Tag Archives: business improvement

Improve the Work . . . Not Blame the Worker

The front-line worker (and by the way it is “front-line” vs. “low-level”) is continually sought for blame in organizations.  The command and control thinker has many tools in place to track performance for these poor souls like performance appraisals, coaching, technology, scripts, policies, regulations, performance/productivity measures, work standards, rewards/incentives, quality control, etc.  The problem is that the focus is on the wrong thing.  You see 95% of problems (failure demand) are attributable to the system and only 5% to the individual, so why waste resources that won’t solve the problem?  Because we all have been taught that way from scientific management theory that prevails in almost every US service business.

Our focus has been on how to get someone to do (or more of it) and not how do we make the system better.  Managements view is limited, focused on costs.  In a management paradox the focus costs, actually increases them.  The productivity mindset unwittingly forces the quality down. 

For example, take a call center with the mantra to reduce AHT (Average Hold Time) if I do not answer a customers question, will the customer not call back (failure demand) and take up more time plus be upset with the service?  Doesn’t the additional call (or calls) wind up costing more money?  What about the impact on customer?  None of these show up in the costs, but they are real and buried in the “unknown and/or unknowable” costs to the system. 

The focus needs to be on the system and will require leadership and thinking . . . systems thinking.  The system is made up of customer demand, work design and flow, information technology, training, hiring, etc. all well beyond the ability of the worker to change or influence.  W. Edwards Deming used to say “Did you hire the wrong people or just kill’em?”  I have found command and control organizations just kill them.  Most workers walk in as a new hire with high expectations and a good attitude before the system beats them down.

If you want business cost reduction, business improvement and/or organizational change you need to start to change from command and control to systems thinking.  A free download is available from my site (www.newsystemsthinking.com) to get you started.  Save a worker, get started improving the work today!

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The Evil of Information Technology

I know what you are thinking right now . . . another dinosaur that just doesn’t get it.  The problem is I have served as a CIO in state government, and consulted with Fortune 500 information technology companies.  I have not been impressed and oddly enough the customers I have seen using these technologies have not been impressed either.  Many IT projects never reach completion, costs overshoot what is planned, and never achieve financial results.  Here are some causes:

Information technology organizations have the same command and control structure as any other organization.
This means the functional specialization born from scientific management theory (see previous blog).  How this plays out are sales quotas have to be met by salespeople and they have powerful presentations, but typically don’t have the product to back it up.  Leaving expectations from customers unfulfilled.  The promise of business improvement and corporate cost reductions never comes.  Rarely have I seen information technology achieve an ROI despite all the conversations about it.

IT companies have their budgets and targets to meet so the customer gets a project plan (typically) and a document to manage scope (can’t have scope creep).  If you are lucky, you may see a business analyst that never really sees the work or if software development you will never see the developer (too valuable a resource).  Even if these valuable resources did see the work, they don’t have the knowledge to redesign the work just the knowledge to automate it.

IT support is a zero sum game for IT organizations of this ilk.  Did you not sign-off on the requirements?  Fixing technology issues becomes a game of “cat and mouse” for the IT company, what are customers going to make me fix and what will customers tolerate.

IT customers come from this same command and control mentality.
Almost every information technology purchase I have seen came from the top.  Unfortunately, these folks (as well-intentioned as they are) don’t understand the intricacies of the work.  These same folks often asked why the front-line people have a hard time adopting new software.  Well let’s see they weren’t involved in the decision process, you made their work harder, and change that is not an improvement is forced upon them . . . not gonna like it.  This isn’t a matter of getting used to it as most executives surmise.

IT customers want to record incoming work, sort it, scan it, route it and record how long took to do it.  Managers can tell you where everything is, how much work is being done by each person, what work is coming in, going out and in backlog.  When you look at the work from a customers’ point of view, however, you regularly find it impossible to predict how long it will take to deal with any customer demand.  The IT system  drives the sorting, scanning, batching, counting routing and recording of work under the misguided assumption it is helping to get the work done.”  The value work is only a small fraction of this activity and worse IT customers have to consume additional costs and resources to maintain the technology.  Bottom line: managers are making investments in IT without understanding the work.

The cure:
Understand:
  Forget about IT . . . treat it as a constraint, not a solution. Perform “check” on the current system.  This means look outside-in and end-to-end from a customer perspective and learn about demand, capability, flow and waste.

