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 Zero-Sum Game: A Loser's Mentality

Most of us have connected with the service sector (public or private) and felt like we have been “worked.”  That burning feeling that what matters to you does not matter to the service company you are interacting with. 

The source of this feeling might be the IVR system you have to go through with its multiple layers of questions and feeling like you won the lottery that day by saying the right words or pushing the right buttons to get to a person that can actually help you.  The multiple follow-up calls you have to make to get an answer can be both frustrating and time consuming.  All along you think in the back of your mind either “how can I quit using this company” or “how do these companies stay in business with such poor service?”  A lot of us tolerate the poor service because we figure the next service organization will be just as bad as this one and the switching cost is too high.

The sad part is that service organizations could provide really good service at a lower cost, but command and control management doesn’t think that way.  The command and control mentality prevents good service and promotes higher cost.  They just don’t see it.  They manage their businesses in a zero-sum game believing there is a trade-off between costs and good service.  One can only be achieved at the expense of the other.  And guess which loses most of the time . . . good service at the expense of some financial or performance target typically for some financial reward that customers would cringe at if they knew about.  The leadership strategy of command and control organizations is to do as little for the customer as possible and maybe they won’t recognize or complain about the bad service.

The problem is customers aren’t stupid and the tolerance for poor service is at boiling point.  Social and business networks are now offering mediums to communicate poor service in an on-line instantaneous fashion that is viral in nature.  People will know about a company’s poor service much faster than before and avoid using those organizations that are guilty.  Recovery will be too late and the costs that don’t show up on the financials will already be incurred.

The management paradox here is that all this is unnecessary.  The zero-sum game is a loser’s mentality.  More costs are incurred through bad or poor service than are incurred when the service is good.  Command and control thinkers do not account for failure demand, multiple calls from the same person to get a problem corrected, or chase the status of a previous call.  All failure demand is waste.  Imagine how much costs would fall if customers got what they want and the corresponding system was re-designed to give the customer what they want and eliminate this failure demand.  Costs would fall and service would improve.

The systems thinking organization understands that value drives profit and not vice versa.  The command and control organization only knows the zero-sum game that is a guaranteed loser.  A change in leadership strategy is imminent, where will your service organization wind up?

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 (free) Understanding Your Organization as a System and gain knowledge of systems thinking or contact us about our intervention services at info@newsystemsthinking.com.

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The New SPC for Service: System Performance Capability

One of the things that is integral to a systems thinking approach is the use of data, but not in the command and control way of thinking.  I have already heard from many of you moving away from traditional (and destructive) call center management measures like talk time and other productivity related measures.  Instead now using failure and value demand measures and the type and frequency of these calls that John Seddon outlined for us in Freedom from Command and Control

We also need to understand the data on a service organization’s ability to perform against customer demand.  These are better measures regarding the performance of the system as a whole and not the performance of a unit or department.  A systems thinker understands that if the customer expects to get something within a time frame (say a week) and the service isn’t performed during this time frame it will create failure demand (chase calls).

The data from the customer expectation is typically “end-to-end” and crosses (potentially) multiple units or departments.  In a command and control organization the measures are by individual, unit , or department and not “end-to-end.”  These end-to-end times have a nominal value (what matters to the customer) and in command and control organizations are often ignored.

The new SPC for service needs to be Service Performance Capability using statistical process control.  What is the customer expectation around a service and how well does the service organization perform around it.  This “outside-in” approach is key to the systems thinking organization.  The command and control organization will pass down financial and performance metrics from the top-down and never consider the customer perspective.

The measures needed to achieve business improvement are concerned with the demand and flow:
Demand – The type and frequency of demand that customers put on the system.  The predictability of failure and value demand.
Flow - The capability of the system to handle demand in one-stop. If customer demand has to go through multiple hand-offs what is the capability of that demand as defined by the customer.

In future blogs I will walk through the statistical definition of capability for our new SPC system.

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 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.

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Marriott Hotels: Is Standardization and Profit a Problem?

I am staying this week at the Marriott World Center where I have done speeches and stayed many times over the past three years.  Every other visit has been for business, but this visit is different . . . this one is the family vacation.  You know . . . wife and two kids “vanilla variety, see Mickey and Minnie, play golf” vacation.  I have almost always been upgraded at this hotel as it is a huge, massive place.  I really never needed the upgrades when by myself on business.  But now that I am on vacation with 3 others, I wanted to be sure I would get a place with plenty of room.  I requested an upgrade half expecting one and when I called a week ahead of time, it was confirmed I would get one of the big rooms.  The internet description confirmed from room details also indicated I would get this large King suite room with sofa pullout and two TVs and pool view. 

