Tag Archives: economies of flow

Plan, Budget and Performance Measures

David Walker of the Comeback America Initiative that he founded is often on CNBC explaining what it will take to get America on track.  It is the same story . . . build a plan, budget the plan and institute performance measures.  To paraphrase Mr. Walker, the former US Comptroller, “this is what big, successful companies do.”

This thinking is what led us to the US decline in the first place.

Mass-production and industrialized thinking that didn’t succeed after WWII has led to retrenchment.  In this case a better word would be – retreat. Down-sizing our budget and workforce requires a plan.  Winners and losers baked in and the losers are Americans.

This does not mean that we should continue down the course of large deficits or that budgets don’t matter, it just means you are managing a retreat.  Large scale ideology leads to massive expenditures as more expense is derived from managing the downsizing.  This is not the way forward for the public or private sectors.

Finance has overwhelmed logic as the numbers are misleading.  Context is needed and so is the evidence.  However, big thinkers don’t have time for the detail and this leads to deficits.  Managing scale, flow is missed and naturally so are the causes of cost.

Political candidates are touting their road maps, plans and other non-sense without knowledge.  Voters starved for detail can get only sound bites, sappy commercials and personal attacks.  It is pathetic.

With budgets, the mantra is to cut costs.  Performance measures help keep the budget numbers on track.  In a system full of waste, just cutting costs misses addressing the waste.  A bad system with no money still leaves a bad system.  Performance measures derived from budgets and plans (without knowledge) almost always lock in the waste.

So, this political season be skeptical and demand more than just pplans, budgets and performance measures – how do we grow?

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.  Read his articles at Quality Digest and his column for CustomermanagementIQ.com.  Learn more about the The 95 Method for service organizations.  Reach him on Twitter at www.twitter.com/TriBabbittor LinkedIn at www.linkedin.com/in/trippbabbitt.

Share This:
facebooktwitterlinkedin

The Customer Strikes Back – Are You Ready?

I recently read an article by Doc Searls in the Wall Street Journal called, “The Customer as a God.”  Customers have long catered to service organizations by being treated in a  herd mentality – meaning the customer has to adjust to to the service organization.  However, the future holds a very different environment.

Doc Searls references it as Vendor Relationship Management. The Customer is King!

This is yet another strike to economy of scale thinking .  Mass marketing soon will give way to individual marketing and economies of flow.  This future means that service organizations will need to absorb great variety in customer demands.  Standardization will not only cost more through failure demand, but will now not give what customers crave services fit for them in a customized manner.

Wow!  Redesigning our thinking about the design and management of work is now more important than ever.  Not only does it cost less, but it delivers service in a truly personal manner.

Are you ready for the future?

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.  Read his articles at Quality Digest and his column for CustomermanagementIQ.com.  Learn more about the The 95 Method for service organizations.  Reach him on Twitter at www.twitter.com/TriBabbittor LinkedIn at www.linkedin.com/in/trippbabbitt.

Share This:
facebooktwitterlinkedin

The 67 Year Thinking Problem

If it wasn’t bad enough that SPC charts disappeared from the Hawthorne Plant after WWII as management adopted a mass-production mindset, 67 years after Japan kicked our collective behinds we still think the same about management.  Worse, we have even fallen deeper into insignificance in the US.  Short-term thinking driven by the financial markets and management with an attention span of the TV generation struggle to compete and innovate.

Buying and selling companies for profit and mergers for economy of scale.  Except profit comes from satisfying customers in new and different ways  . . . and mergers have not achieved the scale needed to increase profit as this comes from economies of flow.  The scale fantasy continues to drive the wrong behavior.

With great embarrassment, the US still tries to copy Japan.  How do you catch a competitor by copying?  It always keeps you behind.  Finding out what matters to customers leads to innovation that is emergent from what you learn.

Instead of thinking for ourselves, we embrace “gurus” that study Japan and have never actually applied the hypothesis.  Because if they had they would discover the truth through application.

The clock is still ticking . . .

