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 Standard Email: Acknowledgement, Order Status and Thank You

We all get them the standard email when doing business with an organization.  “We acknowledge receipt of your order” and “Thank you for your business.”  It’s appropriate to thank someone and acknowledge their order.  It is just so  . . . automated.  I like the thank you, but it doesn’t sound real or heartfelt.  I will soon forget this company and may buy from someone else just because the experience wasn’t memorable.  Some services may get away with this, but if I am spending money that is significant . . . I want more . . . your customers want more.

Technology change management has brought us email and it saves money which for the command and control thinker is a bottom-line proposition.  Order status emails makes me wonder how much money they are wasting in technology and other non-value-added tasks to tell me the status, they are locking in waste.  As a customer I am left wanting more service and am more likely to refer business with a feeling of belonging than a “cost-saving” email.  If my experience is bad or didn’t meet my expectations the “standard” survey does not account for the variety of demand that I want from a service.  Standard emails, scripts and technology can not absorb this variety and usually lead to increased costs.

The customer management process must be appropriate for this variety of demand.  We are in desperate need of methods that lead to absorbing this variety.  Studying customer demand is a good starting point.  The type and frequency of demand will tell us how to redesign our services for customers to “pull” value.  This method will allow a service organization to achieve business improvement, business cost reductions and new business with a more customer friendly and “systems thinking” work design.

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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A Systems View

The first signs of systems thinking came in the middle of the last century in Japan.  This is where W. Edwards Deming influenced the Japanese to start to understand their organizations as systems.  They learned that the functional separation of work and budgetary controls led to sub-optimization and reduced performance. 

When economies of scale first enlightened Frederick Winslow Taylor in the late 1800s it was a breakthrough for its time.  The Japanese breakthrough was about taking a systems view to manage economies of flow an advancement so large it had US manufacturers pleading for protection.

Taiichi Ohno and Shigeo Shingo further developed these ideas at Toyota and Matsushita.  As a whole this the work of these two and Deming largely made up the Japanese Industrial Miracle.

US service companies still follow the economies of scale approach in command and control fashion.  Functional separation of work and budgetary controls that lead to sub-optimization.  The problem with command and control is the design and management of the work.  This thinking features separation of the decision-making from the work.  The worker works and management makes the decisions.  Work is broken into functions and decision-making (control) is achieved through financial goals and performance targets.  Management focuses on output for business improvement and cost reduction.   This focus assures sub-optimization by causing waste and preventing learning about the “what and why” of organizational performance.  Another drawback is the damage it does to culture when those that understand the work can’t make decisions about it or when they are forced to targets they know damage the customer and create internal competition.

This command and control thinking will be abandoned eventually.  John Chambers of Cisco says it will happen in 5 – 10 years.  Will your organization be ready?  What can be done.

Taking a systems view we can overcome this sub-optimal thinking.  To improve performance we must change the system to change the system we must change thinking to systems thinking.  Management thinking must change to improve the system . . . they are the owners of the system.  The good news is with the right approach this thinking can change in a short period of time in service industry. Months rather than years to achieve business improvement, culture change, and business cost reductions.

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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Customer Purgatory: The IVR

 

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As a customer I hate them . . . and as a consultant I hate them.  The IVR (Interactive Voice Response) system that you have to call and usually guess what to say or which button to push to speak to a person.  The questions are usually asked about your account number, number of visits (Disney), phone number, etc., and after answering these questions you are asked to repeat them again when you talk to an agent.  If you hit the wrong button, back into the queue you go and typically with another 8 – 12 minute wait.  The IVR “choices” are not always the way I would communicate my order or problem and I find myself guessing whether what I said or pushed was “correct” and I am occasionally chastised for being so  . . . ignorant.  Or sometimes the agent will tell me no one ever really “figures it out.”  I am not sure that makes me feel better.

Organizations that try to break calls down into pieces mostly find themselves with a significant number of lost or mis-routed calls.  Working to standards (method, procedures, scripts or work volumes) usually increases costs. That business improvement and business cost reduction exercise winds up increasing costs and creating a poor customer experience . . . a management paradox.  This problem becomes worse when people are removed from the call center in anticipation of “efficiencies.”

The current design of most call centers does not allow for value to be pulled by the customer.  Straight talk:  The poor service and inefficiencies (waste) are caused by the way call centers are designed and managed.

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 terminating bad service through application of new thinking . . . systems thinking.  Download Understanding Your Organization as a System and gain knowledge of systems thinking or contact us about our intervention services at info@newsystemsthinking.com.  You can Twitter him at “TriBabbitt.”

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John Chambers (Cisco) Declares "Command and Control is Dead"

Some relief in the 60 blogs I have written exposing command and control thinking as the root cause of bad service and increased costs.  John Chambers (CEO of Cisco) has declared that command and control thinking is dead and if you are an organization using this methodology you will be out of business in 5 – 10 years.  I would say he is about right on the time period and that it is about time a CEO of a major corporation recognized this fact.

The

The table above describes the differences between command and control and systems thinking.  In a word, they are . . . immense.  To move from command and control to systems thinking it requires a change in thinking that can only be learned by doing.  Organizational change management doesn’t require tools, it requires new thinking to replace old thinking (scientific management theory). 

The seeds of change are upon us.  If you haven’t already, start with the free download of “Understanding Your Organization as a System”.  Last one out (of command and control thinking) IS the dinosaur . . . and we know how that ends.

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