Armed with phone and internet confirmation I felt pretty confident when I strolled into the lobby on last Friday morning that my upgrade would be imminent.  When I checked at the front desk I was immediately told no upgrades were available and that the fact I was using points would get me the least of the rooms available.  WOW, Platinum elite and glad that my points were so valuable when I really needed to use them.  I was sent to the front desk training manager who informed me that I couldn’t get the room I needed until Monday (3 days latter).  I relented weary of finding a new spot at this late date.

On Monday, I checked with the front desk in the morning and the room still wasn’t ready, “but would be later that evening.”  Never happened (late that evening) and spoke again to a front desk manager who informed me that not only would I not get a suite, but that she would see what she could do for Wednesday.  I’ll let you know what happens from here.

What I have learned is that the reward points cut into the profitability of a single hotel and this is why they prefer that even Platinum guests not use their points at their destination.  Their customer management process and selection of the “lowest grade” rooms for those using points will discourage a guest from using points at their hotel in the future.  The problem is they take the value from the entire Marriott hotel network and frequent travelers talk about this stuff a lot when they speak with general travelers or amongst other frequent travelers.  The casual traveler seeks the frequent travelers opinion about destinations and experiences . . . word-of-mouth not accounted for on a balance sheet or income statement, but all the more important than all the commercials they run.

Additionally, I learned that the internet confirmation room detail sheet is a standard and in the words of one manager “not representative of the actual rooms we have” therefore the reason for my misunderstanding.  I have no other source to go to than what they represent to me on the internet.  Another failure of standardization and technology in the eyes of the customer. Customers only know the truth by what they see and hear, they can’t read service organizations minds on what is valid and what is not.  Further, these standards also inhibit the absorption of variety that customers seek in services something again not accounted for in Marriott’s customer management process.

All I can hope for is that someone from Marriott or other hospitality industry folks read this and start down the path to systems thinking the industry’s service is in a decline and they are sorely in need of business improvement that will keep them focused on the customer and not the financials.  Value before profit needs to be the mantra.

To learn more about systems thinking, download “Understanding Your Organization as a System” from www.newsystemsthinking.com or read the blogs at blog.newsystemsthinking.com.  These are free resources to a better way.

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Everyday Waste with Command and Control Thinking

OK, so my wife goes to buy a pair of shoes at Dick’s Sporting Goods.  While she is there she observes that there is a customer returning a pair of shoes bought from the another location.  The staff did not want to take the shoes back because this would show up negatively on their store profit.  From the customer perspective, they went to the other store because of a greater variety of shoe selection and had returned to this location because it was close by their home.  Ultimately, the staff member accepted the shoes back knowing that this might affect his stores numbers and might even (some day) lead to its closing. 

While doing bank management consulting, I observed the same behavior at branches.  Many banks would advertise their CD rates and calls for the CDs would go to the call center.  And instead of opening the account on the spot,  the call center was forced to send and/or transfer the customer to a branch.  This was all about the branch getting credit for the CD opening and reflected in their branch profit.  Would the customer have preferred to open the account on the spot?  No one knows for sure, because no one ever asked or looked at it from that perspective.

I am always amazed at the great waste and trouble organizations will go through to make sure that the income statements are accurate and the targets are hit at great cost and decreased service to customers.  The systems thinking organization understands what is important to the customer and then builds its system to optimize value to the customer first.  This always leads to business cost reduction and business improvement that the command and control thinker can not see.  Command and control thinkers are too busy making sure that each component is “optimized” for profit and fails to see what really matters to their customers.

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The 95/5 Rule

As I have entered discussions on Linkedin and other business network sites, I am alarmed by the number of people that are focusing their energies on things like how to find employees that are nice vs. kind and whether a person’s past performance is a good predictor of future performance.  It gets to some of the fundamental problems in our thinking and/or believing that our emphasis on the individual will make an organization better.

