The Problem with Measures in Service Industry and How to Fix It
- May 18th, 2010
- Posted in Systems Thinking Concepts . Systems Thinking and Measures
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In service we have built measurements that serve management purpose (or more appropriately perceived management purpose). Very few (if any) measures are associated with those that relate to the customer. In my company we call this deriving measures from customer purpose (or what matters to them).
Traditional measures used in service management include:
- Expenses (especially salary, building, overhead, etc.)
- Revenue
- Targets (usually by function in the form of KPIs, SLAs, etc.)
- Activity and Productivity (WiP, work completed, projects, milestones, schedules)
- Surveys
Financial measures are no more than keeping score. Targets drive the wrong behavior functional or not. Activity and productivity measures do not mean you are producing anything just doing things and not necessarily the right things. Surveys do not tell us what matters to customers only how we did (plus they give us little actionable information).
Measures derived from customer purpose give a clear sense of customer and I have found that when customer purpose is served all the traditional management measures get better. This is a management paradox to current thinking. When working with managers, I can not take away the crutch of traditional measures until they see that those related to customer purpose drive the traditional measures.
Once I identify the customer measures I put them in the hands of the workers so they can decide what to do to improve them. They have greater understanding of context so it is important to study the work with managers and workers alike. Managers learn that reports are unreliable and workers put their minds to work to innovate and design the system against customer demand.
Costs fall dramatically as workers engage in the work to achieve customer purpose. Culture improves as the worker engages (intrinsic motivation) and functional finger-pointing ends as achievement of customer purpose is systemic.
It is to find better measures that matter and can improve your system.
Leave me a comment. . . share your opinion! Click on comments below.
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Well phrased.
Interesting bones. Can you add some meat? A few examples will be very helpful.
DaveMTx-
The issue I have with examples is that people will copy the measures. Systems thinking is not a copying exercise. If you study customer demand and the purpose for YOUR system you will discover measures that matter to customers.
However, this government story may help size it up for you.
Getting the Benefits http://bit.ly/duUC03
I could not agree more. I worked for a company that recently relocated a medical facility. The final location decision was based on several factors such as lack of suitable options, rent, return on investment (all the financial issues) but not once did they ask the customer if the new location was suitable for them. The result? When the new facility opened, they found that patient numbers reduced considerably. People found the location difficult and time consuming to get to, there was no foot traffic so walk ins reduced, tourists numbers dropped as the new location was far from the tourist areas and the continual road works made it difficult to get to. Do you think management wre interested in these complaints? Not at all. All they wanted to know was what were we going to do about improving the numbers.
When your customers are unhappy and have not been consulted, it is difficult to entice them to come back especially when there is a choice at a better price and a more convenient location. My conclusion in this regard is that financial measures are a statement of how well you are doing with a given set of circumstances and how well you are utilising assets. On their own they do not measure customer satisfaction and in most cases have no customer link. They may measure patient/customer numbers but they do not give any indication of how the customer feels about your company. More often than not, measuring customer staisfaction and addressing deficiencies costs a fraction of the cost of trying to regain lost customers or attracting new ones. Arrogant management does not help either.