  My blog about shared services being done in State Government in the states of Michigan and California is relevant (Government Shared Services: A Recipe for Disaster).  Unfortunately, states are focused on cutting costs which in a management paradox will increase them.

I am a former CIO for FSSA (Family and Social Services Administration) in Indiana.  We decided during my time (2005 – 2006) there to “modernize” the Welfare Eligibility system.  Consolidating the intake system to call centers, eliminating paperwork and making the application process internet friendly.  A plausible idea that I supported at the time.  The problem is the idea has been a disaster in Indiana, potential recipients are being hit with lost documents and missed appointments leading to calls to cancel the $1.16 billion, 10-year contract with IBM and its partners.  Add to that additional staff are being added by FSSA to help clear the backlog.  This is a “modernization” of outsourcing, technology and shared services that we should learn from, not cover up.  After all, you won’t find this failed implementation on IBM’s commercials and website.

What I have learned in the past 3 years from John Seddon (and my partners at 95 Consulting Ltd) is that this project was destined to failure from the beginning.  FSSA took the approach to automate without first performing “check“, this means an understanding of purpose, customer demand, capability, and system conditions were not a part of the original analysis.  This led to poor work design based on command and control thinking top-down vs. outside-in.  Had we studied the system we would have been able to design the work to service those individuals seeking welfare and reduced costs.  Automation, outsourcing and consolidation is not a good place to start to make improvements.  Government management needs new thinking and method to achieve better service and lower costs . . . this is not a zero-sum game (both lower costs and better service can be accomplished).

My friends in the UK have taught me that:

  • economies of flow will always trump economies of scale;
  • service organizations should perform check first and then pull technology, or determine the need for shared services or outsourcing;
  • the hidden costs of bad or poor service are ignored by command and control thinking and understanding customer demand will help reduce costs and improve service;
  • better measures can be found by looking at service from a customer perspective.

I commend Indiana FSSA Secretary Anne Murphy for suspending the roll-out of the “modernized” welfare eligibility system and taking a couple steps back.  Whether she follows better thinking and method remains to be seen.  This system now is costing taxpayers the $1.16 billion contract, additional staff and a whole lot of heartache to those seeking welfare.

For Governor Bill Ritter and State CIO Mike Locatis of Colorado.  There is a better way.  The recommendation by vendors to start with a front-back office process of sharing first and solving problems later, IT outsourcing strategies and shared services strategies are all proven non-starters. 

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.  Learn more about government services at www.thesystemsthinkingreview.co.uk.

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The Money Pit: Government's Obsession with IT

If you look hard enough you will find IT failures at all levels of government . . . local, state and federal.  You will not find these failures in the advertisements of large technology firms or on their websites.  All the same they exist.  They are communicated as extended contracts (fixing the problem will take longer), additional testing required, canceled contracts or a plethora of other possible phrase-laden justifications.  None the less, they are still failures and in many cases a waste of millions or billions of dollars of taxpayer money.

The preconceived notion that IT needs to be a part of service design is fundamentally flawed.  The assumption that websites, mobile technology and the like are fundamental to better service is flawed in that they are just thoughts and ideas.  The danger to government management is when we take these ideas and assume they will improve service.  Further, automation shares this same assumption.  The mentality always seems to be “lets automate this process” . . . instead of “should we automate this process?”  Yes, some things are best left to the “dumb” user that person that actually does the work.

My government and bank management consulting background has seen the hiring of 6 IT people to replace 2 front-line workers in the name of automation and all things IT.  The problem lies in the fact that no one takes time to understand the work.  Managers write specifications, RFPs go out, negotiations are done, contract signed, processes scoped and sometimes redesigned, hardware and software are purchased and/or developed, training and then the failure blamed on some unwitting “fall guy.”  The IT vendor gets more work (a shocking reward for failure) and the cycle continues.

There is a better way.  The better way is to understand work as a system, improve the work and treat IT as a constraint (steady, don’t fall over IBM).  When the new design becomes stable then “pull” IT.  Greater return for your IT strategy . . . what a concept.

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.

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Are Customers "Pulling" Value from Your Services?

In service organizations, customers demand good service, but what does that mean?  In a call center (or any place a customer interacts with your service company), customers want that one call (stop) resolution.  If a customer can get what they want in one phone call or one phone call plus one hand-off than they will be able to derive or “pull” value.  So, how easy is it to pull value from your organization?

We have found that the highest amount of closure in one stop to be around 65%.  My bank management consulting background has seen one stop resolution as low as 15% in US banks.  Often service organizations will claim one stop resolution until we perform “check” and discover that this is not true when we evaluate their workflow.  When one call resolution becomes a target we often see massaging of the data to achieve these targets.

The amount of complexity to a phone call varies by industry where retail typically has lower complexity than a IT help desk.  Regardless, call centers designed based on what matters to customers allow these customers to “pull” value from them.  The reality is this does not happen as customers are put in queues and dealt with by busy service folks (with talk time targets) and can’t “pull” this value. 

