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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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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What Really Sunk the Titanic?

O.K., I know about the big iceberg.  What I am talking about precedes the contact between metal and ice.  This is more a lesson in a management style that existed on April 12, 1912 and still exists today. Yes, the 1,517 souls that lost their lives that day could have been spared with more lifeboats.  A fact that preceded all this caught my attention.

You see when the Titanic left port in Southampton, England on April 10, 1912 they had a group of ship-to-shore operators that were paid for each message that they dispatched.  This was early adoption of Frederick Winslow Taylor’s scientific management theory.  Pay per piece had gained popularity as well as the separation of work.

When the Titanic left Cherbourg, France for the US it had a prestigious list of passengers for her day.  All of these folks were in important positions Broadway producers and actors, important business people and the like.  All of these elite passengers needed to send messages and the operators were more than willing to comply based on their pay-per-message scheme.

As the ship sailed, messages came to operators at a rapid pace, but other messages also were coming to the ship’s operators.  You see, other ships were calling in messages to the Titanic about . . . icebergs.  The calls were burdensome to the operators as they got paid for the messages they sent, not the incoming ones from other ships warning of impending danger.  No one knows for sure, but it is believed from all accounts that only a couple of the many calls to the Titanic made it to the bridge or ultimately Captain Edward J. Smith.

The rest is history.   The de facto purpose of the operators was to make money by completing ship-to-shore communications.  Had they not had the external incentive, would they have communicated more iceberg citings?  No one knows for sure, but it might have saved the Titanic from its  infamous end.

Our service organizations are like modern day Titanics, clouding our future with bonuses and incentives.  Would the current recession have happened if short-term thinking, bonuses and incentives and other poor management practices had disappeared in 1912 with the Titanic?  We will never know.

What I do know is that it has been proved over and over again that scientific management theory, bonuses and incentives will always get us less.  Purpose gives way to greed.

The way of the future is systems thinking born from W. Edwards Deming and Taiichi.  I urge all to learn how to prevent their Titanic by downloading (free) “Understanding Your Organization as a System” which has an overview of a better “systems thinking” 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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50th Blog: My Personal Manifesto

One of my favorite movies is Biloxi Blues not so much for the film, but it gave me a tag line for my life purpose.  “Don’t ever compromise your principles or you become a candidate for mediocrity” as spoken by Arnold B. Epstein.  There have been many opportunities to “pack it in” and not follow the path less traveled, but someone has to stand up and say there is a better way, when there is.  Frustration in getting to change people’s paradigms goes with the territory.

I without doubt believe that Dr. W. Edwards Deming felt that same frustration after WWII when he had been so successful during the war effort improving manufacturing.  The decimation of Europe during WWII  left the world only one place to go for their goods . . . the US.  So the mantra became give the world what they want as fast as we can, not as well as we can.  The principles of Frederick Winslow Taylor (scientific management theory) were followed here in the US and things went well.  Until Dr. Deming was invited to Japan to help rebuild.  This culminated in the Japanese Industrial Miracle and Japan’s rise in the automotive world and the decline of Ford, Chrysler and GM in the 70s.  Now Dr. Deming was invited back to the US to help save the manufacturers in the US.  In Out of the Crisis he would write about 14 Points and 7 Deadly diseases for the transformation of industry.  Later in The New Economics he boiled these points down to his System of Profound Knowledge (Appreciation for a System, Theory of Variation, Theory of Knowledge and Psychology).  Except for the “tools” the fundamental philosophy has been rejected as Dr. Deming called for such things as abolishing performance ratings, inspection, incentives and bonuses.  All ideas rejected by US industry today.

We (the US) never changed our thinking about scientific management theory and we still have the notion that organizational change management has something to do with “tools” found in Lean, Six Sigma or Lean Six Sigma (I have been down these paths they will bring some improvement, but not to the level in which systems thinking will).  I commend him for this simple yet profound find and his ability to work with service organizations to make a huge transformation for companies that are curious for a better way.

For me, I will continue to correct wrong thinking (command and control) that continues to paralyze service industry and stifle private and public sector innovation.  Instead, there is a better method a “systems thinking” one.  Proven over and over again to be better and more profitable than command and control thinking.  Won’t you join me?

 

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IBM = I've Been Moved (Outsourced)

OK, I just took Chase out back and gave them a blogging.  Now IBM has a turn.  In the WSJ this morning (IBM to Cut U.S. Jobs, Expand in India), it was announced that IBM was eliminating 5,000 jobs. Those that read my blogs know this isn’t the typical pushback, but I can certainly understand why Lee Conrad is trying to organize the Communications Workers of America.

The really distasteful part is that decision is made by executives and bean counters that have no understanding of the work or their understanding is tainted by command and control thinking.  This means they have financial targets to hit and whoosh 5000 jobs are gone. 

