Category Archives: Office cost control

Why Don’t Companies Base Head Count on Meeting Customer Requirements?

 

I just read two news articles this morning of the type that make me gnash my teeth and shake my head. Both involved Fortune companies planned to cut staff by the thousands based on bad financial results. Say what? To these companies, I ask, “Why were you carrying so much excess staff you could do without?”

Most service companies carry double-digit percentage excess staff. Likewise for product companies in their back and front office settings. How do I know? Process redesign, streamlining in particular, plays a primary role in helping clients meet and exceed customer requirements. And we constantly find excess staffing over-distributing decision-making authority, leading to employee disempowerment and creating excess bureaucracy, both of which drive customers nuts. Today’s customers want to deal with well-trained, empowered employees and as few of them as possible – and on the web an increasing percentage wants to research and order commodity goods without any personal contact.

So how does head count typically change after streamlining? By a negative 15% to 20%, in our experience. But rather than streamlining, most organizations throw people at problems, and the more they add the less efficient and effective work becomes. So instead of streamlining to create a win-win for both company and customers, they create lose-lose by overstaffing.

Why do they do this?

Layoffs – Where’s the Learning Curve?

One touchy subject inevitably arises when we design customer-centric process. And I hate to see it happen.

Redesigning process from the customer inwards produces an ancillary “benefit,” which to many execs becomes their short-term ROI justification. While new process designs are adding new value to customers, they’re also streamlining the organization, which can dramatically reduce front and back office FTE requirements, raising the specter of layoffs.

While we always consul clients to first consider using temporary functionless staff for special projects, then reabsorbing them to create “no hire growth,” some layoffs inevitably occur. One of our clients, post process redesign, eliminated 600 front office positions, and our process reworking contributed to the eventual closing of multiple plants. Worse yet, overall demand in their industry was declining, leading to very slow growth.

Two things really bug me about this situation. First, too many companies practice “boom or bust” staffing. They lurch from overstaff to understaffing, because they don’t have a clue how to avoid either excess. Second, necessary layoffs often cut people but not their functions or positions. Process streamlining should reduce functions and positions and does not target specific workers. And in neither case are they learning anything from experience. They just keep repeating their destructive practices.

Not a pleasant topic at all, but I just read an excellent post an excellent post by Ron Ashkenas (co-author of “The GE Workout”) that spot on addresses both things that bug me. If the subject’s relevant, I strongly suggest reading it (link below).

http://tinyurl.com/c329on8

Does redesigning process to cut waste produce similar outcomes to redesigning process to improve customer experience?

Before you protest, I do understand that waste-cutting process approaches can be applied for the benefit of customers. But here’s the difference I’d like to highlight.

Waste-eliminating approaches change internal operations – albeit increasingly to benefit customers. In contrast, customer-experience focused approaches changes what happens at points of customer contact and works its way back inside the company, almost in concentric rings. While customer-sensitive, waste-focused process approaches work from inside the company outwards towards customers, trying to add more customer value at every step – customer experience process methods move in the opposite direction.

I’ve designed process both ways, depending on context. But I do find the outcomes radically different – with customer-experience-based process design triggering far more organizational change and involving much more application-layer technology support (which is not appropriate for every context).

How does my experience square with your hands-on process work? And I hope this doesn’t sound exclusionary, but this is such a ground-level experience that I’m especially interested in comments from experienced process practitioners who have “been there,  seen that” for themselves.

Why Can’t Business Streamline Front & Back Office Operations?

The latest McKinsey Quarterly reports new data that should upset those designing organizations and managing operations in O/S (office/service) settings. While manufacturing managed to reduce its expense-to-sales ratio by 2.7% over the past year, despite 90& 0f cost-cutting initiatives failing to last beyond 3 years, the SG&A (sales, general % administration – which is basically front and back offices) remained flat.  And these outcomes defy reason, because office “bloat” is virtually endemic to business and is rarely addressed, while most manufacturing operations had already been streamlined to some degree by year 2000, the starting line for data aggregating.