Most call centers (after evaluation) we have worked with have not been able to provide even the most basic of services in a customer satisfactory way.  When they can’t “pull” this value, you wind up with failure demand (chase calls, problem calls, escalations etc.) that wind up costing more than if the service organization would have dealt with them correctly in the first place.  This failure demand is not accounted for by the command and control thinker or on any balance sheet/income statement for those that see calls as productivity costs to be managed.
 
Call center managers are concerned about “push” because of this productivity mind set.  Prescribing how service agents should act at the point of contact.  The assumption is that customers will value the same things and management can come up with the right script to satisfy it.  We hear talk of service organizations wanting meet or exceed customer expectations but little change of method to achieve it and organizations failure to recognize “push” methods won’t achieve it.  The result of these prescribed “push” methods is higher costs (rework) and worse service.

A systems thinking organization understand the difference between “push” and “pull” and that an understanding of customer demand is the first step to redesigning the work to absorb customer variety.  They also understand the management paradox that costs go down when service improves.

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 thinking 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.

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3 Things to Consider Before Outsourcing

I spoke to a reporter from India (Reed Business Information) this morning regarding outsourcing and more specifically the impact on Infosys.  He informed me my view was “different” than everyone else and I could only reply that I was used to that comment.  Most Americans want “in-sourcing” because they want to bring jobs back to North America, I want service organizations to realize it is a poor financial decision to take this call center or IT outsourcing strategy. 

Decisions are made in command and control fashion from the financials without knowledge of the work and/or based on scientific management theory that has long proven . . . outdated.  So here are 3 things to consider before you outsource:

  1. The Work.  For a call center what is the type and frequency of demand.  More importantly is the demand value or failure?  Most call centers have between 25 – 75% failure demand in their call centers and after outsourced lock in the costs of this failure demand.  For software development it is the realization that software is not developed in a production line, software is developed from knowledge about the work.  When developers are separated from the work it almost guarantees a poor outcome in what is coded leading to multiple rounds of rework that quickly lose their “cost advantage.”
  2. Economies of Flow.  Economies of scale drives American business.  Few understand ”economies of flow” is the real driver of costs.  Trapped in this wrong paradigm service organizations separate functions of work outsourcing pieces leading to sub-optimization (improving the cost of one area at the expense of all others increasing total costs).
  3. Ancillary Costs.  There are technology costs, contracting costs, turnover costs, training costs, meeting costs, customer impact costs, etc.  Look hard at what really is involved and you will probably find other hidden costs.

Evaluating these 3 areas before outsourcing can lead you to better decision-making about what your service organization should do when considering an outsourcing strategy or even an in-sourcing strategy. 

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 evaluation of in-sourcing or outsourcing strategies at info@newsystemsthinking.com.  Reach him on Twitter at www.twitter.com/TriBabbitt.

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The Waste of Targets in No Child Left Behind

In Indiana, if the 180-day mandatory school year wasn’t bad enough, now we have these “standards” (targets) for the federal No Child Left Behind Program.  Last year 65.7% had to pass the test and the new target for this year is 72.6%.  This increase in the target has made in the best schools in Indiana “fail” in the eyes of this federal program.  All this foolishness achieves nothing.

The school systems are performing the best their systems are capable of achieving.  Let me give you an example.  I shoot around 80 when I play golf.  My system allows me to shoot in a range between 75 and 85 with an average of 80.  This is what I am capable of achieving without changes to the system.  To have someone tell me to shoot 72 (on average) requires a change to my system (swing, short game, etc.).  Just setting the target does not change method.  Our school systems need to change method to achieve new heights . . . a new target without method achieves nothing. 

Worse these targets become the defacto purpose of the school systems when the real purpose should be to find new methods to educate our children.  Instead, this defacto purpose urges schools to meet the target.  The targets will (and have) promote cheating and manipulation in the school system that distracts them from changing method and blurring the schools purpose.  These are old methods born from scientific management theory from the late 1800s.

Let’s look at the waste already being created.  My son goes to Hamilton Southeastern and we have already received a letter from the principal explaining why they didn’t pass the new standard target.  I don’t care the reason and what a waste of time and resources for the principal to have to take to to explain.  He needs to be finding better methods.  Targets are creating waste in letters of explanations (time to write), and mailings (money).

Our school systems are badly in need of better methods, not targets.  Our country and state need to focus developing these new methods and gaining knowledge.  I urge Dr. Bennett to find new thinking as targets and standards are ancient ways and cause intolerable waste.

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.

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The Paradox of Susan Boyle

How do you not blog about this woman.  Everyone should have seen this by now http://www.youtube.com/watch?v=9lp0IWv8QZY.  We need more stories like this to remove the cynicism of the world.  The paradox of Susan Boyle is somewhat of an enigma.  She is a new chapter to be written.  I can not help but believe that these types of jolts to our individual systems can only have a positive impact on the broader systems.

It makes me wonder if the management paradox we face in scientific management theory and command and control thinking vs. systems thinking could have the same impact for business.  For me, I believe it can.  This will require people to not be cynical and open their minds to systems thinking.  It is not what we were taught or our belief systems to believe.  The counter-intuitive nature of the thinking of W. Edwards Deming, Taiichi Ohno and John Seddon require a shock to our belief system, but as Susan Boyle has shown us the sound can be beautiful.

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.

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The 95 Method