What about the damage to employees that are training their replacements.  Like the WSJ says IBM had them do.  I can hear it now, “I want you to work with someone that will be replacing your job in a few months and tell them every thing you know.  Oh, and you can keep that job if you are willing to take say a 40% pay cut and live in a foreign land.”  WOW . . . is my job meaningful.  This is something only out of Dilbert.

The whole IT outsourcing strategy works off the premise that software is a production line of functional separated work “where we can take this piece and move it over there and this piece over here and . . .”  I have never found this idea to work well in software development.  The developers need to see and understand the work of their customers in order to build good software.  This is no place to apply scientific management theory.  Doesn’t this industry already have a bad reputation for missed timelines, overdue projects, cost overruns and the corresponding results lead to increased costs for the customer rather than lower.  Now we are going to take the developer and move them 1000s of miles away from the customer and get better software?

This is technology change management, we can’t believe in and in reality will wind up costing IBM more in total costs that the bean counters can’t see in the financials and the executives can’t see in the work.  There is a better way . . . systems thinking.

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Dear Secretary Geithner

Dear Secretary Geithner:

All the regulation you are imposing will not stop the next crisis.  It will stop ones that look like this one, but not the next one.  I don’t fault your intent, but regulation because of the greed of some will cost us all more as increases in fees and taxes.  You see the American taxpayer will have to pay twice, once for the regulation and again for the financial institutions to comply with the regulations.  Talk about double taxation.

I have a different idea.  Let’s take all the organizations with command and control thinking that are inefficient anyway and have bonuses and rewards that facilitate greed be regulated more.  They love costly things like documented procedures, scripts, entrapping IT, outsourcing, shared services and in general . . . waste.  So regulating them will fit right with their thinking.

Those financial institutions that use systems thinking and understand rewards and incentives drive the wrong behavior and a defacto purpose like achieving financial targets can be regulated less.  The front-line worker of these organizations will call out any “funny business” because they will be involved in the decision making of their own work . . . no more Madoffs.  Not only that, these front-line workers will bring business improvement and business cost reductions that will actually create more profit for shareholders and the company in general.

Just a thought.  Let me know what you think.

Kindest Regards,

Tripp Babbitt

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5 Types of Waste in Government

My counterparts in the UK (95 Consulting Ltd.) identified five types of waste in the public sector.  After review, I had a V-8 moment and said these are the same problems we have here with the US government.

Here are the 5 types:

  1. The costs of people spending time writing specifications.  The massive amount of growth in employment in government has nothing to do with public sector innovation or improvement.  It is all of those people being hired to develop specifications, standards, performance targets, contracts, reporting schedules and other non-value activities that command and control thinkers love.  This stuff is based on opinion and bi-partisan ideology not knowledge.  This is a tremendous source of waste as their is no value in this stuff.
  2. The costs of inspection.  Next comes the inspection for all these specifications.  Checklists and training for inspectors.  This inhibits public sector innovation in favor of compliance.  More and more auditors are hired and now we have auditors to audit the auditors that creates waste and huge costs.  Worse we have auditors dictating methods to workers even though they do not understand the work.
  3. The costs for preparing for inspection.  Schools, agencies, state governments, etc. spend lots of time with copying and preparing reports for the auditors.  More documentation is sought to keep the auditors away.  Consulting on how to pass inspections.  All preparation for inspection is waste.
  4. The costs of the specifications being wrong.  The worse cost is the cost of compliance to specifications which actually results in worse performance.  We get the double whammy . . . bad service and high cost.  The nature of arbitrary and opinion-based requirements and specifications without knowledge increases waste.
  5. The cost of demoralization.  The pass/fail, good/bad nature of inspection in accordance with compliance to specifications can demoralize the worker and the public.  Especially, when they can tell the mandate is making things worse which happens more often that not.

Systems thinking offers a better way.  Instead of compliance, we need public sector innovation.  People doing the work need to be able to be able to act in the best interest of their shareholders.  Government management needs to be responsible, they need to chose what to do free from compliance.

Performance inspection in systems thinking is concerned only with the measures that government management uses to understand and improve the work.  Managers should be free to use new methods to achieve these measures.  Public sector innovation would explode and eliminate the 100s of billions of dollars spent in the specification, compliance, inspection, and preparation for inspection.  As a bonus we get government management and workers wanting to help rather than comply.

My counterparts in the UK are implementing as much of this thinking with local authorities as possible.  Their central government stands in the way of removing more waste.  Find out more at www.thesystemsthinkingreview.co.uk.

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 Mandatory 180-day School Year

I rarely try to look at local issues as my blog has international readers, but this has to be addressed.  In my home state of Indiana, Dr. Tony Bennett Superintendent of Public Instruction has issues a mandatory 180-day school year.  On the surface this seems plausible assuring kids are in school 180 days, the more time in school the better . . . right?  Well the 180-day school year is now a target that must be hit by schools without any waivers for weather, and can’t take credit for parent-teacher conferences, and in-service teacher days.  The Indy Star (Indianapolis newspaper) and Indiana Chamber have come out in support of this plan.