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.  Read his articles at Quality Digest and his column for CustomermanagementIQ.com.  Learn more about the The 95 Method for service organizations.  Reach him on Twitter at www.twitter.com/TriBabbittor LinkedIn at www.linkedin.com/in/trippbabbitt.

Share This:
facebooktwitterlinkedin

No Big Surprise – Another Over-Budget IT Project

English: The Seal of the United States Federal...

Image via Wikipedia

Public sector, private sector . . . it really doesn’t make much difference.  The continuing saga of IT projects that run beyond their budget and don’t deliver continues to grow.  Maybe we should be asking what IT initiated project actually ever works.  I have seen claims of improvement, but it is like a football replay – upon further review I have yet to see an IT victory.

Go to an IT vendor website and you would have to believe the opposite were true.  Sorry Charlie . . . but that’s a can of sucker you are reading about on these sites.  Procurers need to be asking for evidence and this is something not promoted in marketing-speak.  A little research will tell you otherwise and don’t trust other fools that have had their share of gullible pie.

You need to go to the work and see the effect on the design and flow of the work.  Management to management communications are full of assumptions and not fact.  And please don’t trust the IT salesperson, they are paid to embellish . . . can you say lipstick on a pig?

The latest is the cost over-run is with the FBI.  This one was originally be slated for 2009 to be ready.  The inspector general found “deficiencies” in the program.  Oh, and the FBI may go over the $451 million budget.  Noooo, really?

IT vendors love to use the favorite words like antiquated, modernization, automation and even sophistication to sell their wares, so be weary.  Any IT pushed on organizations is a dead end.  Your system is unique in customers, design, management etc. and need solutions unique to enabling the work of YOUR organization.  Customization to get what you need that works is better than a cheap solution standardized by what others believe is best.  Common sense?  Yes, it should be, but it is rarely present

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.  Read his articles at Quality Digest and his column for CustomermanagementIQ.com.  Learn more about the 95 Method for service organizations.  Reach him on Twitter at www.twitter.com/TriBabbittor LinkedIn at www.linkedin.com/in/trippbabbitt.

Enhanced by Zemanta
Share This:
facebooktwitterlinkedin

The Oops Factor

State Seal of Indiana.

Image via Wikipedia

Reading Governor Mitch Daniel’s book, Keeping the Republic, he mentions the Indiana Welfare Eligibility modernization.  This modernization was a ten-year deal worth $1.3 billion to IBM and its partners.  It is an important story for all of government because everyone has the same mindset.

This mindset is characterized by anecdotal evidence to support an ideology.  In this case, privatization.  The old welfare system was labeled as the nation’s worst according to the US Department of Health and Human Services back in 2005 – these are the same bureaucrats that Governor Daniels laments about earlier in the book.  The system was rife with error, delays, fraud and unhappy people with the status quo.

Further, the welfare offices were described in the book as “a chaotic mess.  Antique, green-screen computers from the 1970s sat amid the floor-to-ceiling stacks of boxes stuffed with paper.  I asked our researchers to take pictures.  Otherwise, I knew no one would believe later how bad the system was.”

This is the death sentence for governments assuming old manual systems with old technology is always bad.  Government management has embraced modernization because it doesn’t feel “modern.”  However, the old systems are never evaluated for flow or knowledge, just that things looked old.  This is the mentality that wastes taxpayers billions of dollars.  IBM and others wait like wolves ready to pounce on the gullible and naive.

Governor Daniel’s calls the attempt an “oops.”   The re-engineering to modernize and privatize the welfare system wasn’t begun with knowledge but ideology and assumption.  When ideology and assumption are in the decision-making costs increase and service worsens.  Politics has a hard time separating reality from fantasy.  Evidence without preconceived notions is always best.

Modernization and privatization – which I am not against – really need to begin with knowledge of the systems we are trying to improve.  Governor Daniels does not challenge the back office design when describing the improvement effort, yet, here is a huge opportunity for improvement.  Most believe in the front-back office design that handicaps the design of work.  Different thinking and better method are required to improve work.