A quick and spurious retort might be, “Hey, we’re just taking better care of customers.” Wrong. When redesigning office organizations and process Outside-In (starting with customer needs), we routinely find clients can – and should – reduce overall office FTE count by 20%, and often more. All these extra people are standing in the way of delivering what customers want most, second only to quality products backed by quality service – dealing with well-trained, empowered employees. Also, the more hands touching work without adding value the greater the number of “fumbles.”

But those are just the facts (and the McKinsey data is corroborated by heaps of empirical evidence). Whose responsibility is it to streamline O/S workplaces? And considering at least some efforts are underway, why aren’t they improving the overall numbers, which empirical evidence also supports?

Is It Time to Redefine the Boundary between Outside-In & Traditional Process?

We (HYM) commonly characterize O/S (office & service) work as O-I’s natural domain and production as more apropos for inside-out approaches, especially Lean, which is our preference. Since most work directly affecting customers happens in the O/S, this creates for a nice, clean, understandable distinction. But every once in a while, complexity does help – as is the case with accurately describing the O-I/production process dividing line.

Case in point. A very high volume reconditioner of capital goods interviewed us for a process engagement intended to increase throughput (we formally kick off next week). The company’s customers had voted with their wallets that they wanted to sacrifice pristine quality for a lower finished price point, which made throughput and efficiency the primary goals. Sounds like a job for Lean (or LSS) rather than O-I, no?

No. During an initial day observing we quickly discovered the major impediments to reducing cycle time. Communication breakdowns and slowdowns only addressable through systems architecture changes plus an infusion of new, communication-based process automation technologye. Yes, we’re to recommend plant layout changes and work force disposition and training, but this client’s primary issues aren’t origi9nating on the shop floor.

From our perspective, neither Lean nor LSS redesign communication process well, especially at the level of specifying systems architecture and application layer changes. In contrast, the full O-I regimen – which aligns strategy to customers; process to strategy; and then technology to process – gets deep into enabling technologies. So we made what I believe is fair representation saying that O-I was a better fit than Lean or LSS, crossing over the basic O-I/production process dividing line. The client agreed with our thinking.

I know our saying that Visual Workflow, the O-I approach we use, will outperform Lean and Lean Six Sigma in this setting will rile up some traditional process types, who’ve at least had safe competitive refuge from O-I Process on the production side. But I’d venture a prediction that we’ll soon see more encroachment by O-I on what’s been accepted as traditional process space as O-I continues to grow in share of overall process redesign work.

Naked Process: Are you ready to “bare it” to customers (and across silos)?

Companies are accustomed and even comfortable keeping internal process opaque to customers―and often to co-workers as well. “Lack of cost-effective technology” has served as a convenient excuse for shutting out customers and blocking communication across silo boundaries – although we know “technology” is just an excuse.

All that’s about to change. A new technology named CBPA (communication-based process automation) is about to tear away the fig-leaf excuses. CBPA will track typically opaque internal processes including: mortgage and loan processing; insurance claim processing; technology support beyond one-call resolution; special orders; back orders; custom fabrication; incident research; and a host of other high-frequency events – each of which generates high volumes of expensive-to-handle customer calls and e-mail, not to mention endless internal e-mail and even face-to-face conversations.

Because it’s all IP-based and outside corporate firewalls, companies will now be able to let customers access CBPA for self-service – and let internal folks track progress across silo walls as well. Gazillions of dollars could be saved, IF individual companies are ready to “bare their process.”

Several industries have already developed vertical fixes resembling CBPA. You no longer have to call Fed-X or UPS to track a package, just hit the web. Likewise for medical test results. But business-at-large continues to spend gazillions of dollars on people and communication infrastructure to handle customers’ “Where is it?” questions and similar internal queries.

Because it’s IP-based, companies will now be able to let customers access work-in-process data themselves – and let internal folks track progress across silo walls as well. Gazillions of dollars could be saved, IF individual companies are ready to “bare their process.”

