Tag Archives: sub-optimization

The Real Core Competency to Drive Performance

Good service costs lessI still hear a lot about core competency and outsourcing what you are not competent at in your government and business.  There are certainly advantages and disadvantages to such thinking, but what is often missed is the end-to-end system.

Bill recently purchased a music mixer for his band .  Bill had not used a mixer before, but felt that he could learn from friends and YouTube videos.  He purchased a mixer from a distributor of the product manufacturer.  He had difficulty in following the instructions provided with the mixer for set up.  He went to get some help from the outsourced contact center and upon calling the contact center he discovered that they knew less than him.  In fact, Bill frustrated with the support returned the mixer believing there was something wrong with the unit.  He agreed to return the mixer for a replacement unit.  Bill enlisted the help of friends to follow the instructions and discovered that the instructions for set-up were incomplete, but the unit itself was fine.

I have listened to similar stories in every industry.  Product manufacturer outsources there service to a “competent” service provider.  Only to discover that they can pick up the phone and smile and run cool reports, but the ability provide knowledge and end-to-end service is lacking.

There are costs associated with the “core competency” thinking when it is rooted the functional separation of work.  Returns, lost sales (present and future) and the opportunity to help customers and get direct feedback on the end-to-end service.

The manufacturer and the service company have to work as one system because that is the way customers see it.  You lose business quickly with the power of social media when the manufacturer and the service provider blame each other.  Quite frankly, customers don’t care about the service provider contract and the blame game . . . they want their problems solved and to receive good service support for the products and services they buy.  If you can’t deliver end-to-end service you may find customers going elsewhere.

Take a look at your organization as your customers see it –  our 4-day workshop has been called “an awakening experience.”  You will understand the customer view of your organization and take inventory of the assumptions, beliefs and perspectives that drive performance.  Tripp Babbitt is a service design architect and organizational futurist.  His company helps service organizations understand future trends, culture and customer.  The 95 Method designs organizations to improve the comprehensive customer experience while improving culture and management effectiveness.  Read his column at Quality Digest and his articles for CallCenterIQReach him on Twitter at www.twitter.com/TriBabbitt or LinkedIn at www.linkedin.com/in/trippbabbitt.

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Does Your System Make Workers Accountable?

I know what you are thinking . . . “my organization makes workers accountable with measures, performance reviews and inspection.”  Well, we aren’t talking the same lingo.

Rarely do you find measures in service organizations that matter to customers.  Usually the measures are all about reducing costs and meeting budget.  Let me tell you a secret . . . customers could care less about these measures.  And one counter-intuitive truth we have discovered is that measures that customers don’t care about lead to increased costs or a best a scorecard.  W. Edwards Deming referenced these lagging measures as useless to improving costs and service – “it is like driving a car looking out the rear view mirror.”  Customer measures lay out the road ahead.

Performance reviews make workers slaves to the system.  The game is to be compliant, not innovative.  It promotes a culture of brown-nosing and popularity contests, leaving most workers disenchanted.  They do make people accountable – to their boss.  The hierarchy is there to prevent accountability to customers, workers must bow to the next one up on the totem pole.

This thinking breeds inspection for compliance to measures that don’t matter to customers.  Most in inspection and compliance roles add little or no value from a customer perspective and too often creates animosity amongst workers.  Also, I find that workers are stuck in work designs that are sub-optimal and compliance means that we are perpetuating poor thinking and design.

So, what makes workers accountable?

Work that is challenging and designed to improve service is the short answer.  The long answer is that a worker that can see the impact to customer has a better chance of being accountable than a functionally separated one that your piece of work if blind to the one before or after.  This means that better designed work promotes accountability and it doesn’t require compliance.  Most workers willingly are accountable when they embrace a work design that makes them relevant and has ties to customer needs.

The bottom line is that accountability is attributable to 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 The 95 Method for service organizations.  Reach him on Twitter at www.twitter.com/TriBabbittor LinkedIn at www.linkedin.com/in/trippbabbitt.

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Complaint Line Con

You can find almost anything on the internet these days.  I found a piece by A Current Affair on Australian TV that talks about how hard it is to voice a complaint in today’s IVR infected and functionally separated  organizations.  The piece highlights how fast sales lines are picked up and how slowly complaint lines are handled . . . if at all.

You have to love an voice recognition system that does not recognize “complaint” as something that should be routed.  Of course, I believe that the world would be a better place without IVRs in general.  Its not old-fashioned to have a human answer the phone, it’s just good business.

It doesn’t surprise me that sales lines are answered so quickly and most other inquiries are slow to be answered or even resolved.  With many organizations – private or public – running failure demand upwards of 4 – 9 out of 10 calls means that these organizations are frustrating or even chasing away customers.