Improve:  Do not change IT.  If current work uses IT leave it in place or improve the work manually.

Now, can IT enable this process?
Taking this approach will decrease your investment in IT, make your workers accepting of the changes, and give your organization what they are looking for . . . a better investment for their money.

I recently read an article from Virginia Garcia at TowerGroup that IT investment will be down some 5% in the banking industry.  I see other industries with larger drops in IT spending.  While this is going on let’s see what we can improve without IT, I believe you will find business improvement and cost reductions with real ROI and be pleasantly surprised.

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Labels, Tools and Change Management

In our last major crisis, the car manufacturers were on the ropes because they were unable to compete against the Japanese manufacturers.  This was not last year this was in the 1970s and eventually culminated in major changes to the way manufacturing was done.  However, the change never hit the executive ranks and here we are again in 2009 (my opinion). BTW, we have been through a financial institution crisis before and I’m not talking about The Great Depression, I am talking about the Savings and Loan crisis in the 1980s.

So what mistakes did we make that places in our current position, some are outlined between command and control thinking vs. systems thinking.  I see something more subtle that has happened.  When people started to investigate W. Edwards Deming and Japanese manufacturers with visits and questioning of “how they do it” they came back with a label and ideas.  The label was TQM (Total Quality Management).  A label that did not come from the Japanese or Dr. Deming, but a label founded by the consultants that wanted to profit from the new movement.  Worse, in manufacturing visitors from the US saw JIT (Just-in-Time) manufacturing, quality circles, etc. as the “secrets” to improving manufacturing.  Many manufacturers rushed to copy these ideas without understanding the underlying concepts that created these innovations.  What I learned from this time period was you can not copy results and labels are meaningless except to market to organizations.

As the “Lean” movement got underway, I saw a repeat of the same mistakes.  Taiichi Ohno never labeled what he did in the Toyota Production System “Lean” . . . he had concepts from watching a Ford manufacturing facility.  This movement has taken a similar path to TQM in that the focus has been on the tools.  “Lean” has tools like 5S, A3s, Value Stream Mapping, etc. that has watered down the change in thinking required to not only sustain the changes, but to discover new tools and ideas that can take an organization to the next level.

Understanding the basics of changing thinking and speaking to the fundamental concepts that Deming spoke/wrote about in his 14 points and 7 deadly diseases (later System of Profound Knowledge) and Ohno’s Toyota production System.  This has helped gain new learning in service industry in achieving business cost reductions and service improvement.

I will no doubt get push-back from those that aspire to tools that they have achieved gains in their change management programs, and I will not dispute that they have achieved business improvement. I believe there are limitations to this approach without the fundamental change in thinking required at the leadership level to sustain these improvements.

What I do see is a difference in method,  one of changing thinking vs. use of tools as a lead to making organizational change.  A method that has a greater chance of sustaining an organization’s continual (Deming’s preferential term) and continuous improvement process.

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The Cost of Everything and the Value of Nothing

My wife recently read The Last Lecture by Randy Pausch and read me Chapter 50.  Dr. Pausch writes about an experience he had at Walt Disney World when he was twelve and his sister was 14.  His parents had allowed the two to go off on their own and explore.  While they were exploring they got the idea to pool their allowances and purchase a salt and pepper shaker as a thank you for recognizing their maturity.  While walking through the park with their purchase, the bag carrying the gift dropped and broke.  The two were devastated by the turn of events.  A stranger noticed their despair and suggested they take the package back to the  shop where they purchased the gift.  They followed this suggestion and took the gift back explaining what had happened and admitting their carelessness.  The cast member (Disney employee) replaced the shakers and told the two that the store should have packaged it better.  Dr. Pausch explains that this small act of kindness was repaid Disney with $100,000 in subsequent visits to Disney World.  Decades later in speaking with Disney executives he asked them if workers still would be able to replace the item?  He says the executives would squirm and the answer would be probably not.

Command and control thinkers don’t understand value and where it is derived from . . . the customer.  Instead they fill the organization with mandates from financial budgets that are penny-wise and dollar foolish.  Playing the zero-sum game where there are winners and losers, fighting over the piece of the pie instead of finding innovative ways to make the pie bigger.  The customer management process becomes just that a way to manage customers.  The story above creates a management paradox to their way of thinking.