Governor Daniels has brought fiscal discipline to Indiana, but fiscal discipline by itself is doing the wrong thing, righter.  Indiana and other government entities can find dramatic improvement (another 30-70%)  from changing the thinking about the design and management of work.

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.  Read his articles at Quality Digest and his column for CustomermanagementIQ.com.  Learn more about the 95 Method for service organizations.  Reach him on Twitter at www.twitter.com/TriBabbittor LinkedIn at www.linkedin.com/in/trippbabbitt.

Enhanced by Zemanta
Share This:
facebooktwitterlinkedin

Revisiting MBO (Management by Objectives)

The Honorable Jennifer Granholm, Governor of t...

Image via Wikipedia

I am reading two books right now.  One by Governor Daniels of Indiana and another by former Governor Jennifer Granholm of Michigan.  Governor Granholm talks quite a bit about the loss of jobs in manufacturing in her State to outsourcing.  In fact, her last election against Dick DeVos – the former Amway CEO – she let him have it during her campaign for outsourcing jobs to China.  Certainly, the subject for a future blog post.

However, something else caught my eye . . . Governor Granholm’s love for MBO.

“As a big believer in management by objectives, I loved using  the State of the State speech as a blueprint for the year.”

– from A Governor’s Story – Governor Granholm

There is a correlation between the loss of jobs to outsourcing and MBO, but I won’t make it in this post.  They are both wrong behaviors and outsourcing you can find plenty of posts why it isn’t typically saving money.

Organizations and governments are still using MBO – shocking?  Not really.  I still see it in many organizations, once a bad idea . . . always a bad idea.

Peter Drucker invented this thinking in 1954, W. Edwards Deming rocked the world when he spoke about MBO as one of the evils of management (as practiced).  Closely related to MBO is SMART (Specific, Measurable, Agreed, Realistic and Time-related) and a Balanced Scorecard.  Targets come along with these thinking methods.

First of all, Dr. Deming understood that when you provide objectives and targets by function you get sub-optimization.  Meaning if you optimize each functional piece you miss the inter-dependencies and create a system works against itself.  This creates waste.  For example, you often see departments vying for resources focused on what they can get in resources for themselves. Artificial competition is produced and the loss to the system is great because we do what is right for the department, but not right for the system.

Information technology seems to get much of the money in organizations.  Yet IT cannot create value, it can only add value to the relationship between customer demands and work.  Unfortunately, too many organizations don’t get that IT, HR, Finance and other supporting areas aren’t meant to create a profit for their department – they are there to enable the value creating relationships.

With MBO, we get management and worker focused on the wrong things.  Hitting the target laid out in the objective (remember SMART).  The flow is interrupted by the functional separation of work as each piece tries to optimize itself.

“(MBO) nourishes short-term performance, annihilates long-term planning, builds fear, demolishes teamwork, nourishes rivalry and politics.”

– W. Edwards Deming (from Out of the Crisis)

“Management by Fear” was the Deming phrase that replaced MBO.

Governor Granholm is a Harvard graduate.  Peter Drucker taught there.  Harvard, with all its money has become the poster child for bad theory.  Smart people, wrong method.

As voters, we need to ask candidate, “By what method?”  As managers, we need better thinking about the design and management of work – devoid of MBO and targets.

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.  Read his articles at Quality Digest and his column for CustomermanagementIQ.com.  Learn more about the 95 Method for service organizations.  Reach him on Twitter at www.twitter.com/TriBabbittor LinkedIn at www.linkedin.com/in/trippbabbitt.

Enhanced by Zemanta
Share This:
facebooktwitterlinkedin

Software Development and Outsourcing

Earlier this year, I went to India on behalf of a client that had outsourced their software development.  I met with architects, project managers, business analysts, testers and developers.  What they had to say about software development was astonishing, but revealing.

I have nothing against any country.  Outsourcing is not always bad and the worse reason to reject outsourcing is patriotism.  The reason outsourcing fails is because it is not profitable.