Imagine what it would be like in reduced costs to organizations if it could be designed out with different and better thinking . . .

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.

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American Toast: The Revenue – Expense Debate

A classic quote from Dr. Deming was “let’s make toast the American way . . . you burn, I’ll scrape.”  This quote has so many references that you can see in manufacturing, but the same applies to management.  I see more burning and scraping in service organizations with management than I care to mention.

The most obvious is when we take the income statement and functionally separate it into revenue and expense by having sales be responsible for revenue and operations responsible for expense.  CEOs claim that we must grow the top-line and reduce the burden of expense – nothing wrong with that, except asking the question “by what method?”

Getting the sales dogs to hunt and the operations to cut is the formula most management embrace for organizations.  The problem is that revenue and costs are the two sides of the same coin.  The two are inextricably tied together.  The optimization of each as independents leads to sub-optimization and waste.    The burning of toast and scraping becomes a way of “doing business.”

We have functionally separated organizations and rely on specialists to optimize the functions.  This erases the real aim of business . . . profit!  The reward and incentive systems lock in the waste.  Too many times have I seen management make their functional targets and rewards while the organization goes down the tubes.

Profit comes from the combination of revenue and expenses together.  The next step is to manage that way.

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.

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Where Learning Happens

A question posed quite often by folks interested in learning the 95 Method is, “can you put on a class to teach me the 95 Method?”

The short answer is “no.”

Do we do training?  Yes, all the time, but it isn’t of the sort that you sit in a classroom and become inspired by anecdotes and case studies.  You have to be in the work, understanding and coming to grips with seeing things differently.  Only a steady diet of learning how to ask good questions and unpacking what you learn after manageable bites are taken can you slowly unlearn bad habits and embrace new better ones.

The toughest people to engage are always those that believe all they need is a little change . . . and that is most I encounter.  Or worse, they try to start with the things they know like plans.  Always, my response is predictable you begin with “get knowledge” and not plan or even scoping.  Planning and scoping – as traditionally done – fall well short of getting knowledge.

You see, understanding a system is much broader than traditional approaches.  Improving a system as I have stated before requires workers and management to change.  Workers and managers can redesign the system together while management thinking must change to sustain the improvement.

Frustration mounts when speaking to those folks seeing the fantastic improvement from the 95 Method, but try to engage keeping the same mindset that caused the waste and sub-optimization in the first place.   The best way is to begin to work together without preparation.  Going to the work and learning allows you to see for yourself the opportunity for improvement.

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.

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Revisiting MBO (Management by Objectives)

The Honorable Jennifer Granholm, Governor of t...

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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.

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Pay and Performance – Two Separate Things

As the political season heats up, so does the call for “pay for performance.”  The assumption here is that it works . . . and yes, to some degree it does.  Unfortunately, it works in a manner that actually diminishes and destroys service.

Performance is dictated by the system in which you work.  This is true for front-line workers and executives.

I have often quoted W. Edwards Deming and written about the 95/5 Rule.  95% of the performance of any organization is dependent upon how well your system is set-up, and only 5% is down to the individual/  The system is comprised of processes, work design, management thinking, measures, roles and any other element that exists.

It is true that pay drives individual performance.  However, this takes away from the focus on the customer.  Organizations that are functionally separated try to give managers individual pieces of the organization to optimize which results in sub-optimization.  Sub-optimization is the enemy of synthesizing the whole – creating waste and inefficiency.

Individual pay for performance creates competition between workers where cooperation needs to exist to improve any system.  Further, individuals learn to manipulate the system to survive or gain reward.  What this boils down to is that the system loses when pay is tied to performance.

I have seen organizations go out of business while everyone is still getting bonuses for performance.  How can this be?  Some claim it is just the wrong measures and miss the point.  The problem is that pay is tied to performance in the first place.

Improving performance requires redesigning our organizations be they governments or private companies.  Working on the 5% is just dumb and wastes what little time we have already.  This requires a shift in Western mindsets about how we think about work.  It wouldn’t hurt to have governments start to learn this with teachers, police officers and other government jobs.

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.

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Home Depot’s Service Lesson

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This isn’t new news, but provides an important lesson of the failure of six sigma during Bob Nardelli’s tenure as CEO of Home Depot.  Like so many fads trying to find their way to achieve business improvement, this manufacturing initiated one is so yesterday.  The problem is the mass-production, industrialized mindset that spills over into service.

Facts may be friendly, but not in a system that promotes manipulation to achieve the carrot or avoid the stick.  Facts become secondary in these systems.  Numbers just become white lies or damned lies . . . not facts.

