Donald Trump Against Rewards and Incentives?

Are you kidding me?  Donald Trump one of the icons of American Capitalism was speaking against bonuses and incentives (listen – for the impatient folks go to about the 3:00 minute mark).  Bankers making $40 million plus while not even being very good bankers.  These are sales people manipulating the system for the rewards and incentives and who put these systems in place?  Command and control thinking is responsible for this.  Bad loans to achieve the reward or incentive.  Makes you kind of miss the old “boring” bank.

While doing bank management consulting I worked with a regional bank that was moving from the old “boring” bank to become a “bigger” bank and needed to act like a big bank.  They got rid of the old bankers because they weren’t being aggressive enough in their selling.  They needed rewards, incentives and salespeople not bankers.  Oops! they were caught up in the mortgage crisis with this knew aggressive approach.  They are still trying to dig themselves out, the problem is the management doesn’t see what is wrong with their “new” thinking (which is really old).

Most banks stayed clear of the bad loans that started this crisis and have stayed the course.  I would like to see these banks reap the benefits of “boring” banking.  Give them the TARP funds and let the knuckleheads fail.

Rewards and incentives had no small role in the current crisis.  They always get you less.  The sub-optimize the system and get people focused on defacto purposes not related to the real purpose . . . to serve their customers.  This sub-optimization is costing them in higher costs and worse service. 

The leadership development of banks need to include systems thinking as part of their organizational change management programs.  Only then, can they begin to eliminate waste and improve service.  I have several management articles associated with this and banking worth a gander, see this link.

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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Service Innovation: A Better Idea

Service innovation must be hard to come by as I see organizations spending money for very expensive training in innovation.  I have news for every major and minor corporation . . . innovation is not that hard to come by.  I would stand to say even public sector innovation is more than possible for the approach I am referencing.

So here we go . . . where can ideas percolate? With marketing? Executives? Ughhhhhh! No.  That front-line employee that interacts with customers on a daily basis  You know, the worker . . . the ones command and control organizations try to “dumb down” with technology, the ones that aren’t allowed to participate in decision-making for the work they do every day, the ones we try to outsource or get the cheapest, least qualified to save money.  These people have first hand knowledge of what customers want and need from our services.  To varying degrees the workers may be asked (half-heartedly) what they think, but command and control organizations usually don’t put innovation into the hands of “those people.”

I had a conversation recently with a pharmacist for a large drug store chain.  He shared that he gets dictates all the time from corporate marketing and/or executives about what displays. rules, policies, etc. leaving them little room to do the things that would actually enhance profit and customer service.  After all, these marketing and executive folks deal with the customer every day and they know better than what a front-line employee would know (they ARE paid more).  Even though they either never have done the job or haven’t been on the front-line in years.  This isn’t a bottom-up thing this is an outside-in proposition, the front-line worker is closest to the customer.

All those standard displays, processes, etc. keep service companies from giving good service and tapping a large source of potentially profit-enhancing, cost-reducing ideas.  Unfortunately, the command and control thinkers miss this potential goldmine.  The leadership strategy is to manage them with dictates.

A systems thinking organization taps into the front-line worker hires people for these positions that can think and allow them to use their brains to help improve the organization.  These systems thinking organizations work to understand purpose, demand, value and flow and have measures that relate to purpose leaving the workers the ability to innovate . . . liberating method.  This liberation of method enhances the enjoyment of the work and gives the organization a plethora of new ideas to increase profits and reduce costs.  But all this can only happen if we change the way we think about the management of work.

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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Time for a Different Approach for Service Improvement

I have talking to several service organizations that want to know more about systems thinking.  Some have Lean Six Sigma, Lean, Six Sigma, TQM, technology, customer service training, etc. or some combination of these.  Most of the Lean Six Sigma folks I have spoken with are already coming to the conclusion that  LSS does not work the same for service organizations as it does for manufacturing.  I command for recognizing this.  Others are disappointed in their inability to sustain the improvements.  One executive described their efforts as “we fix one problem only to create 2 – 3 more and the ones we fix are broken within a few months.”

As a “reformed” Master Black Belt in Lean Six Sigma I can tell you that LSS has many shortcomings and have blogged about many of them. Other efforts in customer service training fail in other aspects as they assume the problem is with the worker only.  The reality is the problem lies in the system . . . the people, the technology, the work design, motivation, decision-making process, etc.  I have seen people attempt to make things better, but not change their thinking about the causes of waste.  Their organizational change management programs focus on the symptoms and not the causes of these wastes.

To have sustainable improvement organizations must choose a path. One leads to more tools and treating of symptoms . . . or for those that believe they are improving . . . “doing the wrong thing, righter.”  The other path is a systems thinking approach that leads to better thinking and treating the organization as a system.  You have a choice.  You may want to know your options.

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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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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The 95 Method