Say again?

That’s right outsourcing is not profitable.

So scratch that concept of less expensive software developers right from your brain.  Software requires knowledge of the work.  Not better documentation, not better analysts.  The problem is the way we have industrialized software development.

There are a number of things that don’t work in traditional software development.  Prepackaged and turn-key systems sold to customers ignore the existing system customers have in place.  There is no study of customer purpose or the customer demands placed on systems.  Instead the “better” IT system is put into place.  It is the ignorant selling the plausible to the gullible.

Further, the flow of the work is not considered or if it is considered it is automated in an inefficient or as-is fashion.  Sometimes the existing functionally separated systems are perpetuated.  No one asks if the back office needs to exist, often it can be designed out and this does not require software.

Others treat software development as manufacturing.  You hear such words as “software factory” and “production line.”  Software development couldn’t be any more different than manufacturing.  However, it has been designed with different functions, where we can than outsource the pieces like testing or development.  Economies of scale gained through optimizing the pieces and lowering costs by lowering salaries.

It just doesn’t work that way or certainly doesn’t work this way very well.  But organizations continue to follow this path to its failed destiny.  Project overruns, exploding costs for IT development, late projects and software that doesn’t work or entraps workers with poor flow.  The price of admission for this privilege is expensive.  Sign me up.

Oh, and what did that conversation with the outsourcing company produce as its biggest problem in our conversations.  They could do a much better job of developing software if they could come and see the work.

Why did you outsource again?

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.  Read his articles at Quality Digest and his column for CustomermanagementIQ.com.  Learn more about the 95 Method for service organizations.  Reach him on Twitter at www.twitter.com/TriBabbittor LinkedIn at www.linkedin.com/in/trippbabbitt.

Share This:
facebooktwitterlinkedin

Why Do Companies do Reorganizations and Why they Fail

Organizations of all types look to reorganize.  But the reasons are based in assumptions with the hope that it will lead to improvement.  Less evidence exists that reorganizations actually make the business or government run better.

I have heard  many reasons why companies/government do reorganizations.  Here is a list of reasons – by no means comprehensive:

  • Recent merger or acquisition
  • To stay competitive
  • To “shake things up”
  • Realign the business
  • New strategy (or strategies)
  • Improve communication
  • Prelude to downsizing
  • Better decision-making
  • Better execution – related to strategy
  • Going global
  • Free-up creativity and innovation

Please comment if you have more to add.  The assumption is that the reorganization will somehow make things better.  After all, isn’t reorganization what a leader does in the first two years during the honeymoon period?

If you look at these reasons many are based in assumptions.  Mergers and acquisitions are many times are decisions made based on economy of scale thinking.  But scale thinking in organizations is flawed.  Improvement comes from flow and not scale.

Strategies lead to plans and the flaw here is that knowledge is needed before talking about strategies or plans.  Reorganizations are rarely based in fact about how a business will improve, they are full of assumptions about economy of scale, functional separation of duties, and how much an individual leader can affect change.

Knowledge is gained by actually understanding an organization as a system, not from what other organizations are doing or what is “believed” to be true.  This is the reason reorganizations become such incredible failures.  Even though they are often spun as being magnificent successes.  If executives only knew that basing reorganizations on flawed assumptions was a mistake they could bring much to the bottom-line.

Reorganizations don’t have to be a bad thing though.  However, they need to be based in evidence and fact.  This is gained through understanding your organization outside-in as a system.  In essence, understanding the work that creates value for customers, understanding customer purpose and then gaining knowledge about how well an organization performs against purpose.

Reorganization with knowledge of your system leads to a natural change in the roles that workers and managers do.  Otherwise, it becomes an assumptive activity that leads to an expensive failure.

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.  Read his articles at Quality Digest and his column for CustomermanagementIQ.com.  Learn more about the 95 Method for service organizations.  Reach him on Twitter at www.twitter.com/TriBabbittor LinkedIn at www.linkedin.com/in/trippbabbitt.