As a reformed Lean Six Sigma Master Black Belt, I found the method too elitist or internally-focused to be effective in service.  Not to mention that manufacturing and service have altogether different problems.

Six sigma’s project focus is all about reducing costs.  The management paradox being that focusing on costs always increases them.  Too often they wind up sub-optimizing through these projects by reducing costs in one area, but increasing in another.  In a six sigma environment, reducing costs is the aim.

Although six sigma practitioners talk about the customer, most are too busy achieving savings.  “The heck with the customer, I have to show money saved.”  In service, the customer is the key.  Services engaging in organizational change management devoid of studying customer purpose and demand, do so at their own peril.

People would be correct in assessing that the failure of six sigma is  a management problem.  But they have to realize that their is nothing to address these management problems in six sigma.  Not addressing the fundamental thinking problems about the design and management of work leave us with more waste, costs and a demoralized culture.

When management continues its command and control ways, nothing will change for the better.  Management has to play and change too.

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  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/TriBabbittor LinkedIn at www.linkedin.com/in/trippbabbitt.

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The Executive Glass Floor

It’s a little early for football, but I always can remember a game or two where the team leading goes into a prevent defense.  The commentators predictably comment that a prevent defense will prevent you from winning.

Business is different than football in many different ways.  An important one being that aim of business is not to win, but to make money.  This is often lost in the conversation with executives especially ex-athletes carrying over their glory years and yearn for the competition of business.  Aggressiveness without knowledge is a dangerous thing.

Yet, when it comes to making profit most management types look to protect their position within the company.  You hear words like, “Don’t make waves” or “That is too risky” or “Protect the bottom line.”  These are all ways of playing prevent defense in business.  Accountants and risk types can point behind trouble at every corner.  Sensational headlines each day lead to adding expense to protect profit.

Instead profit is diminished as more and more infrastructure is added for protection of more an executive’s position than their profit.  The things they do to protect by watching financials daily and setting targets do nothing but add expense.  The real work is buried amongst a meaningless pile of management reports.

The end game is always surprise when executives realize that the management reports have betrayed them.  “This isn’t what the reports were saying” . . .  exactly the problem.  Meeting internal and external SLAs (service level agreements) is never a good way to manage.

Rarely, do I find that service systems report what is happening accurately.  Instead, they report “what matters.”  And in too many cases this leads to manipulation because “what matters” is what the boss says is important or is rewarded through incentives.  Hit those targets and you get a prize.

C’est la vie.

The management paradox is that this form of “prevent defense” prevents you from profits.  It is a huge thinking problem for executives.  The answer is seeing for yourself the damage, don’t believe me.  Hierarchy and not seeing installs a glass floor.  “Me, in the work? Don’t you know who I am? I do NOT go there.”

Huge profits await those that are willing to shake the hierarchy they have embraced in favor of a more knowledgeable approach.  Seeing is believing and it will save a fortune on your technology spend for data mining and analytics.

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  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/TriBabbittor LinkedIn at www.linkedin.com/in/trippbabbitt.

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Our Processes Aren’t Broken, but Our Thinking Is

Long before process improvement there was an industrialized mindset that set the stage for all businesses to follow.  Influenced by the likes of Frederick Taylor (scientific management theory) and Henry Ford industrialized design became the norm, copied by service.    This perpetuated a myth that we still see in service design today.

Two pieces of thinking still dictate the design of service today.

  1. The functional separation of work
  2. Incentives to the individual to improve performance

Naturally, process improvement began to optimize the functions that had been designed into service.  But optimization of each function leads to sub-optimization.  Process improvement became . . . well, sub-optimal.  Business improvement in the way of design was overlooked  in favor of optimizing what they could functionally control.

Customers know how to see an organization.  They see one entity, a system if you will.  This is seen as “outside-in from a customer’s perspective.”  All those internal processes vanquished by a customer that brings variety and a different perspective.

However, the service design was built from both industrialized thinking and inside-out giving customers poor service.  Customers have to overcome targets, incentives, financials and management reports that hide the truth.  But customers have to navigate these things every day.

The waste is enormous with industrialized design.  Individual incentives focus management on the worker and not the system design.  The worker is focused on the incentive and not the customer.  All bad things in the eyes of systems thinkers . . . and customers.

Focusing on process improvement always seems plausible until we see how little is really “improved.”  A redesign of our systems and thinking is in order.  This will take methods to unlearn what we have learned or passed down to us from previous generations of management.

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  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/TriBabbittor LinkedIn at www.linkedin.com/in/trippbabbitt.

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