Dr. Deming taught me that 95% of the performance of an organization is attributable to the system (processes, technology, work design, regulations, etc.) and 5% are attributable to the individual.  During his 4-day seminars he would use the analogy of an business needing to be run like an orchestra.  Where we can’t have a 200-piece group of prima donnas trying to play a solo.  To achieve great sound pleasing to the ear, each needs to understand the broader aim and system.  As opposed to a bowler that only needs to be concerned with himself or herself.

This fundamental change in thinking is crucial to be a systems thinking organization.  Organizational change management means moving to this type of system.  The management paradox here is that this not the way command and control thinkers think.  They spend an inordinate amount of time coming up with performance appraisals, incentive schemes, performance targets and the like that wind up making the system performance worse.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  He is focused on service design through culture and customer. Reach him on Twitter at www.twitter.com/TriBabbitt and LinkedIn at www.linkedin.com/in/trippbabbitt/.

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Test of a Good Measure in the Service Sector

In Freedom from Command and Control, John Seddon (Managing Director of 95 Consulting Ltd., my partners in the UK) outlines three fundamental principles to a good measure for the service industry.  He works off the premise that the purpose of measures and measurement is to gain knowledge by acting on the system. 

This is diametrically opposed to the command and control method of using measures as targets that are arbitrarily chosen and increase variation in the system.  These same targets become the focus of worker’s attention and they learn ways to manipulate the system in order to achieve the target.

So what are the 3 principles of a good measure in a systems thinking organization? Let’s take a look at what Mr. Seddon proposes:

  1. Does the measure help in understanding and improving performance?
  2. Does the measure relate to purpose?
  3. Are the measures integrated with the work?

Targets are motivation killers.  In contrast, understanding how capable an organization performs against customer demands will always focus people on the right things.  The purpose becomes to serve the customer . . . not the target.  These measures also assist in allowing people to experiment with method (i.e., they way they achieve purpose).  In order to gain knowledge on method we have to integrate the measures (and decision-making) with the work.

With the right measures, systems thinking organizations can achieve new heights in business cost reduction and business improvement.  Customers will be ecstatic about these changes and costs will disappear in a vapor.

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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Sprint: Calling Me Won't Improve Your Service

Maybe it was just a nice gesture or an attempt to pacify a blogger.  The phone call I received from Sprint yesterday about my blog Sprint Away from Good Service shows the type of waste we have in service.  Just as in the service from Sprint my reader had experienced with them the attempt to recover is always to late . . . and more expensive.

Command and control thinkers manage their world from measures they can see on financial reports and not the value given to customers.  Sprint is the epitome of this, but certainly not the only one.  They bet that you (the customer) won’t complain, to save money.  The same way they give you those stupid $100 coupons that you have to send in to get the rebate, they hope you won’t actually send them in.  The problem is it takes the value out of their organization piece-by-piece until everyone hates your service.  Unfortunately, that doesn’t show up on an income statement.  However, I will tell you that the damage is far more than can measured by financials . . . the numbers are just “unknown and unknowable.”  How could you measure the decline of reputation?

The complaints logged to Sprint are what we call “failure demand.”  Unwanted demand from customers that include complaints, chasing (follow-ups), rework,etc. are all types of failure demand.  If I were to sit at Sprint’s call centers or stores how much failure demand do you suspect I would find.  I would guess 60% or more and any service industry I have ever worked with had between 25% and 75% failure demand.  You see command and control organizations like Sprint process your phone calls like a production line, “how cheaply can I handle them” is the mantra.  So they implement measures of production like talk time that matter little to the customer and wind up causing more failure demand.  All of this command and control non-sense is born from scientific management theory over 100 years ago. 

A systems thinking organization knows better, they understand that servicing the customer costs less.  They understand that service and costs are not a zero-sum game that you have to have a trade-off between good service and increased costs.  Better service always costs less.  Think about it, if Sprint gave the customer what they asked for on a timely basis failure demand goes down, customer satisfaction goes up and Verizon, AT&T, etc. would be getting their heads kicked-in.

Like most service organizations Sprint decided to play the recovery game.  Thank you Sprint for the phone call, but your opportunity to serve my reader has passed.  If you want to do all of us Sprint customers (including me), look at your failure demand and your end-to-end processing times and you will see how to be a better telecomm company.  Oh, and  you won’t need this recovery customer management process which does show up on your income statement.

To learn more about systems thinking download “Understanding Your Organization as a System” (free).  If your company provides service this will help you to begin to think in a different way that is simpler and easier than command and control methods.

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The 95 Method