This is not a Republican or Democrat issue.  This is an issue of command and control thinking where a random target is set in stone without regard for the system that it effects.  Targets always get you less.  As if there weren’t enough defacto purposes in our school system we now have a new one which has little to do with educating children.  Superintendents and principals are going to be trying to figure out how to get to 180 days instead of finding better ways to educate our children.  What might they do?  Well, we might put our children at risk by going ahead and having school on days that have treacherous driving . . . we have to hit that 180 days right?  No waiver.  Those pesky non-value-added parent/teacher conferences will have to go away.  Class preparation for teachers is obviously them just being lazy.  There are myriad other sub-optimal things that can happen from a random target set like this. 

For those concerned with more school days I have no argument, except why is 180 days the magical number over 179, or would 185 be better?  No one really knows the answer.  I support Dr. Bennett in having better education, but targets are not the way in the public or private sectors.  This is not a method for new public sector innovation this is old school command and control thinking bound to get us away from our purpose . . . to educate children.

A better way is systems thinking.  Start by studying the system and the interaction of student, teacher and parent.  Learn to leave the decision-making with the work and work on the system of better education as State Superintendent.

Dr. Bennett admits that he once had to used waivers because of snow days as a school superintendent.  He claims to wear a different hat now.  The hat he needs to wear is a systems thinking hat that understands the damage of targets and their corresponding carrots and sticks.  Senseless targets and government management mandates put better education at risk.

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Business Cost Reduction: What to Do?

Folks are hitting my blog from everywhere on earth.  What are they most interested in . . . “How do I reduce costs?” or business cost reduction. The easy way is to reduce headcount, which to me is the worse thing to do.  You wind up with dictates like let’s cut 6, 60, 600, 6000 people from our company.  The bean counters love this approach just cut so many from each department.  These folks are command and control thinkers, they understand nothing about the “work” just the numbers.  I understand those that are forced into this to survive and have NO other alternative.  But what about those that didn’t eliminate bonuses or take executive pay cuts . . . FIRST.  The response is typically we have to keep the good people, funny how it usually isn’t the executive ranks that are trimmed.  So, now we have too many chiefs and not enough indians . . . any one left to do the work?

A systems thinking company does everything they can to not lose those on the front-line.  Executive pay and bonuses are cut FIRST.  Then “across the board” pay cuts before job elimination takes place.  These organizations understand when things get better they will need their collective system to service customers.  

Need more?  Business improvement and cost reductions can be achieved by eliminating failure demand (rework, “chase” calls, etc.) at the points of transaction of service organizations.  Call centers run from 25 to 75% failure demand which is unprecedented opportunity to achieve these reductions.  This may mean that mangers and executives need to step outside their office amongst the front-line to learn about the work they have been managing from balance sheets and income statements for the last two decades.  Scary stuff to actually go where real work is done that matters to your customers.  You will find plenty of waste from that last policy, rule, script, strategic plan, mandate, target, project, balanced scorecard, performance appraisal, etc. from the last executive dictate.

Get started today with systems thinking.  A free download is available to “Understand Your Organization as a System” with information and exercises. Twitter me at “tribabbitt”, but get started.

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Command + Control = FUBAR and SNAFU

I used to use what I thought was a word (not an acronym) Snafu to describe those things that had hit a snag.  Later when I discovered it was an acronym born from WWII, I was less willing to use the it.  FUBAR came later and still less willing to use it.  If you don’t know what the acronym stands for Google it, this is a blog not an acronym finder.

Command and control thinking certainly can lead to FUBAR and SNAFU.  It did during WWII and it does today.  The functional separation of work (scientific management theory) is only only the beginning.  Blame Frederick Winslow Taylor if you must, but no one forced you to follow this method that creates sub-optimization and waste.

Separating the decisions from the work came from A.P. Sloan at GM over 50 years ago, yet we still use this thinking today to come up with targets and mandates that almost always assure locking in waste.

The zero-sum mentality of costs and good service where costs must increase to improve service is only exposes the ignorance of command and control thinking.  Worse this thought process leads to increased costs.

Financial and performance targets, the norm for US businesses increases costs, promotes cheating, prevents cooperation, and becomes the defacto purpose of the organization (i.e., meet the target).

Customers are managed to contracts to reduce costs only to increase them with complaints, relationship managers, call centers and mandates in the command and control approach.

Command and control thinkers love to copy and buy IT to automate only to assure that costs will increase and value to customers decline.

A systems thinking organization understands that business cost reduction and business improvement comes from creating systems that satisfy “what matters” to the customer and allows workers to make decisions about the work and managers to manage the system.  No more SNAFU or FUBAR, only a change of thinking is required.

For more on the distinctions of command and control vs. systems thinking click here.

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The 95 Method