Who is the Customer?

I wish the idea for this post was original.  My Scottish brethren (Stuart Corrigan-95 Scotland) came up with the impetus for this blog.  Something that I hadn’t thought about in a while, but often comes up when working with service organizations.  So, just who is the customer?

  • The customer for government student loans is not the government (even though they will tell you they are).
  • Sales is not the customer of operations or vice versa.
  • Management is not the customer of the front-line worker (even though it is implied that they are).
  • The downstream unit is not the customer of the upstream unit.

There are no “internal” customers.  Only a command and control thinker would split the work out and think this way.  Spending time serving the wrong customer will only increase costs and waste.

For the systems thinking organization, there can only be one question to define the identity of the customer: “On the day we started the system who was it defined to benefit?”  As Mr. Corrigan points out, “answering this question and ensuring that every policy, process and measure is aligned to helping the customer get what they want is the only way to improve service and cut costs.”  Amen, brother Corrigan.

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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Benchmarking: What is it Good For?

Absolutely nothing! 

My counterparts in the UK have an article that is a worthy read Systems Thinking and the Case Against Benchmarking that discusses benchmarking in the public sector for housing repairs.  In this article Paul Buxton outlines four conditions that must be met in order to be able to learn from another organization.  They are:

  1. That the other organization is operating in a comparable environment.
  2. That the other organization’s performance is better than your own.
  3. Be able to understand the reasons that the performance is better.
  4. The lessons learned can be applied to your organization.

Paul points out that there are “significant difficulties” in meeting any of these conditions and “all are necessary to be sure that performance is not made worse.” 

My background in customer service consulting has allowed me to observe that organizations using benchmarking either gives the organization a false sense of security (my metrics compare well) or creates tampering with the system when the metrics are determined to be sub-optimal.  In the latter case, I have seen where the “industry benchmarked standard” for call answer rate is 93.49% and a service organization is at 85%.  There are problems with this comparison (as an example). 

  • What is the operational definition of “answer rate”?  I came from a background of defining SLAs favorably for the Fortune 500 companies that hired me.  What is counted and not counted in that answer rate? If the phone system is down that may not get counted or any of a number of other scenarios where we take out things that might make the answer rate % lower. Believe me data gets manipulated all the time to put companies in a positive light.
     
  • Is my service really better or worse if my answer rate is lower?  Besides the operational definition problem, there are other problems.  I could be answering 100% of calls and still not be providing good service.
  • By taking action, I risk sub-optimization.  My pursuit to get 100% calls answered, may negatively impact other parts of the system leading to increased total costs.
  • Different customer demands than the “benchmarked standard” may effect call answer rate.  Every service company has a different set of customers. 

The command and control thinker likes the idea of having the benchmark to create the “standard” and usually the next step is to use the standard as a target.  The organization than sets its resources (people, technology, process,etc.) to achieving the “benchmarked” target.  The target neither guarantees better service or reduced costs.  There are too many unknowns about what we are comparing against making benchmarking a waste of resources.

Worse, service companies try to copy competitors when their systems are completely different  . . . different people, culture, technology, processes, etc.  leading to disastrous consequences.  Based on faulty assumptions that benchmarking promotes.

There is a better way.  A service organization can identify measures that relate to purpose and acting on causes related to variation.  W. Edwards Deming taught us this.  What is your system capable of achieving and what are the causes of variation for your system.  The 95 Method (my choice of method) promotes performing “check” to gain knowledge of your system (purpose, measures, demand, flow and value).  This systems thinking approach will give you a strategic change strategy that will allow you to achieve business improvement.

So, what is benchmarking good for? Absolutely nothing! . . . say it again.

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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SLA = Stupid Limiting Agreements

SLAs seem to be the staple for the customer management process for contracts, performance and operations.  The first time I heard the word SLA I was consulting for a Fortune 500 IT company and they needed to have a group of metrics because of the poor service they had been delivering to their banking customers.  I already was a student of the statistics of Shewhart and Deming, meaning I understood the difference between “common” and “special” causes of variation and also understood that having a service level agreement (SLA) didn’t improve the performance of the organization.  I used SPC (statistical process control) to determine the differences in variation.  All basic to improving the system.

The problem . . . I was the only one focused on improving the partnership.  The IT vendor and the customer were focused on the service level and not the system.  The customer wanted penalties and the IT vendor wanted rewards (and to avoid penalties).  The two groups spent an inordinate amount of time dickering over what the rewards and penalties should be and I (working for the IT vendor) was to be sure that the operational definition of the metrics was such that the vendor could not fail.  The slew of waste (manipulation, reward/penalty setting, etc.) between the IT vendor and the customer was astonishing.  No one was interested in working together to improve method or even discuss the validity of the original measures. 

SLAs are no more than targets and create what I believe to be adversarial relationships and distrust, focusing on results not method.  This is no different when the SLAs are internal. I see this between departments and units. “I will get you my work in 2 days or less.”  The problem is the measure is not tied to any customer metric it is all internally focused.  Additionally, the amount of manipulation begins when you hear things like “the clock doesn’t start until I open your request” and they don’t open their email for a week . . . did they really hit the SLA?

A better “systems thinking” way is to understand purpose from a customer perspective, derive measures and then find “new” methods.  This avoids the waste associated with measures that do not matter.  Workers that understand good customer metrics and expectations can be creative in changing method.  Partners (like my Fortune 500 IT company and their customers) can achieve continual or continuous improvement by working together on method, not SLAs.

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 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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The 95 Method