I’m excited about this because it’s classic Outside-In. Think of a solution to customers aren’t yet asking for; create customer delight; and grab a lead on competitors. But I’ll admit, it’s also Outside-In because implementing this solution will require organizational redesign, staff redeployment and shedding the traditional “protect ourselves from customers” perspective. Well-led, forward-thinking companies can effect these changes. But many others can’t and will suffer customer consequences as a result.

To be fully transparent myself, I got so excited by CBPA’s potential that I’ve partnered with the software developer’s largest partner to launch a process/technology partnership we’re calling “Enterprise Collaboration.” And I’m presenting a free Avtex-sponsored webinar on March 23rd from 10:00 to 11:00 Central Time (that’s GMT minus 6 hours). You can register @ http://tinyurl.com/yfunttu.

How Can You Negotiate the Politics of Aligning Your Company with Customers?

When we help companies turn themselves Outside-In (customer-centric), corporate politics frequently present the highest barrier. While traditional process redesign focuses on “how” companies work, Outside-In process, the mechanism for turning companies O-I, changes “what” work is done; “who” does it; and how technology supports it – along with the “how.” And that’s where politics enter the picture.

 Changing the “what” and the “who” can both alter the org chart, and usually do. With corporate power and control a zero-sum game, change creates winners and losers among functions, managers and often senior executives. Too many companies try to avoid these potentially disruptive changes by letting customer interests modify “how” work gets done, but stopping there. They may wind up more customer-considerate – but that’s a far cry from customer-centricity, which lets customers drive the work companies do and the functions doing it. And it’s far short of achieving the customer-delight so many companies pursue.

How do you help get your company get over the hump to tackle the “what” and the “who?” First, if you’re going to move your company from company-centric, inside-out to customer-centric, Outside-In, make sure it has the requisite capacity for change – at the executive level particularly – before you try. If it doesn’t, find a new gig with one that does. But if it does have the capacity, and it’s worth the struggle, these two steps may very well help:

1. Map out how many layers of supervision and management separate decision-makers from customers – not just in terms of customer intelligence sifting its way up through the layers until it reaches decision points, but also how many layers high-level decisions affecting customers must work through before reaching the execution level. Many senior executives get the picture. They’re acting on filtered information; and their intentions either aren’t being carried out or get carried out by multiple functions acting on multiple interpretations that produce a mixed bag of customer experiences. That’s not how companies delight customers.

2. Redraw the map with all but top-level strategic decisions made by a single customer advocacy (or customer operations) function sitting one level away from customers – and all the internal support the advocacy function needs provided under customer advocacy guidance. In most companies, this shift will eliminate or shrink layers of staffing extending all the way up to the VP level.

Unfortunately, most C-level executives don’t understand how work flows beneath them, including how much strategy implementers change or even disregard their intent. And an even higher percentage can’t accept higher revenue projections based on achieving customer-centricity – but they’ll jump all over cost-reduction opportunities. I agree the latter approach is more than a bit cynical, and talking about further downsizing staff is tough. However, better to streamline the company and survive than trying to maintain an unsustainable status quo. Plus, doing the right things for the wrong reason is always better than continuing to do the wrong stuff. And bottom line, it’s in company best-interests to get to customer-centricity.

In our experience, willingness and commitment to change structurally pushes organizations over the hump from uphill roads with a change barrier at the top onto downhill paths – to customer-centricity. It’s the tipping point.

“Winner” companies get to the downhill side. “Losing” companies stay stymied, stuck going uphill. And in the long hangover anticipated to follow our current recession, the difference between “winner” and “loser” outcomes will widen into a yawning gap, with lots of “loser” companies leaving the scene.

Just ask Circuit City, CompUSA, Chrysler, GM, Siebel Systems, Sun Microsystems, WaMu, United Airlines and innumerable B2B sellers that continued making good products while customers stopped beating paths to their doors about the risk of staying company-centric. These organizations could (or would) change their management hierarchies to permit customer-centric business to take root. Consequently, they’re dead or needing buyouts (or bailouts).

Are We Ready for a Quantum Leap in Collaborative Capabilities?