 The “unknown and unknowable measures” as Dr. Deming would refer to those things that can not be measured, but were important.  No one knows the cost of a dissatisfied customer, but command and control thinkers can only understand what comes out on the income statement or balance sheet in the short-term.  Business improvement comes from their ability to manage these financials in everyday work by making front-line employees adhere to scripts, mandates, policies, standards, etc. so they can make sure $50 doesn’t go out the door without their knowing.  Meanwhile all the complexity and waste they build into the system winds up costing them more and they wind up being the ones that make the big mistakes for their short-sightedness.

Command and control thinkers can be seen by the fruit they don’t bear . . . They know the cost of everything, but the value of nothing.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to make the work work.  Download free from www.newsystemsthinking.com “Understanding Your Organization as a System” and gain knowledge of systems thinking or contact us about our intervention services at info@newsystemsthinking.com.  Reach him on Twitter at www.twitter.com/TriBabbitt.

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Targets are Killing US (US Business)

I am always amazed at what executives (senior and junior) do to “manage” their organizations.  Are they brain-washed into a command and control mentality?  Or maybe it is a gene that has not been mapped yet.  Regardless, targets are the principle tool that executives use.  Maybe it is something in the leadership development program.

Budgets become the basis of all decision-making.  Executives claim that this is to ensure shareholder value.  In reality, it creates more unstable systems and sub-optimal performance.  Middle managers stuck with objectives that if achieved (by all) don’t guarantee that the company will make money.  Business improvement based on managing costs will almost always increase them.

Measures become focused on targets that are related to productivity and activity instead of purpose.  Management edicts of these top-down measurements/targets usually result in cheating.  For example:

“When I was the corporate purchasing manager for an industrial distributor.  I had the opportunity to increase my bonus based on soemthing called GMROI (Gross Margin Return on Inventory).  I could more than double my salary based on a high gross margin and a low inventory level.  I was not able to effect gross margin (sales function), but I was able to lower the inventory around bonus time.  I achieved an 80% bonus one year, but almost put the company out of business.  We had no inventory, customers were pissed.  I achieved my target at the expense of the organization.”

Unless measures are related to purpose they have no use and the purpose has nothing to do with the top-down, “command and control” hierarchy.  People’s engenuity is engaged in survival, not business improvement.

A better way is to take a systems thinking view, starting from the outside-in (customer view) they can then begin to see waste in their current system.  Systems thinking leads to an approach that allows design against demand instead of demands from the executive suite.  As waste is removed, flow improves lessening costs and providing opportunities for growth (innovation).

A systems view creates a compelling case for change and better design of work, measures and the elimination of targets.  Why eliminate targets?  A lot of reasons . . . they distort the purpose of the organization, create sub-optimization, prevent cooperation, promote cheating, and are typically focused on activity (wrong measures).

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Out with the Old and In with the "New" Systems Thinking

will be the first to tell you to remain skeptical of any “new” thinking.  However, what we have here is not “new” per se.  Our prevailing management style in the US is born from Frederick Winslow Taylor called “Scientific Management” that gives us the structure of functional specialization of work (assembly line).  This original thought has been the staple of our management philosophy from the late 1800s to present.  A time period that spans the invention of the Zepplin, teabags and the first flight of the Wright Brothers to walking on the moon and the iPod.

Nothing changed much until the American W. Edwards Deming was successful in post WWII Japan in the 1950s in what would become known as the Japanese Industrial Miracle.  All of a sudden the US had a staunch competitor in manufacturing.  Add to this “new” thinking Taiichi Ohno and the Toyota Production System, and we have a whole new management system.

When you look at service organizations (private and public sector) you will find precious few that have ever tried such “innovative” thinking.  The list is long as to why . . . competition (no one else pressuring service organizations), “we’ve always done it this way” thinking, lack of understanding, unwillingness to give up control, technology, etc., etc.  For what ever the reason, not much has changed in management since Frederick Winslow Taylor.  Business Improvement programs (Lean Six Sigma, TQM and many others) have become more of the same.  However, “new” thinking challenges this stale sameness.

The economy has changed now.  Maybe we need to be looking for better ways.  My continual search for better methods has led me back to Deming and Ohno. Instead of tools in our continual (continuous) improvement, we need new methods and to change thinking.
To read more on systems thinking with practical exercises, I would urge you to read the Fit for the Future management articles (six in all).  These articles are good reads for your organizational change management and leadership programs.
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Command and Control Assumptions Challenged

Systems thinking requires us to change our thought process.  Moving from scientific management theory but what does it require us to achieve this change?  Business improvement does not come without a change in thinking.

