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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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, Taiichi Ohno and John Seddon.  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.

It wasn’t until John Seddon that I found hope for this better way.  Not where I thought enlightenment would come from . . . an occupational psychologist that studied why organizational change management programs failed.  They failed because the fundamental thinking never changed.  We (the US) never changed its 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?

You get started by downloading “Understanding Your Organization as a System” (it’s free), read articles from my website or twitter me (tribabbitt).

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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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The 95 Method