Among the primary benefits of implementing CRM, SCM, Field Service and other back and front office automation applications has long been raising the level of internal collaboration–and more recently enabling collaboration with customers and suppliers. But we’ve had significant difficulty moving past impediments such as: overstuffed e-mail channels; unmonitored voice mail; inability to share multiple-party communication in a consolidated, multi-channel log; multiple step tasks disappearing from visibility into “black holes” until complete; unmonitored tasks not completed or taking far too long; etc.

Thankfully, relief is on the way. Interactive Intelligence Inc. (i3) will soon launch a new software application dedicated to supporting external and internal collaboration. Once companies redesign process to leverage the new capabilities and then implement the properly configured software, they can:

-Intelligently reroute customer calls to the best qualified people available if the primary recipient is not.

-“Hot transfer” triage calls to qualified and available staff.

-Provide an integrated communication log across all media to call/message recipients.

-Track both internal and external, multi-step processes to keep them moving–and escalate processes that get off track.

-Provide real time visibility into multi-step tasks (such as repair tickets).

-Track presence (whether someone’s at their desk and their status).

-Queue tasks and automatically route work assignments to available staff.

-Monitor, measure and report on communication and tasks.

Taking advantage of these new capabilities will give some companies difficult to overcome competitive advantages. And adopting them will provide all companies deploying correctly (first process, then technology) opportunities for major streamlining. This is powerful stuff–potentially. But how it’s handled in the marketplace will determine whether what we’re calling “Enterprise Collaboration” will realize its potential. I still remember an excellent desktop operating system called “C/PM” losing out to a much inferior system–DOS.

 

 

A Shot Across the Bow

A warning to managers seeing the recession as an ideal time to streamline office/service process

 

Yes, this deep recession is an ideal time to restructure and streamline front and back office process to lower fixed cost and increase scalability for “low-hire” growth in the recovery. In fact, companies taking this critical step will enjoy a distinct competitive advantage once the rebound starts, which economists are predicting in Q3 (of 2009!). They will, that is, if they restructure and streamline office process using a 3rd generation, “outside-in” process approach (think “customer-in”) as applied by such customer-centric “stars” as Virgin Atlantic, Best Buy, Tesco and Amazon.

The right time but the wrong process approach

Unfortunately, most that restructure will instead use more traditional, “inside-out” approaches such as Lean or, worse yet, Six Sigma. What’s lost? I’d like to share with you a Linkedin reply I wrote to a Lean devotee who posted an offensive message dissing the process capabilities of everyone working in the office, front or back–while also spewing forth lots of process nonsense.

[I’ve CRM-ized the message a bit and removed the process-speak (this exchange occurred in the Linkedin Business Process Improvement group following a question regarding whether Lean and Six Sigma had run their course and what would replace them). And please forgive my tone. A large number of contributors had posted great stuff in this thread before this bloke came along and accused a whole bunch of deep thinkers of “not scratching the surface” because they didn’t dig down and find Lean.”]

My reply

(Name withheld) – your point #11, questioning how many office/service (O/S) managers can spell “Lean,” gives you away. You are the prototypical process professional fulfilling Maslow’s prophecy (introduced in this thread several times previously) of all the world tending to look like a nail when the only tool you have is a hammer.
Lean is hardly the be-all and end-all of process. Yes, it’s very effective in most manufacturing settings. But serious O/S process developers (including the ones you demean) eschew Lean because it’s relatively ineffective in most office settings. Unlike Six Sigma, it doesn’t typically damage the office environment. But Lean barely scratches the surface of O/S process opportunities.What’s wrong with Lean in O/S settings? Let’s start with lacking robust tools for assessing and redesigning systems architecture (and I’m not talking about “bolt-on” business process management systems that provide little value in the O/S world). Just as Lean is legendary for rearranging the factory floor, good O/S design methods rearrange the flow of work – which is now information rather than sheet metal, facts rather than components. Lean doesn’t go there.

Next, let’s talk about the application software that enables O/S process–CRM, supply-chain management, communications-based process management, SharePoint, project management applications, proposal development applications. This whole genre of automation software doesn’t exist on the production floor, so manufacturing-based process methods don’t have to account for them. A good O/S process approach should be able to define application software requirements, extending all the way out to fields, forms, views and navigation. Lean doesn’t go there.