There are many assumptions that command and control organizations believe are “truths.”  American businesses love these “truths” and manage by them, but they almost always make service worse and increase costs.  Let’s look at my favorite 11:
 
Assumption #1:  To achieve business cost reductions, there is a trade-off between costs and good service.  I can have one or the other, but not both.
Reality #1:  Good service always results in lower costs.
 
Assumption #2:  Managing costs and making budgets is the way to manage an organization.
Reality #2:  Managing costs and budgets is purely “keeping score” and managing with these lagging measures is like driving a car looking out the rear view mirror.  Creating value for customers is the purpose of the business.  By managing costs and budgets we will always increase costs and decrease service.

Assumption #3:  Using targets and incentives helps improve profits.
Reality #3:  This is the evil twin of assumption #2.  In the 1930s at GM, it was Alfred Sloan who created “management by the numbers” as he saw it as inappropriate that executives should be involved in operations.  The defacto purpose becomes making the numbers . . . and not creating value for customers or  improving the flow of work. Targets are usually tied to incentives and at best sub-optimize the system (one area is rewarded at the expense of another).  An example is the sales department with its quotas and commission schemes that create an “all about me” attitude where the commission is achieved at the expense of the organization with price-cutting and being unable to deliver what is sold.
 
Assumption #4:  Outsourcing will decrease my costs.
Reality #4:  The most likely department to be outsourced is the call center.  The benefit is that transaction costs are lowered based on a production mentality (scientific management).  One assumes all demand is something to be worked, when in reality the failure demand (calls we don’t want) are outsourced as waste.  With failure demand running anywhere from 25 – 75% of phone calls (depending on industry), doesn’t it make sense to work on failure demand and its elimination?  
 
Assumption #5:  The first thing to do is standardize a service process to improve it.
Reality #5:  Without a full accounting of customer demand it is impossible to know if a process should be standardized.  Service has greater variety in demand than manufacturing (one reason why lean manufacturing doesn’t work for service).  I have seen many organizations merge companies to a standard product without first understanding such variety, and this always leads to worse service and increased costs.
 
Assumption #6:  “Economies of scale” will make my service less expensive.
Reality #6:  That is why companies merge so this must be true.  I have listened to banking pundits talk about the impending merger of banks for “economies of scale.”  If that is the reason, I hope that banks never merge.  “Economies of flow” will trump “economies of scale” every time and if that wasn’t true Toyota would never have been able to compete against the US car companies because the US had all the volume after WWII.  Prepare for worse service from the Delta/Northwest merger as the “bean counters” try to lower costs . . . hard to imagine it can get worse.
 
Assumption #7:  Splitting tasks between front and back offices is a good design of work.
Reality #7:  The design of work between front office and back office (and possibly several middle offices ) rings of the functional specialization of work. This is an inefficient design of work that almost all US service organizations have.  Understanding the customer demand, value and the flow of work will lead you to a better design, lower costs and better service.
 
Assumption #8:  Shared services results in lower costs.
Reality #8:  Without IT we could not share services.  The fact we have IT does not mean that we should share services.  In many cases we are sharing call centers or back office functions which may institutionalize waste (and usually does).
 
Assumption #9:  There is one “best practice.”
Reality #9:  No, there isn’t . . . there is always a better way to do things.  A best practice assumes one best way for all to copy.  An organization should never copy as each system has a unique set of customer demands and culture. 
 
Assumption #10:  If I spend more on IT, my costs will go down.
Reality #10:  Unfortunately, I typically see costs go up where IT becomes entrapping rather than enabling.  Seems like all the big IT organizations are driven by making sales rather than adding value.  Better approach: We must first understand our system (perform “check”), improve and then pull technology.  See the article Is IT Bugging You? 
 
Assumption #11: Improvement of service takes a long time.
Reality #11: No, any change management or continual improvement program taking years to show results should be discarded.  It usually means that rationalization and coercion are in place. An executive once informed me that “the improvement program had finally started to take hold after 3 years and the people that were left (after many rounds of purging) were finally starting to get it” . . . this is coercion.  Too many careers lost and brains tortured for something that can be easily gained with better systems thinking.

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