Note to Self – Part 2

Process

20. The design of work (i.e. an organisation’s internal performance environment that includes a governance framework, organisation design, an operating model, business planning and capital investment processes, policies, procedures, technologies, systems, data etc.) must always be contextual and specific to the unique circumstances (e.g. the external operating environment) of the organisation in question. It also needs to be flexible as practicable in respect of method (the rules that determine how work is done).

21. This design should be based on a thorough understanding of the organisation’s customers’ demands and their “nominal value” (what matters to them). If companies only think in terms of managing activities and functional objectives (i.e. they just focus on the optimisation of the discrete parts), they will never understand operational work in terms of it being an end-to-end flow that starts when you become aware of a customer’s demand and ends when that demand is fulfilled.

22. The design of work needs to encourage the optimisation of this end-to-end flow. Without exception, a focus on optimising the parts in isolation from each other will lead to the sub-optimisation of the system.

23. Silo mentality has unwittingly created a culture where treating the symptoms of a problem has become the default remedy. We seldom take the time to understand or appreciate the actual causes of a problem and take appropriate action on the system to rectify these causes.

“How can you solve problems if you don’t know what caused them? Managers love fire-fighting. Knowledge is far less sexy” – Hermanni Hyytiälä

24. By designing work that allows customers to pull value from the organisational system, the experience of work becomes far more creative, innovative, interesting and engaging. It is both a sustainable and an adaptive approach.

25. As counter-intuitive as it may appear, good service at the lowest possible cost is the consequence of optimising end-to-end flow. It is a productivity and cost win/win.

“You have to take an operational view of how the organisation serves customers – to identify what happens to customers at the point of transaction; what demands they make and how the system responds to those demands. Managing (the) flow (of work) means thinking of service (delivery) as customers pulling value from the system. If customer demand is met with a systems that (is able to) fulfil that demand, and only does that, the consequence is good service at lowest cost” – John Seddon

26. Effectiveness (doing the right things) must come before efficiency (doing things right). In terms of cost and productivity, it is less harmful to do the right things poorly than the wrong things efficiently.

27. The emphasis on effectiveness means that ‘system waste’ is kept an absolute minimum. System waste is what is caused by any disruption to the flow of work and the subsequent ‘failure demand’ i.e. the type of customer demand that arises when an organisation fails to do something, or do something right, for the customer (a Seddon concept). Examples include:

  • The remedial work associated with mistakes, defects or omissions
  • Doing something having failed to do it when originally requested or required
  • The duplication or contradiction of activities arising from too many interfaces or confused roles and responsibilities
  • The introduction of unnecessary complexity through over-specification or over-regulation

28. The substantial costs associated with ‘correcting’ failure demand are entirely wasteful and may not be visible to leaders. These include:

  • The additional resources required to service failure demand
  • The cost of non-productive time
  • The cost of investigations
  • The cost of legal or contractual claims

29. One of the major weaknesses of conventional management thinking is that it fails to distinguish between customers’ value demands and failure demand. Not all demand is equal.

30. Higher costs and lower productivity are not the only consequences of system waste and failure demand. There is a worse consequence still; the loss of customers.

31. Organising for customer focus does not equate to blind acquiescence and obedience. Challenging customer demand that you perceive to be as lacking value (e.g. someone presenting at Accident & Emergency with a very minor injury) is entirely valid.

32. Financial measures and functional measures are production-centric and should only be used as a means of monitoring work, as opposed to a means of controlling work, and as indicators of performance. They must not be used as objectives.

33. Why? Because they do not tell us anything about how the system is performing in terms of understanding customer demand and whether the flow of work has been optimised to meet this demand. They are not contextual.

34. Production-centric measures still prevail because they are relatively unproblematic to measure. However, just because something is easy to measure does not mean it is important.

“Information about outcomes can either be simple, comparable and efficient to collect or it can be a meaningful picture of how outcomes can be experienced. It cannot be both ” – Toby Lowe

35. It is far more important to use purpose-centric measures which help in understanding and improving performance because they are: (i) related to the purpose of the system (how well those things that matter to customers are being done from their perspective); and (ii) of practical benefit to customer-facing people at an operational level because it develops their knowledge about how well they are performing.

36. Such measures include:

  • The types, volumes and frequencies of customer demand
  • The capability of the system to respond to that demand in terms of capacity and end-to-end time – these results can be studied over time to reveal whether variations in performance are just ‘noise’ i.e. within a predictable range, or whether they require special attention because they are genuinely beyond a customer-facing person’s control
  • Surveying customers to assess the accuracy of the work done and the value created for them (i.e. to verify that they got what they needed, when they needed it, right first time)
  • The types, volumes and frequencies of system waste that occur in, and disrupt, end-to-end flow

37. Conventional thinking has yet to cotton on to the fact that measures of financial success are measures of consequences. Shareholder value, profit, growth, lower costs etc. are consequences of managing organisations as systems because this is what delivers the value to customers at the lowest cost. They must not be treated as targets or objectives in themselves, which they are all too frequently, as this distorts behaviours. Due credit goes to Unilever’s CEO for recognising that profit is not a purpose as reported in this recent article.

Martin Wolf told us that the goal of maximising shareholder value (as reflected in the stock price) was practically the dumbest idea in the world and had the opposite effect of what was intended: it resulted in looting of true shareholder value.” – Steve Denning (at the Global Drucker Forum 2014)

38. Targets do not help to improve performance. In fact, they hinder performance improvement for the following reasons:

  • They are intrinsically arbitrary and detached from the work
  • They motivate people in a bad way i.e. they motivate people to do anything, including cheating, to meet the target
  • They reveal nothing about the ‘what’ and ‘why’ of current performance
  • They make people accountable to an organisation’s hierarchy rather than its customers
  • They rely on judgement and subjectivity rather than knowledge
  • There is no reliable method for setting a fair, sensible, reasonable or achievable target

39. The only meaningful target is the relentless pursuit of perfection which, of course, can never be achieved. Think about it…

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One Response to Note to Self – Part 2

  1. Pingback: #NZLEAD PREVIEW: Working in the logasphere; an approach to building effective leadership | NZLEAD

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