And what about alignment? Effective O/S process design should be fronted by a systematic approach to aligning business strategies with customers, not just the desire to do so. Lean doesn’t go there, either. Then it needs to systematically align process to business strategies. As practiced, Lean rarely goes there. And lastly, effective O/S process design needs to align technology with process. Lean never goes there.

If you objectively read all the comments in this thread preceding yours (or read them at all), you’d realize that you are the one who hasn’t “scratched the surface.” Others have.

 

 


I would respectfully challenge you to visit
http://www.h-ym.com/officeprocess.htm, scroll down a bit, and study the chart differentiating the O/S process environment from manufacturing. Then I’d like to read your defense of how a process methodology designed for the latter could migrate to the former. And why anyone would bother trying? Or are we back to Maslow again.

If you’re going to restructure, do it right

If you’re going to restructure and streamline O/S process during the downturn, please use an appropriate process design approach. You’ll be amazed at the outcomes.

 

Poor Office Process, Poisonous Office Environment (and costs that will send you into toxic shock)

 

Are engineering and sales pointing fingers at each other? How about customer service and parts? Or HR and branch locations? How about sales and marketing management? Or IT and the rest of the front and back office? Okay, you’re like any other company. But do you have even the slightest sense of what all this dissonance is costing you?

Probably not. In which case you ought to grab or access the April 2009 edition of “Harvard Business Review” and read some sobering data. Very sobering.

April’s HBR features a very pithy one-page abstract by Christine Porath and Christine Pearson, How Toxic Colleagues Corrode Performance, which may very well peel back your eyelids. Their data alone might scare you into action–including running some toxic employees out of town.
You can’t fire the problem

But here’s the irony. Just firing these people won’t accomplish much, because a new set of “bad actors” will quickly fill their shoes. A relatively small percentage of inherently dysfunctional folks notwithstanding, the vast majority of these toxic employees didn’t start off toxic. Instead, their work environment created interpersonal strife by giving people and functions conflicting messages and conflicting goals, and they eventually succumbed to the venal side of human nature. 

The primary culprit is bad work design, not bad people.

That’s the case in almost every one of these toxic situations we’ve walked into over many years of consulting. Poorly designed office process creates conflicting sets of personal and functional interests, and when people and functions pursue their self-interests, the sparks fly. That, in turn, brings out the basest human instincts in some; causes others to withdraw or flee; pushes people who can get past their self-interests into the line of fire (punish the innocent); creates discord everywhere; triggers retribution–until the whole office goes dysfunctional. And then the company cans a few perps, only to have new ones almost immediately step up to the plate.

That’s usually the time when clients engage us–when it becomes painfully obvious that replacing people isn’t the answer–and eliminating sources of toxicity is. Unfortunately, a considerable amount of damage has already occurred.

But isn’t this the norm?

Hey–every office is a bit dysfunctional, no? So why get all bent out of shape? Here’s where Porath and Pearson really shine. While I don’t want to violate HBR’s copyright, I will give you this juicy quote:

Berating bosses; employees who take credit for others’ work, assign blame or spread rumors; and coworkers who exclude teammates from networks–all these can cut a swath of destruction visible only to the immediate victims.

Visible only to the immediate victims, perhaps, but damaging the entire company, especially the bottom line.

How much damage?

Unfortunately, the authors lack the data to convert negative employee behavior into specific dollar costs, but they have quantified the frequency of different types of negative employee reactions to office dysfunction. From there, it doesn’t take much imagination to project whether the size of the dollar loss is a golf ball, a baseball, a softball, a soccer ball or a basketball. It’s a damn blimp!

How employees react to dysfunctional office environments

Again, I don’t want to give away the goods so you won’t go buy the magazine, especially because the article is only a page long. But between 80% and 38% of employees reported specific reactions ranging from loss of commitment to the organization to decreased work quality.  From a process designer’s perspective, when I add it all up it’s not a trickle, not a flow, but a damn gusher of dollars flowing out the door.

But since we’re in a recession, we can afford it, eh?