Share This:
facebooktwitterlinkedin

Want Service Improvement? Make No Assumption

Assumptions . . . the killer of an organization’s ability to get innovation, improve culture, delight customers, optimize systems, sustain improvement and capture the market.  Management is filled with assumptions about how the work should be done.  The carnage created by these assumptions can be seen increased costs and disappearing customers.

I thought I would put together a list of some top assumptions I see regularly i working with service organizations – with brief commentary:

  1. Cutting Costs to Improve the Bottom Line – A focus on costs always increases them.  Costs are reduced by improving flow, not scale.
  2. Workers (and Customers) Can’t be Trusted – The system management put together filled with carrots and sticks leads to manipulation and cheating.  Surviving a poorly designed service system is all about survival for workers and customers.  Inspection, auditing and governance are poor substitutes for a good system.  Further, why design our systems for the less than 1/2% that might cheat a good system.
  3. Technology will Improve Service – IVRs and entrapping IT are the result of attempts to reduce costs (see #1).  The partial or complete failure rate of IT projects is over 90%.  Redesigning systems is a better and cheaper alternative.
  4. Rewards Motivate People to Do the Right Thing – Rewards do motivate . . . to focus on the reward and not customer purpose.  Rewards sub-optimize the system and create competition where cooperation is needed.
  5. Functional Separation of Work is the Only Way to Design an Organization – No one articulates that they want functional separation, but no one challenges it either.  Service organizations broken into sales, marketing, operations, finance, HR, IT and more.  One size fits all in organizational design is really bizarre if you think about it.

I’ve run into scores more, but these really show up in so many organizations.  If management is to improve . . . changing the design and management of work begins with erasing (not just challenging) our assumptions.

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.  Read his articles at Quality Digest and his column for CustomermanagementIQ.com.  Learn more about the 95 Method for service organizations.  Reach him on Twitter at www.twitter.com/TriBabbittor LinkedIn at www.linkedin.com/in/trippbabbitt.

Share This:
facebooktwitterlinkedin

Why “Buy American” Isn’t Enough

USAToday’s article about Roger Simmermaker and his buy American movement may indeed garner support – even Diane Sawyer has challenged Americans to “buy American.”  Seems a patriotic and viable way to bring jobs back to the US.  I do not see this lasting for very long.

Why?

Quite simply, Americans want to buy the best products for the money they put out.

For years of my youth I heard about Jap junk.  Along came claims that Japan was “dumping” cheap products on the US to get market share.  I even remember a time when a foreign car being driven in Detroit was shot at.

The truth is that Honda, Toyota and Nissan make better cars at a lower price.  This is a not a scale (volume of production) problem, if it was the Big Three had all the scale after WWII.  This is a problem of flow and thinking.  The Japanese wanted to build a better car and American’s want more profit.  Buying American indeed may just make executive’s richer and few jobs added.

To compete against anyone for jobs, we have to change our thinking about making products and services that people want to buy?  Will you really give up all those Apple products because they are not made in America?  Ultimately, consumers will go where the best value lies for any products and services.

This is not a worker problem.  Management designs the poorly conceived systems that workers have to endure.  Different thinking about the design and management of work is needed.  The short-term profit and industrialized approach have run its course to predictable ruin in America.  “Every man for himself” will not get the job done.

Our poor management thinking has created crisis after crisis, yet they refuse to budge.  Much of the outsourcing and off-shoring is done because of flawed management thinking about costs – as are many other poor management decisions based on cost.  Economies of flow, not scale.  A focus on costs, always increases them.

If we want to “buy American” let’s start to build products and services in America that consumers wants to buy.  This begins with a change of thinking, not just a patriotic mantra.

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.  Read his articles at Quality Digest and his column for CustomermanagementIQ.com.  Learn more about the 95 Method for service organizations.  Reach him on Twitter at www.twitter.com/TriBabbittor LinkedIn at www.linkedin.com/in/trippbabbitt.

Share This:
facebooktwitterlinkedin